Paul Krugman and the Google Reader monopoly that isn’t a monopoly


If I didn’t see the Paul Krugman’s name as the author of the articles of his I read, I’d assume that the author were writing tongue in cheek.

In a recent blog post entitled “The Economics of Evil Google,” Krugman explains why a company with a monopoly on a news aggregate application, in this case Google Reader, might discontinue their service.  At the end, through the thoughts of Ryan Avent, he suggests a possible solution:

So what’s the answer? As Avent says, historical examples with these characteristics — like urban transport networks — have been resolved through public provision. It seems hard at this point to envision search and related functions as public utilities, but that’s arguably where the logic will eventually lead us.

Not surprisingly, Krugman would not seem to mind the government providing this service.  His conclusion, however, ignores the more obvious answer of maybe it’s just not worth Google’s time and effort.

There are a ton of products that get sent to the market.  Only some of the make it.  Some of them get a decent following, but they end up fizzling out despite the loyalty of their customers.  They just can’t get enough buyers.  Does that mean that products that fold should be taken over by the government because some people have come to love and rely on it?  Furthermore, is a news aggregate site really that important to the functioning of a society that the government has to provide it if no one else will?

Now Google may have been willing to take a hit on Reader in order to attract customers.  But I’m going to assume that they reached the point where they decided enough was enough and they’d be better off without it.  This would be no different than McDonald’s offering a free McFlurry to patrons of their restaurants.  If they discontinued the free ice cream, should the government subsidize a McDonald’s patron’s McFlurry since they’ve come to expect it?

That’s preposterous, and so is the government taking over a service that the market said “no thanks” to.

Want to know what’s even more ridiculous?  Google doesn’t have a monopoly with Google Reader at all.  It literally took about 15 seconds of research to find out that Google Reader wasn’t the only service of its kind (which didn’t surprise me at all).

Feedly is another news aggregate service that was more than happy that Google Reader decided to back out of the market.  According to a recent blog post, “more than 500,000 Google Reader users have joined the feedly community over the last 48 hours” and “to keep service up, we 10x our bandwidth and added new servers.”

Amazing, isn’t it?  Usually catastrophic failures in the marketplace such as this take a little bit longer than virtually right away for another business to add supply to balance the demand.  See, in the free market, businesses love heavy traffic—it’s an opportunity to make money.  Do you think government reacts to traffic the same way?

Here’s a nice list courtesy of Wikipedia of news aggregate services.  There are a ton of choices, so knock your socks off.

Mr. Krugman, first of all, do a bit of research.  And secondly, understand that when a market, i.e. people, rejects a product, there’s probably a good reason for it.

Then again, what’s a Krugman article without a big ol’ red herring?