Puzzling Over the Invisible Economy

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Last week I did something that felt very 1990′s: I purchased a compact disc. The CD wasn’t for me; it was a Christmas present.

As I wrapped the CD, I pondered the silliness of the whole enterprise. After all, the recipient — like most of us these days — listens almost exclusively to MP3 files. In fact, I’m not even sure if he has a CD player beyond his laptop, which he will use to convert his disc-shaped gift into a more useful set of MP3 files.

But somehow it felt more “real” to give a physical compact disc, rather than to transfer the property rights to a more ephemeral MP3 file. The same thing can be said for books. I now read mostly on my Kindle. You might think that this would lead my family to give me books in the appropriate electronic format; after all, they are cheaper, easier to travel with, and more useful.

Instead, my family virtually stopped giving me books. In fact, I only received one book, a volume that isn’t yet available electronically. A couple of years ago I gave a Scrabble set as a gift, and it was a hit; but our current Scrabble set is no good for traveling, so I thought about purchasing an electronic iPhone version. I passed though, because visiting the App Store on Christmas Eve just seemed to miss the point.

The examples left me wondering: What explains our schizophrenic attitude toward the invisible economy? We embrace the flow of bits and bytes in our daily lives, but we feel reluctant to give them as gifts.

It’s not often you’ll hear me say this, but I can’t see any coherent economic explanation. I’m leaving this puzzle for the psychologists, sociologists, or perhaps a more creative economist.

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  1. Tribrix says:

    On the flip side, I really dislike the virtual gifts people are always giving me on Facebook, especially because they usually require me to instal some application, which I am reluctant to do. If there was something real behind those gifts, like MP3 files or an AVI movie, I’d be more inclined to accept them. Given that the virtual gifts cost my friends nothing, I don’t feel bad not accepting them.

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  2. uthor says:

    Even though I listen to most of my music in MP3 format (at my computer or at work), I still buy mostly CDs versus digital files. Yes, the first thing I do is rip my CDs into mp3s, but that doesn’t stop me.

    Like you say, I enjoy having a physical copy. The few things I buy digitally, I end up burning to a CD-R, anyway.

    I know that things I have burned to CD-R get listened to less than actual CDs (despite mostly listening to things on my mp3 player). Maybe it’s because I can’t listened to burned CDs on my home stereo (it’s old and dying). Maybe it’s because the slim cases I put CD-Rs into get skipped over when I’m looking for a disc to play in the car. Maybe it’s because I tend to buy things I’m less sure about in mp3 format, and thus am less happy about them on average.

    I think it’s a nasty feedback loop. Since I tend to listen to things I buy digitally less than things I buy on actual CD, I associate good music with real CDs. I then favor the CD format for things I really like and the digital format for things I’m mildly interested in.

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  3. PsiCop says:

    CDs are not necessarily useless in the MP3 era. Sure, it takes an extra step (i.e. ripping the music) to get them onto the MP3 player, but the CD remains a relatively high-quality CD-audio-format copy of the music, a de facto backup. MP3 players and computer hard drives are not invulnerable to data loss. Even backup tapes/drives have been known to fail, so the ability to go back to the CD again … even if it’s not likely to be required … means it has some value.

    And I suppose having the CD on hand might be useful if the RIAA ever comes knocking, demanding the license status of all the digital music you have.

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  4. tb says:

    could it be we still have an inherent distrust for the permanence of digital media? if i give you a cd, which gets ripped to mp3, when your data is lost, you still have my cd. maybe we’re slowly getting over the fear on our own purchases, but aren’t as willing to risk it for a gift…

    i.e., we’re more concerned with the longevity/utility of the singular gift, and less concerned with any one of the multiple things we buy for ourselves… just a theory.

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  5. Traciatim says:

    Physical media with no DRM has one major advantage over DRMed media files. For one is that the right holder can not take the persons music away from them at will.

    What happens if the company that is selling the files goes under and your file must be ‘synced’ every 30 days or you lose your rights to listen (to avoid people copying it)? Very suddenly you will have a useless string of bits. This can not happen with physical unencrypted media.

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  6. Michelle says:

    I’ll venture my opinion as a non-pyschologist, sociologist, or economist. Unwrapping physical gifts at 25, 45, or 75 is just as fun as unwrapping gifts at 5. Opening an email informing you of an electronic ITunes gift certificate is just not the same.

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  7. Tenorca says:

    This might seem trite or obvious, but the simple fact is you can’t unwrap an invisible gift. I think of it in the same way as if you were to give your son some extra money for Christmas: would you just deposit it into his account or give him a check? Certainly, the latter requires more effort on his part (like the burning of a CD), but the physicality of the thing makes it “real.” Plus, there’s obviously more effort in wrapping an actual item than in sending some bytes. The wrapping denotes that you planned for the person, you selected them something, you got it on time, prepared it for them, wrote a card—in other words, you care. In an invisible gift scenario, you could knock out an entire spate of gift giving in a couple hours of clicking. It seems, well, a little off-handed. If the holidays are indeed about showing love through gifts (and we can bemoan this all we want, but there’s also something touching about receiving a special item and about selecting it for a loved one), sending an email just seems, not Grinch-like, exactly, but extemporaneous, certainly.

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  8. Robin says:

    I received an iTunes gift card this Christmas and was very happy. I was able to unwrap it and have my direct to digital files too.

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