The ASI in the news

Remarkably we have some reasonable economics in The Guardian:

"The contract negotiation they are having is about who gets the profit split on ebooks," said economist and Adam Smith Institute fellow Tim Worstall. "The correct answer emerges from our behaviour as consumers. We don't know what the consumers are valuing most – the distribution system Amazon supplies them with or the new JK Rowling that Hachette publishes. If we value JK Rowling more, then Hachette should win."

The point being that there's no metric by which we can decide what the profit split between a distributor, like Amazon, and a publisher, like Hachette, should be. There's simply no theory which provides us with a guide as to who should gain the lion's, or any other, share of the moolah. It all depends upon what we, the consumers, desire the most. If it's what the publishers provide then they should get that cash. If however most books are very close substitutes for eah other and we value the distribution system more then Amazon should get the folding stuff. And the only method we have of working out which is which is to observe what we all actually do. Will we go around Amazon in order to purchase Hachette products or will we not worry about JK Rowling and read some other Kindle book?

That is, the correct outcome in theory can only be derived from observation of market behaviour. There's simply no other way of doing it other than to watch it emerge.