In case you have not been following the catfight, let me get you up to speed.  Chris Anderson wrote a book called Free.  I haven’t read it, but it apparently says “all your ideas are belong to us” because the price of ideas is crashing to zero.  Malcom Gladwell says “please don’t let my employer read that”…I mean, “No its not.”

Let’s have a model.  There are tiny ideas and big ideas.  The tiny ideas are more like facts, or observations or experiences.  They are costless to produce but costly to communicate.  They are highly decentralized in that everybody produces their own heterogenous tiny ideas.  The big ideas are assembled from a large quantity of tiny ideas.  Different people have different production technologies for producing big ideas from small ones.  These could differ just in cost, or also in terms of the quality of big ideas that are produced, it changes the story a little but doesn’t change the economics.

Start with a world where the marginal cost of communicating a tiny idea to another individual is large.  Then the equilibrium market structure has big-idea producers who incur the high cost of acquiring tiny ideas, assemble them into big ideas and communicate the big ideas to the masses for a price.  This market structure sustains high prices for big ideas and sustains entry by big-idea specialists.

Now suppose the marginal cost of communicating the tiny ideas shrinks to zero.  Then an alternative for end users is to assemble their own big ideas for their own consumption out of the tiny ideas they acquire themselves for close to nothing.  The cost disadvantage that the typical end user has is compensated by his ability to customize his palette of tiny ideas and resulting big ideas to complement his idiosyncratic endowment of other ideas, tastes, etc.   The price of big ideas crashes.  Former producers of big ideas exit the market.  This is all efficient.

An important implication of this model is that the products that Anderson expects to be free are not the products Gladwell produces.  So when Gladwell says that this is absurd because the economics do not support big ideas being sold at a price of zero, he is right.  But that is because the big ideas are not being sold at all, and this is all efficient.