Paul Krugman and the Economics of Books

Depending on where you buy the columnist's new book, there's up to a $15 price variance -- one that hurts not just publishers and writers, but readers, too.

Depending on where you buy the columnist's new book, there's up to a $15 price variance -- one that hurts not just publishers and writers, but readers, too.


Paul Krugman is a Nobel laureate in economics, a professor of economics and international affairs at Princeton, and a provocative columnist at the New York Times since 1999 with over 850,000 Twitter followers. He is also a bestselling author, most recently of End This Depression Now. Writers like Krugman are prized in the world of publishing -- possessing gravitas, while remaining sound investments because of their substantial popularity. The future of their work serves as a bellwether for the industry.

Krugman's publisher is the highly respected W. W. Norton & Company, founded in the 1920s and notable because, among other reasons, it has been owned by its employees since the 1960s. Norton's other authors include Michael Lewis, Joseph Stiglitz, Stephen Greenblatt, and Fareed Zakaria, as impressive a group of writers and thinkers as any in the country. Fortunately for Norton, it was not one of the five major publishers targeted by the Department of Justice in its antitrust allegations over e-book pricing.

In early September, a federal judge approved a settlement between the DOJ and three of those publishers -- Hachette Book Group, Simon & Schuster Inc., and HarperCollins -- which obliges them to adhere to strict requirements that places the setting of prices back in the hands of the retailers, most importantly, the dominant online bookseller. Two other publishers -- Penguin and Macmillan -- along with Apple, intend to go to trial to show that there was no collusion in the agreements that enabled them to adopt pricing strategies that had the effect of limiting discounts. Within days, under the headline "Publishers' Worst Nightmare: Amazon Again on Discount Warpath," Charles Cooper wrote on, "It's back to the future. . ." as Amazon again was discounting HarperCollins e-books with Hachette and Simon & Schuster sure to follow. The outcome of this protracted battle over prices will have a profound impact on publishing in the digital age, because it will ultimately determine what consumers expect to pay for books.

To get a sense of where the pricing issue now stands beyond the legal battles, I embarked on this simple exercise: I went to every major on-line retailer and a selection of traditional booksellers to find out what they were charging for Krugman's End This Depression Now. The title was published last April and reached as high as number 17 on the New York Times bestseller list for printed books. A starred review in Publishers Weekly concluded,  "Krugman has consistently called for more liberal economic policies, but his wit and bipartisanship ensure that this book will appeal to a broad swath of readers from the Left to the Right, from the 99% to the 1%."  According to Norton, the book has sold 30,000 copies in print, with e-book sales of 25,000. The list price for the book is $24.95, and every bookstore I called is selling it at that price. You can also order it directly from the publisher's website, but that comes with a shipping charge and sales tax where required.

Here is where the pricing becomes interesting. Amazon's hardcover price is $14.71, with no shipping charge for customers who pay an annual fee of $79 for Amazon Prime and two-day delivery. The Kindle edition is $9.48. At the hardcover is $14.71, but the e-book price is $13.72 ( has free shipping for orders over $25). Moreover, in the Barnes & Noble bookstore, the hardcover is $24.95. On Apple's iBook, the price is $11.99. The Sony store charges $14.99, and on Kobo, which was recently named the e-book provider in the coming year for independent booksellers, the price was $15.49. Only Google Play matched Amazon at $9.48.

So, given these choices, what would you do? To some extent, the decision seems to depend on the reading device that customers purchase, with Amazon rolling out successively more affordable versions of its Kindles, most recently on September 6. Writing in the Wall Street Journal, Greg Bensinger said that while the latest group of Kindle Fires "included technologies that are already available in many other tablets, Amazon's new products stood out for their low prices, especially compared with Apple's popular iPads." Publishers believe that Amazon's goal is to condition its millions of customers to the lowest prices available for the hardware it sells and the content they carry, with the ultimate intention of driving vendors to accept less for what they sell. Mike Shatzkin, an oft-quoted publishing consultant, told the New York Times, "I think everybody competing with Amazon in the ebook market had better fasten their seatbelts."

In her opinion, approving the DOJ settlement with the publishers, Judge Denise Cote removed any obstacle to discounting with the argument that consumers have the right to expect the lowest possible price. "It is not the place of the court," she wrote, "to protect these bookstores and other stakeholders from the vicissitudes of a competitive market." For now, the estimable output of W. W. Norton, including Krugman's End This Depression Now, will continue to be available at a variety of prices. But over the longer term, with possibly serious consequences for the viability of publishers and booksellers, the odds favor the public's instinct to get the best bargain. To reiterate a crucial point I have made before: Publishers will always need the revenue to support authors and the staffs that edit, produce, and market their books, and to provide a reasonable profit for their owners. If the squeeze becomes too tight, the result will be fewer books that matter -- like End This Depression Now -- whether in print or digital formats.