Monday, November 15

New books shouldn't be rare

On Tuesday, Johanna Skibsrud won the Giller Prize, one of the top literary awards in Canada, for her book The Sentimentalists. But if you try to find a copy of her book at your local bookstore, you'll likely have failed.

It turns out that the book is published by a small boutique outfit in Kentville, Nova Scotia, and they are unable to meet the new-found demand for Skibsrud's book in a timely manner. At first, I became angry when I read about this in the Toronto Star. It appeared that the publisher was attributing his slow production to being a small business, "weaving themselves into the life of a community, unlike the Wal-Marts of the world, merely in search of a profit." That spin irked me, because not being able to come anywhere close to meeting demand is a sign of incompetence, rather than a necessary outcome of running a small business. Lots of small businesses are competent enough to meet customer demand.

But then I got curious. The way the publisher spoke about how he printed the books, it sounded almost like a work of art. But art is produced very differently than books. There is only one Mona Lisa. You can buy prints of paintings, but there is still a scarcity to paintings that we don't see that with books. As long as someone is willing to buy a book, it keeps getting printed. We don't see J.K. Rowling handwriting one copy of Harry Potter, selling it for millions, and then have a limited-edition print of 1,000 copies get run off. The scarcity is why a piece of art can be worth millions and why a book is only worth $20.

But what if books were printed in limited quantities? Perhaps the publishers of The Sentamentalists are intentionally limiting their print run so as to increase the book's value.

Economists like to draw supply and demand graphs. Here is a basic supply and demand graph for a book such as The Sentamentalists (I've oversimplified things by ignoring the fact that the publisher has a monopoly over the book, but the principles of what I'm trying to illustrate still hold):

In a normal situation, supply and demand would reach an equilibrium, where 10,000 books are printed and sold for $20 each. But in reality, the supply of The Sentimentalists is fixed at the few-hundred copies that have already been printed — until the publisher gets his act together and prints more — so we get something that looks like this:

Supply is fixed at, say, 500 copies, so we get a new equilibrium where there are maybe 500 books available, for a price of about $100 each (just look on eBay, where the resale price of the book is $100 as I write this).

The graphs show that different people value the book differently. If the price of the book were $500, only a couple of people would buy it. But if the price were 50 cents, hundreds of thousands of people would buy it. The problem is that we can't charge different prices to different people for the book — Chapters has to slap a price tag on it, and that's what people pay, even if secretly they would be willing to pay even more. So when supply is reduced, the reason the price goes up is that the people who really, really love the book, and could have gotten it at $20 if 10,000 copies were printed, now bid the price up to $100, because if they don't, people who value the book at $99 will steal away their copy.

Where economics becomes a lot foggier is whether people actually value the fact that the book is rare. Is there a threshold quantity beyond which people increase their valuation of the book, simply because it is rare? Such a picture would look like this:

It's not clear whether this picture is correct or whether the straight demand curve is more accurate. Economic theory is surprisingly lacking in this area. Interestingly, the most insightful bit on the artisan book market and rarity might come from Thorstein Veblen's 1899 work, The Theory of the Leisure Class:
These products, since they require hand labour, are more expensive … As a further characteristic feature which fixes the economic place of artistic book-making, there is the fact that these more elegant books are, at their best, printed in limited editions. A limited edition is in effect a guarantee — somewhat crude, it is true — that this book is scarce and that it therefore is costly and lends pecuniary distinction to its consumer.
My hunch is that Velben is right, and that scarcity does create value in itself. That's why the Mona Lisa is so valuable, but you can buy a poster of it for less than $10. Likewise, you can buy a Harry Potter novel for about $12, but a first-edition hardcover will burn a $50,000 hole in your wallet.

So, to conclude my rant, the publishers of The Sentimentalist are being stupid if they don't get lots of copies into the marketplace soon. Sure, do a small first run and sell them for a high price for collectors who value rarity. But you can capture the "rare market" while still flooding the market with thousands of "generic" copies of the book.