Forget the Big Mac index, try penguin books instead

[Cross-posted from the New School Economic Review – original here]

Wandering about New Delhi I am always struck by the way that the markets are organised. Special areas are set aside in each residential quarter (or ‘colony’ in the vernacular) and people know what markets are good for what. So off we went to get some books at Aurobindo Market, and if you want price disparities, forget about the Big Mac index and have a look at the price of books. Books are homogenous products, they are easy to replicate (so piracy is usually easy) and global publishers sell the same good in all markets under the same rules (unlike McDonalds who will need to consider rent prices, franchise costs, hygiene regulation and local tastes).

I ended up buying a very large Penguin Classic, Kautilya’s The Arthashastra – think Macchiavelli meets Adam Smith but anno 300 BC in India, preceding and influencing Greek writers such as Xenophon. The total price was 599 rupees, or $13.36 US. That seemed a bit steep to me, but turns out that the same Penguin edition is $42.95 in the US. Of course $14 buys  you a lot more here than at Barnes & Noble on Union Square, but a quick check on the PPP rates suggested that what I paid for The Arthashastra was about $33 in PPP terms. It seems that Penguin is pricing this very academic book a little below par value for the world. But academic special interest books can be very expensive so I had a look at Stieg Larson’s The Girl with the Dragon Tattoo on the next shelf. 499 rupees, so $11.19, and how much for the same book on Amazon? $14.95 RRP, but yours on-line for $8.25… The nominal price on Union Square is lower than the price in Delhi??  The PPP price of this fiction work is around $27.

That only seems really mad if you consider that the average wage of well-paid, albeit low to medium skilled, labour in Delhi (lets take a driver) is around 10,000 rupees a month: So a paperback would constitute  5% of the monthly wage.  That is almost a full days wage to buy a book. Most New Yorkers can earn the price of a book in an hour or two. So where does that leave the market? Targetting a very small niche group for educational texts – with a global price point – and an even smaller niche for fiction and general reading material, which costs more than the global price. I am told similar patterns emerge for CDs, DVDs and other entertainment material. I wonder what the founder of Penguin Books would make of this, given that:

The first Penguin paperbacks appeared in the summer of 1935 and included works by Ernest Hemingway, André Maurois and Agatha Christie. They were colour coded (orange for fiction, blue for biography, green for crime) and cost just sixpence, the same price as a packet of cigarettes. The way the public thought about books changed forever – the paperback revolution had begun.

A pack of smokes costs above $11 in New York and 100 rupees in Delhi (although the local rolled variety are much less). Book prices have a long way to go in one of these locations, if Mr. Allens intentions are to be realised.

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