Both traditional publishing and self publishing have their adherents, and the battle lines are being drawn.

So, how come there are battle lines?

If someone wants to self-publish, go ahead! If someone wants to sign a contract with their traditional publisher, go ahead! I may care about the outcomes for my friends, because I care about my friends, but it’s hard for me to get worked up because some dude I don’t know just signed a contract for books that will come out in 2014. It’s his choice. So maybe he doesn’t make as much money. I generally don’t get exercised about unknown people who make business choices that only impact their personal lives. That’s because I think of writing as a business, something that I should approach rationally, with reasonable questions in mind, not as a religion that should be taken on faith and not doubted.

Here’s a little test you can run so that you can differentiate between a business model and a religion.

• Do you think that everyone should do it your way?
• Do you think that everyone that disagrees with you simply doesn’t understand what you know so well?
• Do you use words to describe people who disagree with you that are derogatory in nature?
• Do you secretly (or not so secretly) think that everyone doing it differently is misguided and just needs to come to the light?

Congratulations! You are espousing a religion.

• Do you think that profit and loss depend on individual circumstances?
• Can you list circumstances that make profit more likely?
• Do you accept that, even under the best of circumstances, loss might still occur?
• Do you believe that reasonable people might differ, and that different ways of doing things might still both prove profitable?

Congratulations! You probably have a business model.

Please note that there are business model/religion types on both sides of the self/traditional publishing divide. There is nothing wrong with having a religion, or holding strong beliefs. Just try to recognize that, as with all religions, someone else holds different beliefs dear, and there’s no need to vilify them for it.

This is the vaguely economic argument that people make when they talk about e-book pricing: “The price of all books will go to zero. Everyone knows that in a perfectly competitive marketplace, the price will tend towards the marginal cost of distribution, which for digital goods is zero. Authors must band together and make sure that books are priced at something high, or we will all surely perish.”

I bristle at the indiscriminate application of economics, where nobody checks that the assumptions underlying the economic theory holds true first. Here’s the challenge: if someone wanted to read for free for the rest of their life, they could do it, easily, today. They’d start with Project Gutenberg. There is a ton of Pride and Prejudice fanfiction–more than any one person could read in her lifetime. People have been posting stories–entire novels worth–on livejournals for lo these many years. There is more free reading material available than any reasonable person could tackle. And yet–shockingly–people pay for electronic books.

How can you explain this? Is it a breakdown in the market? Is it that the market has not yet reached equilibrium? Is it that ereaders haven’t yet become commonplace? None of that. It’s because a book is not a perfectly competitive marketplace.

It would be if there were no intellectual property laws–anyone could compete perfectly with books by Courtney Milan simply by making a copy of my book, which would cost them basically nothing to do. Nobody could charge anything for books by Courtney, because somebody would always undercut them. I would make no money. You can see this principle at work on Amazon if you search for public domain works.

Luckily for me I have an exclusive right to distribute my books and to license others to do so, and so there is not a perfectly competitive marketplace for books by Courtney Milan. In fact, the market is quite the opposite of competitive: I have been granted a legal monopoly over books by Courtney Milan, and that means I can charge whatever I want, and nobody else can sell my books for less, unless I give them the right to do so. Therefore, we don’t have perfect competition.

“But Courtney,” you say, “books are economic substitutes for each other. If you charged $5,000 for a book, people would just go and read Sherry Thomas and Tessa Dare and Julie Anne Long and Meredith Duran instead.”

Too true. I may have a legal monopoly over books by Courtney, but there are decent economic substitutes for books by Courtney. The problem is that (a) there are a small number of really good economic substitutes and (b) all substitutes are imperfect, with some substitutes being more imperfect than others.

For instance, I have a vast amount of empirical data demonstrating that at least some people would rather pay $7.99 to read my book than spend $0.00 to read Moby Dick for free. This is because Moby Dick is a really, really bad economic substitute for a historical romance. I like to think that even in historical romance, there is no perfect substitute for a book by Courtney. Heck, my books aren’t perfect substitutes for each other. Most people don’t read Unveiled a second time and say, “Well, now I feel just as good as if I’d read Unclaimed, so why bother?”

We all know that books are imperfect substitutes for each other because if there were, by golly, I still wouldn’t be waiting (semi-patiently) for George R.R. Martin’s Dance with Dragons. I’d have read Coraline by Neil Gaiman and I wouldn’t bother. If books were interchangeable, I wouldn’t have stood in line to get Patrick Rothfuss’s signature. Scheherazade would never have lasted a thousand Arabian nights, because the King wouldn’t have cared how the story ended.

Now, I don’t deny that books are imperfect substitutes for each other. And I don’t deny that this results in  price competition. But as a general rule, the better the author, the harder it is to find a good old-fashioned economic substitute for her Conversely, the worse the author, the easier it is to substitute. It’s really easy to bore people. It’s hard to entertain them. And the authors who can make you laugh consistently–or keep you on the edge of your seat–or have you reaching for your hankie–you know they are not interchangeable.

So, when someone says that price must tend towards the marginal cost of distribution, you are implicitly saying that authors write indistinguishable crap. And frankly, if I believed I wrote indistinguishable crap, I wouldn’t bother writing.

One of the reasons that competition is so imperfect in the book world is that this is a field that is very hard to enter. Oh, you might think it’s easy–all you have to do is slap words down and put a book up on a Kindle. But it is hard to write a book, and it is a thousand times harder to write a good book. It takes a lot of skill and a lot of talent. Self-publishing doesn’t make it any easier to write a good book–it just makes it easier to take a bad book to market.

Writing a book is so hard that there are not enough truly awesome authors in this world to keep the voracious readers in excellent books for all their reading hours. Voracious readers have to settle for “really good” authors and “enjoyable” books. If they read fast and often enough, they’ll delve into the “okay” territory just so they have something to read.

So yeah, I’m not worried about author compensation. It is already the case that authors like Stephen King can charge $34.99 for a book, while authors like Courtney Milan charge $7.99. There’s a reason for that, folks, and it’s because Courtney Milan is a really, really poor economic substitute for Stephen King.

I do think there are some ramifications to the e-revolution. I do think that there’s unmet demand for more reasonably-priced works. And I do think that price-competition will force the price of many books down. But I don’t think that having 500,000 books on Amazon priced at $0.99 will so transform the book industry that everyone will have to drop their prices to $0.99 and will still only sell 100 copies. The book industry has managed to survive against a backdrop where every single excellent book from a century ago is available for free.

There are rumblings around publishing blogs about the forthcoming apocalypse. What apocalypse, you ask? You know–the apocalypse in which all of New York publishing crumbles to dust under the onslaught of a vast supply of 99 cent books, which force the market price of a book to that of an iTunes download. That apocalypse.

Everyone seems to be making a bunch of predictions about what will happen, and I figure that I’m about as qualified to prognosticate as anyone else out there. I am confident that every single one of these little gems will come true in the following five years, so read ’em and weep.

1. A lot of people are going to make a lot of claims using figures that were gleaned through confirmation bias. The word “data” will be used when the person means “anecdote.” Multiple anecdotes will be strung together and pointed to as “data,” and statisticians will weep and gnash their teeth and talk about the need for random sampling to no avail.
2. Really good books will be published, which makes me happy as a reader. Some of those books will have a low, low price, which will make me happy as a consumer.
3. Crappy books will also be published, priced anywhere from $400 to $0.99. Hopefully I will avoid most of them.
4. Really good books at a reasonable price will always be in demand.
5. There will not be enough really good books available to satisfy the most voracious and/or picky of readers.
6. Thus: reasonably good books will also be in demand.
7. Crappy books will not be in significant demand at any price.
8. Some really good books will still have disappointing sales, and fans will be baffled.
9. Not all really good books will come from New York.
10. Not all crappy books will come from indies.
11. People won’t agree on whether a book is really good, but if everyone agrees that a book is crap, it probably is.

If 99 cent books were going to destroy the nascent ebook industry, I would think that Project Gutenberg would have done it by already. There’s a massive number of REALLY GOOD books available for free–and yet people still buy the latest Stieg Larssen. People buy the latest Courtney Milan, for that matter, too.