UTAD Killed by Economic Illiteracy

UTAD will be shut down June 30. The reasons given show gross economic illiteracy on the part of the librarians who run this service. UTAD is short for Utah Article Delivery - and is explained below).

UTAD is being discontinued because "It’s so successful, it became too expensive ... costs don’t go down ..."

The problem with UTAD is that it is what is known to economists as a third party payer system. Most transactions have a demander and a supplier - two parties. Exchanges made voluntarily (thus the title of this blog) between those parties tend to work well - if they don't, one or both parties stop volunteering for them. UTAD is a system in which there is no give and take between those two parties, so neither has any idea if their costs and benefits are reasonable.

For a library patron (a demander) UTAD is nearly free. Having an article delivered costs no money, and the wait is usually 1-2 days. When stuff if cheap, demanders want a lot of it. So, UTAD will deliver more articles than an alternative system in which patrons would have to go get the articles themselves.

For a library, UTAD is not costless. It is probably very costly. They have to go pull a journal off the shelf or off the internet, get fair use permission, copy it, and fax it (usually long distance). Libraries have other things to do with their scarce resources. What this means is that the more articles they have to send through UTAD the more they will have to charge for each one.

But, individual libraries don't face that charge. Because UTAD is a service of UALC (Utah Academic Library Consortium) its costs are paid by the group - the third party. The costs to this third party are bound to be large because: 1) they've given demanders an opportunity to obtain more stuff than they would otherwise, 2) they've implicitly told suppliers not to discourage this through high pricing.

The generic result for third party payer systems is well known to economists, and discussed in many principles texts: relative to a (conventional) equilibrium, a third party payer system will have more stuff exchanged at a higher price. This escalation of costs is most widely seen in the U.S. health system, which is also (predominantly) a third party payer system.

UTAD is short for Utah Article Delivery. It is a service in which a patron at any higher education library in the state can have a copy of an article faxed to them from any other library in the state that has the original source on its shelves. It is a very useful service for a state with many scattered colleges but three research libraries that are concentrated along the Wasatch Front.

The article cited above notes that it is the cost of obtaining articles which are not available within the state that is the problem. I am sure that this is part of the problem, but please don't be gullible enough to believe that it is the only problem - if it was, UTAD could just be modified to either charge for these articles, or deny access to them.

This is just cover for the deeper issue. That is that the wonderful and noble idea of a library that is open to everyone and free (at first blush) is a cost escalation problem waiting to happen. As a society we ignore this pervasive fact, and substitute for it occassional drastic cuts. Don't get me wrong - I love libraries, I have worked in them, and I have friends that are librarians. But acting surprised or offended at this sort of cut borders on unethical.

Comments

[Jacqueline]

Yeah, why don't they just charge $1 or some other trivial amount for the service. I bet imposing even a small cost would go a long way to solving the financial problems, not because of all the revenue they'd raise that way, but because people would ration their usage of the service by only requesting the articles they really want/need than just requesting whatever.

[Dave Tufte]

I think they don't do this because there is a general mindset that what makes a library a library is free access to stuff. And I think there are a lot of people in the libary community who recognize that this policy gets them into trouble that they could get out of by charging small fees. I don't object to that group not being in a majority, but I do object to people not even recognizing this is a possibility.

[Jacqueline]

I pay a lot of overdue fines every year because I'm lazy about returning books on time... I treat libraries as a business that offer a free book rental for the first three weeks and then after that period you have to pay for them. :)

[Brian]

Libraries would spend more money running a $1 payment system than they would collect. There needs to be an incentive to institute such a system even though it costs money. That incentive must come from UALC, but instead the program will be terminated.

[Dave Tufte]

I don't think the point of a micropayment system is to cover costs, but to rein in demand. Libraries control overdue books reasonably will with a dime or quarter a day.

[Dave Tufte]

There is a flash animation illustrating the argument I am making here posted at The Conservative Cat. It's URL is http://www.conservativecat.com/mt/archives/2004/11/111504_capitali_1.html