Information Economics
Description
Summarized by Roger Clarke [1]:
"information economics, adopts assumptions that are very different from those of conventional economics:
- tradable items are not scarce;
- one party's possession or use of them does not deprive others of possession and use;
- information is both an output from, and an input to, innovation processes;
- information is difficult to appropriate, because:
- tacit knowledge cannot be extracted, reproduced, communicated or assimilated quickly or for low cost;
- codified knowledge may not be reproduced, communicated or assimilated quickly or for low cost;
- knowledge embodied in artefacts is, in many cases, not codified, and hence may not be readily extracted.
These assumptions are attuned to the digital era, and they lead to a very different view of innovation from that of conventional economics:
- innovation is mostly cumulative, seldom ‘big bang’;
- innovation is heavily dependent on contributions by users, adopters, suppliers, and competitors;
- mere imitators, in the absence of ‘value-add’, contribute little, and are ‘free riders’ on the innovator’s investment; but
- there are many natural protections for innovators, especially the investment and lead-time involved in:
- the development of tacit knowledge;
- its conversion into codified knowledge; and
- development and marketing of competitive products.
The conclusions from an analysis grounded in information economics are therefore fundamentally at odds with those of conventional economics:
- innovators need only limited assistance to be able to overcome hurdles and achieve returns;
- even a ‘limited monopoly’ hinders cumulative innovation, and its scope and length must be no more than that necessary to avoid stunting the initial innovation;
- mere imitators must be punished for misappropriation; but
- encouragement must be given to:
- investigators of innovations;
- enhancers of innovations;
- extenders of innovations; and
- developers of competing innovations.
More Information
DM Lamberton, Economics of Information and Knowledge : Selected Readings, (1971); and GC Dempsey, “Revisiting Intellectual Property Policy: Information Economics for the Information Age”, 17:1 Prometheus 33 (1999).
Read the full essay Business Models to Support Content Commons
Also:
- JP Barlow, “The Economy of Ideas: A framework for patents and copyrights in the Digital Age”, Wired 2.03 (March 1994), @ http://www.wired.com/wired/archive/2.03/economy.ideas_pr.html
- E Dyson , “Intellectual Value”, Wired 3.07 (July 1995), @ http://www.wired.com/wired/archive/3.07/dyson_pr.html
- K Kelly, “The Economics of Ideas”, Wired 4.06 (June 1996), @ http://www.wired.com/wired/archive/4.06/romer_pr.html