{"id":95,"date":"2018-07-02T09:41:12","date_gmt":"2018-07-02T09:41:12","guid":{"rendered":"http:\/\/lisp1.epgpbooks.inflibnet.ac.in\/?post_type=chapter&p=95"},"modified":"2018-12-04T10:11:48","modified_gmt":"2018-12-04T10:11:48","slug":"economics-of-information","status":"publish","type":"chapter","link":"https:\/\/ebooks.inflibnet.ac.in\/lisp1\/chapter\/economics-of-information\/","title":{"rendered":"Economics of Information"},"content":{"raw":"
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I. Objectives<\/strong><\/div>\r\n
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This lesson is written with the following objectives:<\/span><\/div>\r\n
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\r\n\r\n \r\n\r\n\u2022\u00a0\u00a0\u00a0\u00a0\u00a0 To bring about a clarity in understanding the concept of economics of information.\r\n\r\n\u2022\u00a0\u00a0\u00a0\u00a0\u00a0 To examine the effects of information and information systems on economy.\r\n\r\n\u2022\u00a0\u00a0\u00a0\u00a0\u00a0 To view information as a commodity.\r\n\r\n\u2022\u00a0\u00a0\u00a0\u00a0\u00a0 To understand the characteristics of information.\r\n\r\n\u2022\u00a0\u00a0\u00a0\u00a0\u00a0 To chart out the economic properties and economic role of information.\r\n\r\n\u2022\u00a0\u00a0\u00a0\u00a0\u00a0 To recognize information services as products\r\n\r\n \r\n\r\nII. Learning Outcomes<\/strong>\r\n\r\n \r\n

On completing this module you should have an understanding of the economics of information (i.e. economics of information and information products) as also the role of information in the economy of a nation \/ organization (i.e. information as an economic factor. Also a general idea of what constitutes the information industry should be formed on completion of this module<\/p>\r\n \r\n

III.\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>Structure of the Module<\/strong><\/p>\r\n\u00a0<\/strong>\r\n\r\n1.\u00a0 Introduction\r\n\r\n2.\u00a0 Concept: Economics of Information\r\n\r\n3.\u00a0 How information and information systems affect economy\r\n

3.1. The economic effects of Information Technology (IT) on organizations<\/p>\r\n

3.2. Electronic markets<\/p>\r\n

3.3. Network effects<\/p>\r\n

3.4. Social Media<\/p>\r\n

3.5. Informational characteristics of markets<\/p>\r\n4.\u00a0 Information as a commodity\r\n

4.1. What is a Commodity<\/p>\r\n

4.2. Characteristics of Information<\/p>\r\n

4.2.1. Information is expandable<\/p>\r\n

4.2.2. Information is compressible<\/p>\r\n

4.2.3. Information is substitutable<\/p>\r\n

4.2.4. Information is transportable<\/p>\r\n

4.2.5. Information is diffusive<\/span><\/p>\r\n

4.2.6. Information is sharable<\/span><\/p>\r\n

4.3. Economic properties of information<\/span><\/p>\r\n

4.4. Economic role of information<\/span><\/p>\r\n5. Information Services as Products<\/span>\r\n

5.1. Offline information services as products<\/span><\/p>\r\n

5.2. Online scholarly database services as products<\/span><\/p>\r\n

5.3. Electronic information services for professional purposes as products<\/span><\/p>\r\n

5.4. Electronic information services for social purposes as products<\/span><\/p>\r\n

5.5. Business information services as products<\/span><\/p>\r\n

5.6. Financial information services as products<\/span><\/p>\r\n

5.7. E-mail services as products<\/span><\/p>\r\n

5.8. Electronic information storage services as products<\/span><\/p>\r\n

5.9. Real Time information services as products<\/span><\/p>\r\n

5.10. Audiotex services as products<\/span><\/p>\r\n

5.11. Videotex services as products<\/span><\/p>\r\n6.\u00a0 Summary<\/span>\r\n\r\n7.\u00a0 References<\/span>\r\n\r\n \r\n\r\n1.\u00a0\u00a0\u00a0 <\/strong>Introduction<\/strong>\r\n\r\n \r\n

The extensive development of informational technologies, the emergence of information networks, the increasing reliance of the contemporary society on collecting, processing and distribution of information for its economic health, a paradigm shift to information work as a predominant occupation have led to the conception of information as a primary source of income. Branscomb (1994) while talking about the value of information states:<\/span><\/p>\r\n \r\n

Information has always been a valuable asset to those who possess it. Where the fish were biting was an important piece of information to tribal societies. They shared this information because it was in the interests of the community to do so, and the catch was shared by all members of the tribe. Today where the fish are biting is a carefully guarded secret by fishermen who store the longitude and latitude in the memories of their Loran equipment on their fishing boats. Their boats are also equipped with satellite antenna in order to obtain access to the remote sensing satellite data that discloses where the schools of fish are concentrating and what prices are offered for their catch on the global markets. (Branscomb, 1994)<\/span><\/p>\r\n \r\n

Thus, collection of information and construction of knowledge become an economic activity that provides for sound decision making. We are living in an increasingly complex and dynamic world where information is becoming very important for human as well as technical development. Let us first try to understand the concept of economics of information.<\/span><\/p>\r\n \r\n

2.\u00a0\u00a0\u00a0 <\/strong>Economics of Information:<\/strong><\/p>\r\n \r\n

The discipline of Economics is divided into two general fields, viz., microeconomics and macroeconomics.<\/span><\/p>\r\n \r\n

Microeconomics: <\/strong>Microeconomics analyzes the economic behaviour of individual units which may be persons, households, firms or industry in an economy. The attempt is to understand the decision-making process of these individuals when they go about allocating their limited resources. It also attempts to study the factors that affect economic choices of these individuals and the effect of changes in these factors on their decision making; further, the corresponding change in the markets brought about by these choices and also how prices and demand are determined in the markets.<\/span><\/p>\r\n \r\n

Macroeconomics: <\/strong>Macroeconomics deals with the behavior and performance of an economy as a whole. Here the focus is not on individual behavior and decision making but on the aggregate changes in the economy. Thus, it is concerned with the study of unemployment, growth rate, gross domestic product, inflation, price indices, savings, consumptions, investments, international trade, international finance etc. Besides aggregate indicators, macroeconomics also analyzes the microeconomic factors that influence the economy. Thus, the factors that are studied in macroeconomics and microeconomics may influence each other. For instance, unemployment in the economy will affect the supply of workers in individual industries.<\/span><\/p>\r\n \r\n

Economics of Information: <\/strong>When we are talking about Economics of Information it concerns microeconomic theory. It assesses the role of information in all economic activities as a factor of production, growth and development. The noted economist and Nobel laureate Joseph E. Stiglitz has clearly explained the concept of information economics in his article titled \u201cInformation\u201d in <\/span>The Concise<\/em> Encyclopedia of Economics<\/em>. Information economics according to Stiglitz (2008), \u201chas explored the extent to which markets and other institutions process and convey information. Many of the problems of markets and other institutions result from costly information, and many of their features are responses to costly information\u201d. In this article he enlightens how information economics helps explain economic volatility. He points out while efficiency wage theory may explain persistence of unemployment; it is information economics that explains\u00a0<\/span>why employers pay higher wages to workers. As monitoring the information about the productivity of the employees is costly, the employers pay them more as an incentive not to shirk work. The use of credit rather than equity as a source of finance for new investment and the widespread occurrence of credit rationing happen because of costly information. The shareholders find the information about what management is doing very costly and thus are wary of buying more shares.\u00a0<\/span><\/p>\r\n \r\n

Stiglitz (2008) clarifies three other market responses to costly information.<\/span><\/p>\r\n\r\n