Economics of information (final term)


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Economics of information (final term)

  1. 1. Economics of informationMuhammad A. GanaeeMPhil Minhaj University
  2. 2. Definition of InformationAll the facts, conclusions, ideas, and creative worksof the human intellect and imagination that havebeen communicated, formally or informally, in anyform.(Online Dictionary for Library and Information Science)
  3. 3. Definition of economicsThe word “economics” comes from the Greek oikos, meaning“household”, and nomos, meaning “rule” or “governance”. Soeconomics means “rules of household”.A social science concerned chiefly with description andanalysis of the production, distribution, and consumption ofgoods and services.(Merriam-Webster Dictionary)
  4. 4. Economics of InformationThe economics of information is a branch ofmicroeconomic theory that studies how informationaffects an economy and economic decisions.
  5. 5. Economics of information: anintroductionFirst emerges in 1960sFundamental changes in world economicsEmergence of computer technologyEconomists Library and information scientistsEconomists tend to study the nature ofdecision making, the distribution ofinformation, the flow of information,and the role of the “informationsector” in a market context.Library and information scientists tendto look at notions of whatinformation is and at informationproducts as items bought, sold, used,copyrighted, made public, orprovided, particularly in libraries.Both sets of researchers attempt to refine models to explain for price, costs,benefits, values, and economic impacts.
  6. 6. Uses of the word "information"1. Information-as-process– The act of informing– communication of news of some fact oroccurrence; the action of telling or fact ofbeing told of something{Oxford English Dictionary, 1989, vol. 7, p. 944).
  7. 7. Uses of the word "information”continues…2. Information-as-knowledge– what is perceived in "information- as-process"– the "knowledge communicated concerningsome particular fact, subject, or event(Oxford English Dictionary, 1989, vol. 7, p. 944).
  8. 8. Uses of the word "information”continues…3. Information-as-thing– Used for data and documents– regarded as being informative– having the quality of imparting information(Oxford English Dictionary, 1989, vol. 7, p. 946).
  9. 9. The Nature of Information1. Creationcreated for reasons beyond the marketLike for self-expression, space between creator/consumer disappear1. IntangibilityInformation is intangible with no set unitof measure.2. Heterogeneitya single kind of information can havemore than one form).
  10. 10. The Nature of Information continues…4. Time• highly perishable (for example, live news)4. Public good• is not consumed by being used• can be resold• given away with no reduction in its contents
  11. 11. Economic roles of information1. A Substitute for physical entities– Telecommuting replaces the movement of people– Exploration through imaging replaces explorationthrough surgery.1. Used for influence– Influence, persuade– Advertising serves buyers & sellers about products.1. Essential in education– serving the process of learning– Supplement teacher by providing material
  12. 12. Economic roles of informationcontinues…4. A substance of cultural enrichment– People are willing to pay for it, which is the basisfor the entertainment industries.4. As a product– produced as a package.– Can be a service– can be a capital resource
  13. 13. The macroeconomics ofinformation• The branch of economics that deals with anation’s total economic behavior.• role of information in national economies– in the distribution of the workforce amongvarious types of activities and functions.• It also relates to effects on nationaleconomic policies.
  14. 14. The macroeconomics ofinformation(continues…)• Background– Mark Uri Porat (He is best known for his doctoral work inwhich he created measures of the information economy).– In 1977, added information sector in national economies• Agriculture• industry• services– Four categories of information functions:1. Management functions2. Support functions (primarily clerical in nature)3. Equipment functions (hardware and software)4. Substantive functions (involved in the production and distributionof information)
  15. 15. The macroeconomics ofinformation(continues…)Categories ExamplesInformation production Research and DevelopmentAuthoring and composingInformation distribution Publishing and LibrariesTelevision and MoviesInformation transactions TelecommunicationBanking and brokerageInformation equipment Computer hardware and softwareTelecommunicationsCategories for Information industry
  16. 16. The macroeconomics ofinformation(continues…)National policy planninggain economic values, information based economyValues from use of information– Better workforce, more capable of dealing with problems.– Better product planning and marketing, based on moreknowledge about consumer needs.– Better engineering, based on availability and use of scientificand technical information.– Better economic data, leading to improved investment decisionsand allocation of resources.– Better management from improved communication and decision-making.
  17. 17. The macroeconomics ofinformation(continues…)Barriers to use of information– Costs are incurred in acquiring information.– return is over long term, expenditure is madeimmediately– Information is not directly productive– Results not clearly attributable to the information– information as an overhead; subject to cost-cutting
  18. 18. The micro-economics ofinformation• The branch of economics that deals withthe behavior of the individual producer andconsumer, particularly as decisions aremade with respect to the allocation oflimited resources.
  19. 19. The micro-economics ofinformation(continues…)The costs of information1. Information must be created, by generation andprocessing of data; these are authoring functions.2. It must be assessed for publish ability; these areeditorial functions.3. It must be processed for the generation of a master;these are composition functions.4. Products and/or services will be produced.5. The products and services will be marketed.6. They will be distributed.
  20. 20. The micro-economics of bookpublishingpercentagesRoyalties 10%Capital costs 30% (editorial 5%, composition 25%)Delivery costs 30% (production 14%, distribution 16%)Discount 30% (for sellers)• creation of an author• Return is royaltyEstimates can be made of the costs for print form distribution
  21. 21. The micro-economics ofscholarly journal publishing• research faculty member (20%-50% time)• two or three research articles/year• the rewards not income– the academic advancement, reputationEstimates of functional costsCapital costs 61% (editorial 32%, composition 29%)Delivery costs 39% (production 26%, distribution 13%)
  22. 22. The micro-economics of databasesand digital libraries• Databases & digital libraries• Electronic publication– digitized text– numerical data files– Images– reference databases– bibliographic catalogues• costs of the producer and distributor• costs by the users or by libraries, in terms ofstaff time, resources used like computers andinternet charges.
  23. 23. Economics: things versusinformationThings InformationWhen a thing is sold, sellerowns it.Idea, blueprint is sold, sellerstill possesses it.Things can be replicated onlythrough the expense ofmanufacture.Information can be replicatedalmost zero cost without limit.Things wear out, theirperformance deteriorates withwear and tear.Information never wears out,although it can become obsoleteor simply untrue.A thing exits in a location, andtherefore a unique legaljurisdiction.Information is nowhere andeverywhere.
  24. 24. Economics: things versusinformationThings Informationdiminishing returns: doubling farmlabor does not double the outputfrom the land.Increasing returns: big factories havelower unit costs than smallfactories.Information has perfectly increasingreturns: spend the money to learnsomething once and thatknowledge can be reused atadditional cost forever; double thenumber of uses and cost per usehalves.Economics of things is consistent withefficient markets: fields andfactories can compete against eachother as a price taker incompetitive markets.The economics of informationrequires imperfect markets: limitthe access of others to is bycopyright, patent, secrecy. If thereis limit, it is a monopoly. Eitherway information does not havelike fields or factories.
  25. 25. References1. Evans, Philip and Wurster, Thomas S. (1999). Blown to Bits: Howthe New Economics of Information Transforms Strategy. Boston:Harvard business school press. ISBN: 0-87584-877-x2. BUCKLAND, M. K. (1991). Information as thing. Journal Of TheAmerican Society For Information Science, 423. Wheeler, W. (2011). ECONOMICS OF INFORMATION: A BRIEFINTRODUCTION. Progressive Librarian, (36/37), 42-50.4. Merriam-Webster Dictionary (online). Available at: (accessed on 14th December 2012).5. Reitz, Joan M. Online Dictionary for Library and InformationScience. Available at: (accessed on 14thDecember 2012).
  26. 26. References6. Available at: (accessedon 14th December 2012).7. Wikimedia Foundation. (2012), Archive Available at (Accessed:14th December 2012).8. Joseph E. Stiglitz (2000). "The Contributions of the Economics ofInformation to Twentieth Century Economics," Quarterly Journalof Economics, 115(4), pp. 1441-1478.9. Marchant, Mary A.; Snell, William M.. "Macroeconomic andInternational Policy Terms". University of Kentucky. Available at: .(accessed on 14th December 2012).
  27. 27. Economics of informationQuestions?