Saturday, Nov 26, 2022
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From The Internet To Digital Economy - Dr Yasam Ayavefe

The first sketch of the relationship between the Internet and forms of economic coordination has just been drawn, prompting us to reconsider the properties of the network. It invites to reject them in terms more functional than morphological.

Dr Yasam Ayavefe
Dr Yasam Ayavefe

The first sketch of the relationship between the Internet and forms of economic coordination has just been drawn, prompting us to reconsider the properties of the network. It invites to reject them in terms more functional than morphological.

There are three key functionalities that make the Internet a vector of economic transformations:

— First of all, plasticity, that is, it allows to network new participants, add an abundance of content of all kinds, open or close knowledge spaces. It allows networking techniques that preceded the Internet.

— Then there is the possibility of cross-over, that is, interaction across uninterrupted geographical, political, economic or social boundaries. The Internet is therefore both transnational and cross-industry. Connections are made through small professionals and the general public as well as large corporations.

— Finally, there is selectivity, i.e., the ability to modulate the exchange of information very subtly according to the nature of transmitters, receivers and roaming channels. 

This selectivity allows greater access to information in terms of the strategic actions of economic agents. In particular, it facilitates the search for partners and products best suited for mutually fruitful exchanges.

In the absence of further exploration, these three basic functions of the Internet provide important insights into the emergence of the digital economy.

This may suggest that the emergence of technology should, on the one hand, take a natural course.

However, it is thought that greater technological performance can only lead to greater economic performance. This vision currently partially contradicts the facts. It is flawed because of its reductive simplicity.

While the fundamental remains unchanged, ICT offers miraculous approaches. In this way, it was gradually implemented.

Confusions affecting the availability and transmission of knowledge do not arise solely from the knowledge structure of the economy. It ignores that it has the effect of creating changes in the choice of economic mechanisms. The dynamic stability of these mechanisms can lead to error.

Market Economy and Public Goods

From the perspective of change, what is the contribution of ICT and then the Internet to regime change in post-industrial economies? Here we hypothesize that this process lies in a dissociation between knowledge and its physical support.

Before the advent of writing, knowledge was indistinguishable from speech, which alone could convey it. Before the invention of the printing press, written information was closely tied to the support for which it was written.

Only if this support itself was transmitted could it be transmitted. It made possible the reproduction of information at a lower cost and therefore its wider distribution. Same for disc, CD, DVD etc. also applies to

Today, this connection has been broken, and the texts, sounds, images that circulate the information content of the Internet are no longer hidden anywhere.

This registration not only affects information goods. At the same time, information content affects an increasingly large portion of all growing goods and services.

For these purely non-informational goods, of course, there is, strictly speaking, not recording, but rather information content and various forms of software.

This evolution of the link between production and content has important economic consequences, affecting both supply conditions and demand conditions:

On the supply side, there is a double movement:

• First, the development of trivialized and low-informational basic production
• The second is the products offered to the final consumer, consisting of commodities enriched with strong and differentiated information content and added value.

Upstream are the R&D items required for commodity production and content development. In this case, it produces high fixed costs. On the downside, the assembly and distribution of service packs is accomplished at a low marginal cost.

In conclusion, the digital economy is a general production function with strongly increasing returns, far from the usual features of the market economy and closer to those of the public economy.

On the demand side, information goods with high information content demonstrate the essential characteristics of non-competition and non-exclusion inherent in public goods.

An agent selling information goods at least allows for a very low opportunity cost compared to the utility delegated to the buyer.

In addition, knowledge goods are often the source of significant club influences. In addition to the economies of scale, the supply supports the emergence of an independent buyer followed by monopolizing effects. Thus, demand creates economies of scale.

ICTs develop tools that should theoretically support the more efficient functioning of a market economy. But they actually lead to the emergence of a public economy.

Find out more about Dr. Ayavefe and his work here: