Saturday, 18 May 2013

the internet economy Part II and the new gold rush; economic production in an information economy

[This is a re-post (originally posted on 8 Nov 2012) with minor edits, deleted the original posts by mistake]

[Readers who haven’t read Part I should read at least the last paragraph before continuing here]

     Economics = Land, Labour, Capital

This is something many of us learnt at school, that economics is based fundamentally on land, labour and capital.  Is this still valid?

     Economics = Land, Labour, Capital, Information….perhaps!

I am no economist but a keen observer of the still evolving internet space.  My qualification and luck is to be entrusted with bringing and then running the first internet service in Singapore, thus early exposure.  Like a train-spotter looking at it move from the bottom before commercialisation began (1991) and its climb up in significance (after 1995), provides an enlightened perspective.  It’ll be up to the economists, I’m merely highlighting developments emanating from the internet space and the possible significance of economic production in the information age.

This is why the data storage industry will continue to grow and why we need more mathematicians.  This is why the advertisement industry will expand especially public relations.  This is why IT, traditionally a back-office function to improve efficiencies and cut costs will move to the frontline in sales.  This is why housewives will play a bigger role in the economy.  And this is why a professor in Yale, Yochai Benkler in “The Wealth of Networks: How Social Production Transforms Markets and Freedom” suggested the world is witnessing a ‘new resource in the production of goods and services’.  He based this on the open source model but this should only be a sub-set of a larger model (internet business model) in the machinery of an internet economy.  Open source with its roots in the very design of the internet but is now mostly known as a software movement (we’ll look at this and its impact on the IT industry later) is based on openly sharing information and collaboration to better design a widget.  It has been used to design a 3-D printer, to raise funds for start-ups, to write a book, in green designs, to beat the S&P 500.

As one of the central mechanism of an internet economy, open source, others like the implications of the value-of-free and internet methods such as crowdsourcing would be expected to drive economies increasingly based on information.  That makes Singapore’s accomplishment having established the country as a telco hub or rather a communications hub (in a future essay entitled ‘the ISP is the telco’, the central thesis is that the term ‘telecommunications company’ is passé) visionary and astute.  The data protection regulations need to be aligned with those of Europe and US though.

This is also why productivity may start to rise again.  Economists have been concerned that global productivity growth has slowed for years.  Some have put the blame of the European debt crisis to countries replacing slower productivity growth with borrowed money to maintain the standard of living.    Whatever it is, there is positive news for productivity in the information age.

Computing, which historians would establish as the first engine of the information age and thus push back the start of the information age towards the 1950’s instead of the conveniently assigned year 2000 by the media, has raised global productivity for decades. But it has so far penetrated only the government and the large organisations.  The SME, an IT-challenged sector and an Achilles heel of governments in their attempt to encourage comprehensive computerisation will finally do so with the cheaper internet software, open source and Cloud computing which reduces both costs and complexity.  They should also adopt more internet business rules for their business.  With SME being a large sector in most countries, productivity would be given a fillip.

But the internet would do much more (for productivity) and does so in a different manner, using mostly unused resources, directly and indirectly...the subject of the next post.

©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.