Economic impacts of information and communication technologies
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Economic Impacts of Information and Communication Technologies. Univ.-Prof.Dr. Hardy Hanappi Institute of Economics University of Technology of Vienna http://www.vwl.tuwien.ac.at/hanappi/. Overview. 1 Basic Theory: From economic processes to technological progress, and back 2 More Theory:

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Economic Impacts of Information and Communication Technologies

Univ.-Prof.Dr. Hardy Hanappi

Institute of Economics

University of Technology of Vienna

http://www.vwl.tuwien.ac.at/hanappi/


Overview

  • 1 Basic Theory:

    From economic processes to technological progress, and back

  • 2 More Theory:

    The role of technology in dynamic economic models

  • 3 From Theory to Policy:

    A consistent framework for analysis applied in Austria

  • 4 More Empirical Findings:

    Selected recent results of economic ICT impacts in Europe


Basic Theory

  • Economic Processes

  • Information & Communication Processes

  • Economics  ICT

  • ICT  Economics

  • History: Economics  ICT


society

Basic Theory – Economic Processes 1

Economics:

Primary metabolism of society

primary distribution

process

production

time

time

secondary distribution

process

Classical view of

reproduction and

growth

consumption


Basic Theory – Economic Processes 2

Commodity producing societies

Distribution 1

production

Distribution 2

consumption

organisation

commodities

reproduction

growth

revenues

production units

markets

expenses

commodities

households

labour

expenses

wages

households


Basic Theory – I & C Processes 1

What is Information?

  • Periodicity: years, days

  • Living systems: adaption to periodicity, copy in structure, memory is impicit in evolved structure

  • Animals & Humans: memory explicit in individuals, used as model for anticipating behaviour

memory  models

individual  society

language


Basic Theory – I & C Processes 2

Basic Theory – I & C Processes 2

Commodity production:

Stable reproduction  stable money flows

coercive

Regulation of behaviour by power

institutions

ideological

 Market mechanisms, money, price systems (information technology)

Capitalism

Production of new information becomes necessary for the survival of production units

 new production processes, new products, new utilities, new institutions


Basic Theory – Economics  ICT 1

Maintenance of profitrate  new technology

Level of profits:  = revenue - cost

revenue = price x quantity

cost = wagerate x labourtime + interestrate x capital

Volatility of profits:  (profitrate) = f (stable relations)

within firms

Stable relations

between firms

between states


Basic Theory – Economics  ICT 2

New technology must drive:

price  : market power, quality (actual or perceived), price ratchets

quantity  : new products (versions), new needs (discovered or produced),

quantity ratchets, expanding geographical markets

wagerate  : against unions, lower reproduction cost, globalisation

labourtime  : technology, cheaper regulation (lower taxes)

interestrate  : finance versus industrial capital

capital  : technology, cheaper regulation (lower taxes)

infrastructure cost  : public institutions (education, health, transport, ...)

cost of social peace  : law, social identity, power systems, ...


Basic Theory – ICT  Economics 1

Information technology provides information commodities

  • Large amounts, very low variable cost

  • Bottleneck: opportunity cost of consumers (getting attention)

  • Bottleneck: selection of relevant information (names, „brands“)

  • Bottleneck: Decreasing information processing capacities

 Changing firm structure, changing institutional structure

 Global shake-up of profitrates


Basic Theory – ICT  Economics 2

Communication processes (subset of information processes)

Defining characteristic: temporal aspect

Information usually is accumulated in knowledge:

knowledge(T) = knowledge(T-1) + information(t) – obsolete information(t)

But:

Utility Ui(communication) of entity i builds up in time, is satisfied by communication and vanishes again. E.g. phone calls, music ...

Echo effects: not receiving communication signals is interpreted as signal!

 filling in attention gaps, economy of time, substitution strategies


Basic Theory – Economics  ICT 1

Prevailing direction of causality: From economics to ICT


Basic Theory – Economics  ICT 2

Swarming:


More Theory

Selected model types describing technolgy in an economic context:

  • Money as information technology

  • Technology in search models

  • Production of public good information

  • Production of finite knowledge set information

  • Production of models


More Theory – Money as information technology 1

General Equilibrium Theory:

typical

typical

Observed quantities and coins carry information:

Strong welfare implications !


More Theory – Money as information technology 2

Disequilibrium theories:

  • Prices signal needs of households

  • Markets transmit need signals to production units

  • Production units signal their technological possibilities to markets

  • Markets transmit technology signals to households

  • Exchange takes place in market disequilibrium

  • Adaption takes place in expectations disequilibrium

  • Evolution of needs due to disequilibrium

  • Evolution of technology due to disequilibrium


More Theory – Technology in search models

Example: Searching for a low price shop

No information acquired

Information bought

Use information if

that is


Firm 2

no R&D

R&D

Firm 1

no R&D

0, 0

10, -10

R&D

-10, 10

5, 5

More Theory – Production of public good information

The R&D game:

Not enough R&D in basic research!

 Public funding

 Patent system

Cheaper and more advanced ICT cannot help.


More Theory – Production of finite knowledge set information

Tragedy of the Commons model

Several firms produce information in the same finite knowledge area.

Since for every single firm additional R&D still is profitable, they

still carry on, even if (from an aggregate point of view) it would be wise

to move to a new area of research.

 Clear property rights

To much R&D is carried out!

 Promote cooperation

Advanced ICT might even worsen the problem!


World (Model MW)

z0 = w0 + 0 u1 + ß0 u2

Entity 1 (Model M1)

z1 = 1 u1 + ß1 u2

Entity 2

Original Model M2:

z2 = ß2 u2

Modified Model MM2:

z2=(1-)ß2 u2+(1Mu1+ß1M u2)

Ideological Model MM:

z1M = 1M u1 + ß1M u2

More Theory – Production of Models

Ideological Power

The cheaper ideological influence (advanced ICT) the less direct coercive

power is needed!


From Theory to Policy

  • A model for Austria

  • How information technology enters

  • Some quantitative results


From Theory to Policy – A model for Austria

sectors

cons.

inv.

gov.exp.

Input Output

Analysis

sectors

aij

Final demand components

wages

GDP

distribution

profits


From Theory to Policy – How information technology enters

1. As a sector in IO-analysis

2. Modified by R&D policy

Public R&D expenditure (socioeconomic structure)

Innovation

Model

AUSTRIA 3

Macroeconomic Rsults

General University Fund

Human Capital

Model

Regulations


From Theory to Policy – Some selected results 1

Four policies: Demand side, supply side, deregulation, education initiative


From Theory to Policy – Some selected results 2


More Empirical Findings

  • Recent Eurostat statistics

  • Results from the S.T.A.R. project

  • The productivity paradoxon


More empirical findings – Eurostat 1


More empirical findings – Eurostat 2


More empirical findings – Eurostat 3


More empirical findings – Eurostat 4


More empirical findings – S.T.A.R. 1

STAR Website

www.databank.it/star.


More empirical findings – S.T.A.R. 2

  • Ambivalent influence of ICT on employment

  • Peacemeal engineering succeses in e-commerce

  • Slow recovery from the stock exchange bubble

The productivity paradoxon starts to be solved !


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