The Old Continent and the Internet

1. The Old Continent and the Internet Luc Soete International Institute of Infonomics University of Maastricht http://www.infonomics.nl “Internet for All. Equal Opportunities on the Net”, Berlin, 20th September 2001.

2. New economy evidence rapidly fading away… • Over the last year: dotcom crash, telecom problems, high tech sector, old economy strengths and now weaknesses… • Downturn of cycle undoubtedly linked to network features of the new economy and failure to understand the services basis of the new economy • Impact of terrorist attack on US: final blow to new economy or crucial element in bifurcation towards a global information society rather than a global mobile society?

3. Back to basics • Information represents a social good, not just an economic good in any society, rich or poor. • Its “economic” value depends though on particular use and context conditions. One of those conditions is access: value is a function of the network access (price, quality). Network access has been primarily nationally organized. • There is no “one” information society: there are many (European) information societies. Policy challenges between drive for further harmonization versus diversification

4. Structure of my brief talk • Information as a social good (Rawles) and its appropriation by economics: a historical overview and the limits of the e-economy… • Information economics: some basic micro-economic insights • On the need to move beyond economics: on open information, communication and non-monetized value. The challenges to Europe.

5. 1. Expanding economics: in space • Granting of property rights to physical public goods (classic example of fish pond); today a condition of sustainable development, still relevant in many developing countries. • Questions about inequality (see e.g. Marx in 1842 in the Rheinische Zeitung about the “new” inequality of poor people depending for their heating on collecting wood in now privatised forests).

6. in time • Expansion in the direction of the externalisation of household tasks also as a consequence of double income earners. Importance of opportunity costs of time (Gary Becker), enlargement of division of labour to traditional non-commercial but nevertheless valuable household activities. • New inequality in (in)voluntary nature of work and “free” time.

7. in information and communication • Obviously not a new phenomenon, but thanks to new ICT a radical increase in codification, access and tradability of information and communication. • Digital divide: “socialisation” of information and communication is not the same as “socialisation” of knowledge.

8. The appropriation of value out of information and knowledge depends in the first instance on the degree of “exclusiveness”. There are however clear limits to the creation of exclusion… But can one...

9. Concerns about appropriation • Hackers illustrating technical limits… friends or enemies (DMCA in US) • Clinton en Blair’s decision last year about public access to knowledge collected within the framework of the human genome project • The continuing Microsoft trial saga • Very different national responses: Australian policy of parallel imports with respect to IPR, Europe going for a fortress Europe strategy.

10. 2. Insights from micro-economics • Information goods have public good characteristics. This raises questions about “appropriation” • Goods information leads to reduction in transaction costs and an increase in competition, but poses “information asymmetry” problems • Information infrastructure leads because of positive feedback network effects associated with “non-rivalry” to monopoly formation (natural)

11. Information goods and appropriation • Appropriating value out of information and knowledge is based in first instance on the creation of “excludability”. There are, however, clear societal trade-offs between strong excludability and broad, open access. • Information and codified knowledge have only value in interaction with “tacit” knowledge. ICT access and use are likely to increase the efficiency of learning, hence the importance of open, broad access.

12. Goods and services information • Information overload represents also a cost factor: namely “searching costs” • Search engines are still rather primitive (“determining authority”, “collaborative filtering”, “global brain technology”) • There are difficulties in establishing trust and security in a virtual environment • Value to the individual to be the only one to know or value not to know (insurance systems)

13. Information infrastructure • Importance op open standards (comparison of B2B with EDI) for efficiency improvements • How to maintain open competition on the digital information highways characterized by very low marginal costs (non-rivalry) and strong network feedback mechanisms? • Importance of public role, often local, in granting access. Dark fiber concepts as the Stockholm initiative, raising back issues though about universal service and agglomeration “inequalities”

14. 3. Beyond economics • Economic value paradox of heaven and hell • Consumption externalities of physical versus information and content goods • Access issues for the citizen and infra-structural provisions raising new geographical inequality issues • Individual behaviour and collective behaviour in virtual environments and economics, raising individual inequality issues

15. Conclusions: On the need for access for all • As in the case of previous earlier technologies, the spreading of the use of ICT and the Internet has occurred most rapidly amongst the more educated, high income groups of society. • But differently from previous technologies, ICT and Internet in particular magnifies differences in learning capacities. • The emerging digital divide is hence very different from previous divides: it is not so much based on “ownership” or “income”, but more on individual differences in learning capabilities, responsibility, communication talents, etc.

16. Digital divide policy challenges How do we deal with this “new” inequality? Need for a European “new deal” called “cognitive Keynesianism” based on: • recognition of the importance of public and private investment in education, learning and knowledge more generally for growth and equality • “activating” education and developing incentives for such investments • adherence to “open” features of the science and knowledge system enhancing transmission and knowledge diffusion aspects, reducing the blocking aspects of IPRs • give political priority to importance of large social change: so far the knowledge driven society has been strong on economy and poor on society

17. New European challenges • Internet is more than new or e-economy. • Europe interesting case though: • National approach up to now to Internet and ICT diffusion. But what about @ + €? • Focus on “easy” diffusion: large cities, high incomes, highly skilled groups. Runs quickly out of users though • Relationship towards Europe’s social welfare model? Question not answered in Lisbon summit • European social institutional diversity: • barrier or source for future dynamism? • possible lessons for the rest of the world