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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

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
Overview Technologies

  • 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
Basic Theory Technologies

  • Economic Processes

  • Information & Communication Processes

  • Economics  ICT

  • ICT  Economics

  • History: Economics  ICT


Basic theory economic processes 1

society Technologies

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
Basic Theory – Economic Processes 2 Technologies

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
Basic Theory – I & C Processes 1 Technologies

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 Technologies

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
Basic Theory – Economics Technologies 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
Basic Theory – Economics Technologies 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
Basic Theory – ICT Technologies 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
Basic Theory – ICT Technologies 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 11
Basic Theory – Economics Technologies ICT 1

Prevailing direction of causality: From economics to ICT


Basic theory economics ict 21
Basic Theory – Economics Technologies ICT 2

Swarming:


More theory
More Theory Technologies

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
More Theory – Money as information technology 1 Technologies

General Equilibrium Theory:

typical

typical

Observed quantities and coins carry information:

Strong welfare implications !


More theory money as information technology 2
More Theory – Money as information technology 2 Technologies

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
More Theory – Technology in search models Technologies

Example: Searching for a low price shop

No information acquired

Information bought

Use information if

that is


More theory production of public good information

Firm 2 Technologies

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
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!


More theory production of models

World (Model M informationW)

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
From Theory to Policy information

  • A model for Austria

  • How information technology enters

  • Some quantitative results


From theory to policy a model for austria
From Theory to Policy – A model for Austria information

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
From Theory to Policy – How information technology enters information

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
From Theory to Policy – Some selected results 1 information

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



More empirical findings
More Empirical Findings information

  • Recent Eurostat statistics

  • Results from the S.T.A.R. project

  • The productivity paradoxon






More empirical findings s t a r 1
More empirical findings – S.T.A.R. 1 information

STAR Website

www.databank.it/star.


More empirical findings s t a r 2
More empirical findings – S.T.A.R. 2 information

  • 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 !