Speculative microeconomics for tomorrow's economy

First Monday

Volumn 5, Issue 2, 2000, Pages

  DeLong, J Bradford ^a,b,c   Froomkin, A Michael ^d  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c FEDERAL RESERVE BANK OF SAN FRANCISCO   (United States)

^d UNIVERSITY OF MIAMI   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 12444317461     PISSN: 13960466     EISSN: None     Source Type: Journal    
DOI: 10.5210/fm.v5i2.726     Document Type: Article

References (37)

1. This paper is a revised and updated version of "The Next Economy," placed on the World Wide Web in early 1997 at http://www.law.miami.edu/∼froomkin/articles/newecon.htm and http://econ161.berkeley.edu/Econ_Articles/newecon.htm, and presented at Brian Kahin and Hal Varian's January 1997 Harvard Kennedy School conference on the emerging digital economy. DeLong would like to thank the National Science Foundation, the Alfred P. Sloan Foundation and the Institute for Business and Economic Research of the University of California for financial support. We both would like to thank Francois Bar, Caroline Bradley, Steven Cohen, Joseph Froomkin, Brian Kahin, Tom Kalil, Ronald P. Loui, Paul Romer, Steven Cohen, Carl Shapiro, Andrei Shleifer, Lawrence H. Summers, Hal Varian, Janet Yellen and John Zysman for helpful discussions.
2. A version of this paper will appear in Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Property, edited by Brian Kahin and Hal Varian, (Cambridge, Mass.: MIT Press). ©2000, J. Bradford DeLong and A. Michael Froomkin.
3. Emphasis added. Adam Smith, The Wealth of Nations. London: 1776, Cannan edition, p. 423.
4. See, for estimates of growth in economic product and increases in material welfare over the past century, Angus Maddison, Monitoring the World Economy. Paris: OECD, 1994.
5. Within national borders, that is. Migration across national borders is more restricted today than ever before.
6. See Gerard Debreu, Theory of Value; an axiomatic analysis of economic equilibrium. New Haven, Conn.: Yale University Press, 1959.
7. In Britain at least. Inhabitants of West Africa or India in Adam Smith's day had very good reason to dispute such a claim.
8. See Jeffrey K. MacKie-Mason and Hal R. Varian, 1996. "Some Economic FAQs About the Internet," Journal of Electronic Publishing, volume 2, number 1 (May), at http://www.press.umich.edu/jep/works/FAQs.html;
9. Lee McKnight and Joseph Bailey, 1996. "An Introduction to Internet Economics," Journalof Electronic Publishing, volume 2, number 1 (May), at http://www.press.umich.edu/jep/works/McKniIntro.html
10. When the Wall Street Journal sells a Berkeley economics professor an annual subscription to its e-version, does it imagine that the same user's identification-and-password might be used in one day to access the e-version by the professor at work, by a research assistant working from home on the professor's behalf, and by the professor's spouse at another office? Probably not.
11. See George A. Akerlof, 1984. "Labor Contracts as Partial Gift Exchange," In: George A. Akerlof. An Economic Theorist's Book of Tales. Cambridge, Eng.; New York: Cambridge University Press.
12. That excludability is a very important foundation for the market is suggested by the fact that governments felt compelled to invent it. Excludability does not exist in a Hobbesian state of nature. The laws of physics do not prohibit people from sneaking in and taking your things; the police and the judges do. Indeed, most of what we call "the rule of law" consists of a legal system that enforces excludability. Enforcement of excludability ("protection of my property rights," even when the commodity is simply sitting there unused and idle) is one of the few tasks that the theory of laissez-faire allows the government. The importance of this " artificial" creation of excludability is rarely remarked on. Fish are supposed to rarely remark on the water in which they swim. See Brad J. Cox, 1996. Superdistribution: Objects as Property on the Electronic Frontier. Reading, Mass.: Addison-Wesley.
13. In large part because the government did not restructure property rights to help them. Had the government made the legal right to own a TV conditional on one's purchase of a program-viewing license, the development of the industry might well have been different. And such a conditioning of legal right would have been technologically enforceable. As British billboards used to say: "Beware! TV locator vans are in your neighborhood!"
14. Newton N. Minow, 1964. Equal Time: The Private Broadcaster and the Public Interest. New York: Atheneum, pp. 45, 52;
15. Newton N. Minow and Craig L. LaMay, 1995. Abandoned in the Wasteland: Children, Television, and the First Amendment. New York: Hill & Wang.
16. It is worth noting that in the debate over Microsoft in the second half of the 1990s, virtually no one proposed a Federal Operating System Commission to regulate Microsoft as the FCC had regulated the Bell System. The dilemmas that had led to the Progressive-era proposed solution were stronger than ever. But there was no confidence in that solution to be found anywhere.
17. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," Rand Journal of Economics, volume 16, number 3 (Autumn), pp. 319-327, abstract at http://www.rje.org/abstracts/abstracts/1985/Autumn_1985._pp._319_327.html
18. See Charles H. Ferguson, 1999. High Stakes, No Prisoners: A Winner's Tale of Greed and Glory in the Internet Wars. New York: Times Business.
19. See Jean Tirole, 1988. The Theory of Industrial Organization. Cambridge, Mass.: MIT Press.
20. See generally The GNU Project (free software) and OpenSource.org (open source generally).
21. See the GNU General Public License.
22. See Categories of Free and Non-Free Software.
23. In January 1997, Bargain Finder shopped at nine stores: CD Universe, CDNow!, NetMarket, GEMM, IMM, Music Connection, Tower Records, CD Land, CDworld and Emusic. A sample search for the Beatles' White Album in January 1997 produced this output: I couldn't find it at Emusic. You may want to try browsing there yourself. CD Universe is not responding. You may want to try browsing there yourself. $24.98 (new) GEMM (Broker service for independent sellers; many used CDs, imports, etc.) I couldn't find it at CDworld. You may want to try browsing there yourself. $24.76 Music Connection (Shipping from $ 3.25, free for 9 or more. 20 day returns.) CDNow is blocking out our agents. You may want to try browsing there yourself. NetMarket is blocking out our agents. You may want to try browsing there yourself. CDLand was blocking out our agents, but decided not to. You'll see their prices here soon. IMM did not respond. You may want to try browsing there yourself.
24. See http://www.clickthebutton.com/nosite.html
25. Interview with Tedd Kelly, executive director of eCollegebid, consultants for educational resources and research, 1 November 1999.
26. See http://www.auctionwatch.com/company/pr/pr5.html
27. Tibor Scitovsky, 1976. The Joyless Economy: An Inquiry Into Human Satisfaction and Consumer Dissatisfaction. New York: Oxford University Press.
28. E.g. Michael H. Goldhaber, 1997. "The Attention Economy and the Net," First Monday, volume 2, number 4 (April), at http://firstmonday.org/ issues/issue2_4/goldhaber/
29. A. Michael Froomkin, 1996. "Flood Control on the Information Ocean: Living With Anonymity, Digital Cash, and Distributed Databases," 15 University of Pittsburgh Journal of Law and Commerce 395, and at http://www.law.miami.edu/∼froomkin/articles/ocean.htm
30. Nicholas Negroponte, 1996. "Electronic Word of Mouth," Wired, volume 4, number 10 (October), p. 218, and at http://www.hotwired.com/wired/4. 10/negroponte.html
31. Judge Posner suggests that this is the economically efficient result. See Richard A. Posner, "Privacy, Secrecy, and Reputation," 28 Buffalo L. Rev. 1 (1979);
32. Richard A. Posner, "The Right of Privacy," 12 Ga. L. Rev. 393, 394 (1978).
33. Compare, however, Kim Lane Scheppele, Legal Secrets 4353, 111126 (1988);
34. see also James Boyle, "A Theory of Law and Information: Copyright, Spleens, Blackmail, and Insider Trading," 80 Cal. L. Rev. 1413 (1992) (arguing that most law and economic analysis of markets for information are based on fundamentally contradictory assumptions).
35. Brad J. Cox, 1996. Superdistribution: Objects as Property on the Electronic Frontier. Reading, Mass.: Addison-Wesley.
36. For example, consider this: "Technology has set into motion dazzling challenges to market mechanisms whose free market dynamism is being impeded by anti-competitive handcuffs imposed by participants and sanctioned by regulators. A free market is nurtured by a culture of disclosure and equal access to information that fuels rather than fetters the marketplace. The dangers are real and the opportunities abundant. The efficiency and expanse of an unburdened open market is limitless. Tear down the barriers to competition, remove the obstacles to greater innovation, spotlight all conflicts of interest, and unleash the flow of timely and accurate information, and our markets - like never before - will be driven by the power and the brilliance of the human spirit." SEC Chairman Arthur Levitt, 1999. "Quality Information: The Lifeblood of Our Markets," at http://www.sec.gov/news/speeches/spch304.htm (delivered October 18).
37. See generally A. Michael Froomkin, 1996. "Flood Control on the Information Ocean: Living With Anonymity, Digital Cash, and Distributed Databases," 15 University of Pittsburgh Journal of Law and Commerce 395.