economic efficiency requires that there remain no unexploited opportunities to make someone better off without making someone else worse off.1 In the context of the provision of information,2 this subsumes two criteria. First, efficiency in production requires that society create information if and only if its cost is less than its combined value to all users. Second, efficiency in distribution requires that information be available to all users who value it at or above the marginal cost of distribution.3 For reasons discussed below, it is rarely possible to completely achieve either, let alone both, of these objectives. Nonetheless, society has developed a number of institutions that move it closer to their achievement. Where benefits are not quantifiable, one may have to be satisfied with achieving the agency’s goal (quantitative or not) at minimum cost.

Unlike most commodities, information goods such as geographic data have the property that once generated they can be used by one user without reducing the amount available for use by others. As previously noted, efficiency in production requires that society produce information if and only if the information’s combined value to all users exceeds the cost of production. For example, if user A values a particular piece of information at $5 and user B values the same information at $3, it is economically efficient to produce the information at any cost less than $8. For many types of information, the value to one user is independent of the number of other users. In these cases, the information’s value to society is simply the sum of its value to each individual user.4

1  

An alternative definition of efficiency is the state in which all scarce resources are directed to their most highly valued uses.

2  

We use the term information rather than intellectual property because whether information becomes intellectual property depends on whether the legal regime accords it that treatment. For example, information that is in the public domain is not intellectual property.

3  

Marginal cost refers to the cost of providing a copy to an additional user. This should be distinguished from the average cost of making copies for all users. “Cost of dissemination” (terminology in Office of Management and Budget [OMB] Circular No. A-130), and “direct cost of search, duplication, and review” (Freedom of Information Act [FOIA] terminology) usually set prices close to the economic concept of marginal cost, but differences may exist in particular circumstances. Unless otherwise noted, this report assumes that FOIA and OMB Circular No. A-130 require marginal cost pricing, and, for convenience, we adopt the phrase “marginal cost of distribution” to represent any of the legally or economically precise terms listed in the preceding sentence.

4  

However, there may be cases in which the value of information to any user is reduced when others have access to the same information. In such cases, the social value of the information will be less than the sum of the values to each exclusive user.



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