Fostering Research on the Economic and Social Impacts of Information Technology (1998) / Chapter Skim
Currently Skimming:
2 Illustrative Examples and Unanswered Question
2 Illustrative Examples and Unanswered Question
Pages 21-77
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From page 21... ...
Since the range of potential impacts associated with information technology is vast, the examples and issues outlined below are organized according to the domains in which they are extraordinarily important: private life, including households and community; social infrastructure; and business, including labor and organizational process. Cutting across all of these are issues integral to life in an information economy and society among them protection of intellectual property, pricing of information, and electronic commerce.
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From page 22... ...
22 100 90 80 70 ~ 60 o a! so 4J 40 30 20 10 o FOSTERING RESEARCH ON IMPACTS OF INFORMATION TECHNOLOGY ELF to ~ ~+~1 by ++~ to $+ o o o o o o o 0 + o ~ o o X x X: o ooze °x o `'o ~_ r r I 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Year Electric service Telephone 0 Cable x VCR -PC 0 Refngerator + Own autos FIGURE 2.1 Penetration of various household devices in the U.S.
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From page 23... ...
, organized by social scientists at Carnegie Mellon University, is a field experiment documenting the use and effects of household computers in more than 100 households in Pittsburgh, Pennsylvania. Families were selected for demographic diversity, and a matched sample of eligible but not-selected families was also tracked.
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From page 24... ...
One study of this topic, using Nielson data from more than 14,000 households, discovered that Internet "drop-outs" were less likely than those who continue using the Internet to have developed social relationships and roles online (Chung, 1998~. Research on differential impacts holds a very important message to those, such as policy makers and others, wishing to understand the interactions between technology and society as a single, uniform impact: they will forever be disappointed or deluded.
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From page 25... ...
For as long as community has remained intact, for example, libraries and churches and schools have functioned to bring people together, to educate newcomers, and to reinforce the virtues of citizenship. Today the number of potential secondary anonymous relationships has increased vastly as individuals seek to accomplish tasks by relying on mediated information received from strangers.
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From page 26... ...
26 FOSTERING RESEARCH ON IMPACTS OF INFORMATION TECHNOLOGY 2.1.4 Education Increased use of computing technologies in K-12 education is giving rise to important new areas for social science research. The Internet has penetrated rapidly and extensively into U.S.
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From page 27... ...
Such a study can take advantage of natural variation across states and school districts and would not require active intervention.2 This mapping of the range of endeavors under way would lay the foundation for the second phase, a more intensive study of how best to use computers in education. It would be worth considering how to organize, fund, and research a small number of schools as demonstration sites where work practices and organizational structures are radically redesigned to improve teaching and learning through technology.
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From page 28... ...
A series of discussions is called for that would involve both the public sector and the private sector and would include educators, parents, technologists, and researchers in exploring the feasibility and usefulness of such demonstration projects. A significant opportunity to study the use of information technology in the public schools is presented by the Schools and Libraries Universal Service Fund, which was established as part of the Telecommunications Act of 1996.
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Historically, in several instances, the political demand for universal service has repeatedly induced Congress to ensure universal service at uniform rates. For example, a postal service available to all was established by the Constitution.
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Sooner or later the political calculus tips the balance toward a policy of guaranteeing universal service. The second principle that has been applied is the desirability of equal opportunity.
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Various comments to the FCC in its recent docket on universal service reform indicated that the current structure of pricing in telephony is costing the United States billions of dollars, with very little impact on penetration rates for basic telephone service. These deadweight losses arise because the prices of services such as long-distance calling, for which demand is sensitive to price, are set well above cost, and the prices of price-insensitive services, such as basic service, are often below cost, in direct violation of the economic principles of efficient pricing to cover joint and common costs ("Ramsey pricing"; see Kahn, 1970~.
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From page 32... ...
According to this study, the monthly charge for basic access was not a significant factor in their choice of whether or not to purchase telephone service. Public policy debate surrounding the 1996 Telecommunications Act raises new and unresolved research questions.
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From page 33... ...
A majority of the large national hotel chains have set up their reservations centers in Omaha, Nebraska, leveraging large computer databases and cheap long-distance telephone service. Even as it becomes easier to transmit data across both state and international borders, tracking or regulating these activities remains very difficult.
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From page 34... ...
34 FOSTERING RESEARCH ON IMPACTS OF INFORMATION TECHNOLOGY York, Washington, New Orleans, Chicago, Los Angeles, San Francisco, and Seattle and quite possibly resort business centers. Those urban centers should thrive, while smaller or less attractive cities will share the fate of the older suburbs and struggle with declining populations, jobs, and property values.
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From page 35... ...
One implication is that work tasks could be designed in such a way that there is an identifiable output that the home worker or the telecommuter is delivering. 2.3.2 Labor and Information Technology Labor Market and Information Technology The popular press is filled with anecdotal evidence about the negative effects of information technology on employment.
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Overall, in 1950, 37 percent of the employed labor force was information workers; by 1990,55 percent of the labor force was information workers. What accounts for this dramatic change in labor market structure?
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(19941. They found that the rate of investment in computers was positively correlated with higher demand for skilled workers relative to less skilled workers.
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Unfortunately, there is relatively little data on the extent to which people value nonmarket services and virtually none on how computerization might affect such services. Effects of Information Technology on Labor and Skill Demand The evidence on information technology and wage inequality suggests that computers may be partly responsible for the relative increase in the demand for skilled, educated workers.
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From page 39... ...
2.3.3 Organizations and Processes Measuring Productivity As noted in Chapter 1, while the rapid pace of technological change in computing and communications has been astounding, it has been hard (at least until very recently) to find evidence for improvements in productivity as a result of these dazzling technological innovations.9 A fundamental problem is that many of the variables typically measured are becoming less relevant in the emerging information economy.
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Replacing old information technology with new while retaining the same work practices and
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While there are encouraging reports (see CSTB, 1994a; Brynjolfsson and Hilt, 1996, 1997) that perhaps the productivity paradox is no more, there yet remains substantial work to be done in understanding what work practices and organizational struc
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From page 42... ...
That is the challenge facing the social scientists studying the new industrial frontier. Information Technology and Organizational Structure Both firms and markets can be thought of as sophisticated institutions for processing information about desires, costs, capabilities, and constraints (Galbraith, 1977; Hayek, 1945; Radner, 1992; Sah and Stiglitz, 1986~.
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From page 43... ...
Research is needed to extend existing theories about organizations and to learn from the organizational changes and experiments that are already happening (see Box 2.5~. Results of such research would provide a sound basis for corporate "re-engineering" efforts that seek to make better use of information technology.
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From page 44... ...
Firms and social scientists could collaborate on survey design and data collection; results would benefit the participating companies as well as the broader research community. Process Handbook In recent years, a number of striking examples have emerged of how information technology can be combined with the redesign of organizational processes or the invention of new processes to transform the way organizations work.
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From page 45... ...
In fact, a prototype for such a database a process handbook has been created by Thomas Malone and colleagues at the Massachusetts Institute of Technology. The handbook is intended to help people imagine new organizations and organizational practices, redesign existing organizations, share ideas and "best practices" about organizational processes, and generate or select software to support or analyze these processes.
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From page 46... ...
technical limitations disciplines that rely on photographs and drawings used computer networks less.l l Even within a single scientific field, e-mail can differentially benefit scientists who otherwise could be at an information disadvantage. For example, according to one study, physical oceanographers who work at inland universities or laboratories derived more benefit from each additional e-mail message sent or received than did oceanographers who worked at coastal universities or laboratories (Hesse et al., 1993)
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From page 47... ...
In one field trial of the tips system with 1,300 field support people, Xerox found that about 15 percent of the employees submitted tips and that the tips database was accessed more than 1,000 times a day (Bell et al., 1997~. The technology per se in this system is not at the forefront of computer science.
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From page 48... ...
Making appropriate choices requires attention to a range of considerations and perspectives and can be informed by economic and historical analysis. Economic Analysis of Intellectual Property Rights The classic economic study of the trade-off between innovation and intellectual property protection is that of Nordhaus (1969)
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From page 49... ...
Knowing how intellectual property protection strategies and market structure interrelate is clearly important for understanding how secure hardware might work in protecting intellectual property rights. Among the variety of alternatives for protecting intellectual property are fixed licensing rates, media taxes, and statistical sampling.
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English bookstores could not keep up with the demand for novels and romances, and so they started renting them out. These circulating libraries, as they were called, were denounced by the literate classes as "slop shops of literature." They were
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The video rental stores changed all that. Like the circulating libraries 200 years earlier, they brought a new form of entertainment to the masses.
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From page 52... ...
Far from killing Hollywood, video was Hollywood's savior. Just as in the case of circulating libraries, video rental created a huge new market for both renting and buying the product.
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A more recent study looked specifically at the privacy concerns and experiences of computer users (Louis Harris & Associates and Alan F Westin, 1997~.~9 This survey found that while many people are concerned about the confidentiality and security of personal information online, there are very few
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From page 54... ...
The report also found lower trust in online institutions and communication: computer users had less confidence in online businesses than in other institutions and were more concerned
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Just as in the case of private data, crosstabulation of innocuous data sets can identify seemingly anonymous subjects. Certainly, social scientists must develop a code of practices, ethics, and perhaps regulations that will help deal with these issues.
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for a thorough study. The online Information Economy Page on Security, Privacy, and Encryption2i is also a valuable resource.
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From page 57... ...
For example, comparative studies to determine the effects of the availability of electronic preprints in particular scientific disciplines as well as other information-sharing and dissemination practices of various disciplines could yield useful insights. Further elucidation of questions concerning information overload can come from microlevel studies of technology, information viewing practices, and information-seeking behavior.
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From page 58... ...
How does the credibility established by peer review conducted prior to publication in scientific journals translate to the digital environment where researchers can reach a wide audience without publishing in traditional journals? In a highly competitive environment, the costs for information production and distribution are sometimes driven to the lowest possible level.
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From page 59... ...
How will people recognize and manage bias in information, such as that which may be present in advertiser-sponsored content? The Information Gap The typical formulation of the gap separating information "haves" and "havenots"27 is highly biased toward a definition of literacy as the ability to read and write written text, and even somewhat biased toward scholarly communication.
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From page 60... ...
Quite diverse content distributed by cable television, such as the History Channel, the Cooking Channel, and the like, is supported by finely tuned advertising. This line of reasoning helps to explain why broadcast television, which until recently depended almost exclusively on advertising revenues, is often perceived to appeal to the least common denominator.
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From page 61... ...
For the case of bundling, this type of aggregation has been studied in a number of articles in the economics literature (e.g., McAfee et al., 1989; Schmalensee, 1984~. The analysis shows that the benefits of aggregation depend critically on the low marginal cost of reproducing digital information and the nature of the correlation in valuations for the goods: aggregation is less
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Marginal Cost r , Quantity q FIGURE 2.3 Deadweight loss from sales of a zero-marginal-cost information good. Assume that after the first unit, marginal production costs, denoted by c, are close to zero.
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20 15 '' 10 5 0.0 0.25 0.5 0.75 1 Quantity (for bundle) FIGURE 2.5 Demand curve for a bundle of 20 information goods with independently distributed uniform valuations.
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From page 65... ...
Collection of data, analysis, and further theoretical work would all be helpful. 2.4.7 Network Externalities Economists say that a network externality exists when one consumer's demand for a product or service depends on how many other consumers purchase that service.
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. In recent years Congress has authorized the Federal Communications Commission (FCC)
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His model indicates that when electronic marketplaces reduce the costs to the consumer of searching for the lowest price, there will be (1) an improvement in overall economic efficiency and (2)
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From page 69... ...
did not find much evidence that prices on the Internet were any lower or less dispersed than prices for the same goods sold via traditional retail channels. Their analysis was based on data from 52 Internet and conventional retailers for 337 distinct titles of books, music compact disks, and software.
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From page 70... ...
The information economy calls for new economic institutions such as "certificate authorities" that certify the connection between legal identities and possession of cryptographic keys a public-key infrastructure. Large certificate issuers include Versign, which has close ties to the credit card issuer Visa, and GTE, which has close ties to MasterCard.
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From page 71... ...
He cites earlier studies that suggest that the welfare effects of price discrimination will be benign from the viewpoint of overall welfare, but price discrimination may certainly affect the division of economic gains between consumers and firms. These earlier studies typically assumed a monopolistic market structure, which may or may not be appropriate for electronic commerce.
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From page 72... ...
The dramatic information-centric changes that have occurred across all societies in recent decades suggest that the social forces enabled by the development of information structures and the prevalence of communication behaviors be measured. More fully developed, a set of quantitative information indicators offers opportunities for comparatively measuring community information assets, public participation, interconnectedness, social capital, information poverty, and .
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From page 73... ...
A measure of the facility of electronic communication, and an evaluation of the development of this dimension of the information infrastructure; Information quality of life index. Similar to an index produced by the Organisation for Economic Cooperation and Development, an index that would attempt to evaluate the qualitative levels of communication available to individuals; Leading information indicators.
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From page 74... ...
Rather it is the entire constellation of economic and organizational strategies, managerial perspectives, and work practices within which computing technology is embedded that affects wage inequality. One possible response is improved training of workers for IT-related jobs.
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From page 75... ...
While considerable research has been conducted on the effect of different patent regimes on innovation, little has been studied regarding the consequences of different copyright protection schemes (see section 2.4.1~. Theoretical work and empirical research on different copyright protection regimes will help inform future actions to protect intellectual property.
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or near-VOD would be lucrative and popular. However, early experiments by the cable industry showed that consumer response to VOD was unlikely to generate sufficient revenue to justify investment in interactive cable systems.
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Radio and television broadcasting and e-mail are examples of push technologies, because they both transmit information regardless of whether or not anyone specifically requested it; the World Wide Web is an example of pull technology since a page must be requested before it is sent. Note that push technologies can be used over the Internet as well; examples include the PointCast system, which delivers customized news to users' computer desktops.
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