CHAPTER 22 Cybernomics

 Economics driven by a huge digital machine, the Internet

The Digital Age  Because numbers, or digits, have become so vital to our lives, economists are calling this the “Digital Age”. 4.gif

E-Commerce  Business done online.  Impacting business-to- business relationships, as well as, business to consumer, and consumer to business relationships.  Shop online, advertise online, pay bills online

The Customer Wins  Because so many companies are online now, customers can compare quality and price of products online without ever going to the store  saves consumer time and $  Customer will buy from the company that delivers the most “bang for their buck”  companies have to meet the customers needs or face bankruptcy

A Marketing Revolution  Marketing- all of the activities needed to move goods and services from the producer to the consumer  Marketing Changes- reduced cost or free delivery the more you buy; coupons via , pop-up ads, etc.  Cybercommunities- Customers talk online via blogs, twitter, consumer advocacy websites, etc.  bad press travels fast  producers (companies) very conscious about keeping the customer happy

The Information Age  The period of time when telecommunications and computer technology gave information significant economic value  Today’s consumer is much more knowledgeable about the value of the products they buy  knowledge is power, economic power  May be as significant to altering the way people do business as was the Industrial Revolution

A Knowledge Economy  An environment in which knowledge is at least as valuable as tangible goods  Products of a knowledge economy are different from the products of an industrial economy  Knowledge products increase in value the more they are they are used, while industrial products decrease in value the more they are used. Ex: If you buy a computer software program and don’t use, it is of no value. Each time you use it, you have benefited from it without losing any value. With shoes, however, every time you were them, you taken value out of them, they are one day closer to being worthless because of wear and tear.

 Have no spatial boundaries  can be used simultaneously by people in different countries  Have two parts, the product and the idea. The product is the physical item (disk); the idea is more valuable because it can be customized to meet your needs. Ex: if two different people buy the Excel program, one may use it to budget for their wedding, while another may use it manage the costs of their business, etc.  Provides jobs for both highly skilled, creative people (ideas) and for less-skilled manufacturing workers (product)

Innovation  Creativity, a factor not always given the credit it deserves by economists. Creativity, or innovation, can spur rapid economic growth, and social and economic change. Ex: the automobile changed the entire economy of the US.

Waves of Innovation  Major innovations going back 500 years have prompted social, political, and economic revolutions that have ushered in the start of new business cycles.  Ex: The printing press  spread of new ideas and technology  new ships and compasses, etc  Age of Exploration, Spanish exploration and Colonization of the Americas  Columbian Exchange  Age of Absolutism

Schumpeter Cycle  Economist Joseph Schumpeter studied the history of major business cycles and the innovations that prompted them

Issues in Cybernomics  Safe Internet Trade  Protecting Intellectual Property  Protecting Consumer Privacy  Helping Developing Nations catch up with the rapidly changing global economy