Internet & Society Policy and Technology of Control Internet Economics: New Economic & Business Models Spring 2010 February 9

Internet & Society Policy and Technology of Control Theories, Thinkers and Frames Barlow Cluetrain Goldsmith and Wu Benkler Lessig

Internet & Society Policy and Technology of Control LAW MARKETNORMS ARCHITECTURE

Internet & Society Policy and Technology of Control What do we mean by regulation? Constraining Individuals Enabling Individuals Constraining Government Enabling Government

Internet & Society Policy and Technology of Control What kinds of things are suitable to regulate with each of the forces?

Internet & Society Policy and Technology of Control Wikipedia What did we learn?

Internet & Society Policy and Technology of Control

Internet & Society Policy and Technology of Control liveops.com

Internet & Society Policy and Technology of Control Individuals Communities States

Internet & Society Policy and Technology of Control Customers Workers Firms Markets

Internet & Society Policy and Technology of Control - Economic value - Innovation - Economic growth

Internet & Society Policy and Technology of Control Business models, economic models & the Internet What’s new?

Internet & Society Policy and Technology of Control The Long Tail

Internet & Society Policy and Technology of Control Long Tail Sale of less popular products is now a larger part of sales Lower search costs = more stuff available for more people Lower inventory and distribution costs make it becomes profitable to sell a wider variety. Netflix vs. the video rental store. Amazon vs. the bookstore. Does this lead to concentration of the aggregators?

Internet & Society Policy and Technology of Control Shirky and the Power Law

Internet & Society Policy and Technology of Control Economics and the Internet Knowledge economy & economic growth Public and private goods Intellectual property rights User-centric innovation

Internet & Society Policy and Technology of Control Economic history & economic growth Smith Solow Romer Coase

Internet & Society Policy and Technology of Control Adam Smith The power of markets Laissez faire economics The pin factory, scale and specialization

Internet & Society Policy and Technology of Control Economic growth 1.0 Robert Solow Labor, capital, savings & technological change

Internet & Society Policy and Technology of Control Economic growth 1.0 Capital Output Labor Technology

Internet & Society Policy and Technology of Control Economic growth 2.0 Paul Romer Endogenous growth theory Increasing returns to scale Incorporating human capital Monopolistic competition Non-rivalrous goods

Internet & Society Policy and Technology of Control Public and Private Goods ExcludableNon-excludable RivalSushiFishery Non-rivalCable TV Copyrighted work Public defense

Internet & Society Policy and Technology of Control Public Goods ExcludableNon-excludable RivalPrivate goodsCommon-pool resources Non-rivalClub goodsPublic goods (pure)

Internet & Society Policy and Technology of Control The Digital World: Public or Private? ExcludableNon-excludable Rival Non-rival

Internet & Society Policy and Technology of Control The Digital World: Public or Private? ExcludableNon-excludable Rival Internet infrastructure Spectrum 1960 Internet infrastructure Non-rival Internet infrastructure Applications Spectrum 2007 Information F/OSS

Internet & Society Policy and Technology of Control Public and Private Goods Rival vs. Non-rival = f(demand, physical supply) Excludability = f(institutions & policy)

Internet & Society Policy and Technology of Control Public goods Free rider problem Market failure leads to inadequate provision Rationale for government intervention Standard market solution – property rights

Internet & Society Policy and Technology of Control Property rights Exclusive right to decide use of resource Exclusive right to the services of the resource Exclusive right to transfer/sell the resources Absence of property rights is often cited as leading to a tragedy of the commons

Internet & Society Policy and Technology of Control Intellectual property Patents Trademark Copyright …may entail certain exclusive rights…

Internet & Society Policy and Technology of Control Tragedy of the Anti-commons Michael Heller The under-utilization of resources Patents and property rights Comedy of the commons

Internet & Society Policy and Technology of Control Governing the Commons Elinor Ostrom Governance of the commons Common-pool resources can be well managed without government regulation or privatization

Internet & Society Policy and Technology of Control Economic growth 2.0 Paul Romer Endogenous growth theory Increasing returns to scale Incorporating human capital Monopolistic competition Non-rivalrous goods

Internet & Society Policy and Technology of Control Economic growth 2.0 Physical capital Output Labor Technology Human capital