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 Whats 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