Valuing Information & Instrumental Goods

Abstract

This essay offers a framework for valuing information as process capital by combining ideas from economics and computer science. Drawing a distinction between data and procedures, it augments the traditional Bayesian model that treats information as a change in uncertainty with elements that permit information to be treated as reusable instructions. It then applies the standard hedonistic methods — used in marketing to value tangible goods — to information goods. This leads to a generalized method for ascribing value that can be applied both to procedural information such as software, blueprints, and production know-how as well as to arbitrary resources that have instrumental qualities, that is, they represent tools for effecting outcomes. This approach has the added advantage of supporting efficient information transfers since consumers need not always see the information they are about to buy.