World-Wide-Welfare: A Micro-Economic Analysis of the New Economy
METEOR Working Paper No. RM/01/004
Posted: 9 Apr 2011
Date Written: 2001
In the wide and increasing attention for the so-called "new economy", two, not necessarily compatible, issues meet the eye. Firstly, most discussions apply macro-economic concepts, yet secondly their general gist is that the new economy demands new tools for analysis. In this paper, the existing micro-economic tool-kit is searched for theories with which a grip on economics associated with digitalized information is possible. To that end we introduce the distinction between commodity-information, information-commodities, and information-infrastructure. It allows for an application of micro-economic insights in various market structures and their welfare consequences to the new economy. Commodity-information is likely to have a beneficial effect on coordination issues, and thereby the potential to increase welfare. To fully exploit this potential, concerns related to the reliability of information and the confidence in buyers and sellers have to be dealt with. Information-commodities, however, carry the conditions for the rise of natural monopolies with their negative welfare effects. The same is to an even larger extent true for aspects of the information-infrastructure. Market developments in both categories are to be kept in check by government through competition policy, if the great world-wide-welfare potential of the new economy is to materialize.
Keywords: new economy, information, coordination, market structure, infrastructure
JEL Classification: D4, D8, L1, L4
Suggested Citation: Suggested Citation