The economy is now a networked economy. "Information goods" are becoming more important than traditional goods. Online businesses are a more substantial driving force than brick-and-mortar establishments. Some people even say that in this networked world centralized managerial hierarchies are obsolete; in the future, they will be replaced by decentralized, disaggregated, peer-to-peer communities.
These are all common claims. How can we make scientific sense of them and explain them with economic theory? Is government regulation needed to keep digital markets free, fair, and open? More generally, does the new economy call for a new kind of economics, or is traditional economics still useful?
My answer to all of these questions is bound up with an Austrian perspective: here we find the tools to analyze and understand what is going on.
I'm teaching a course in the Mises Academy that brings an Austrian perspective to these issues, focusing on recent examples, applications, and illustrations while grounding the discussion on basic economic principles. From my point of view, the Austrian paradigm allows us to separate the marvelous realities of the networked economy from the fallacies being spread by pop futurists.
We will begin with an overview of the "new economy." What is the economic impact of the web, inexpensive global wireless communication, social networks, and the like? Do they constitute new forms of competition, social interaction, community, and even a new kind of "democracy" itself? How have these changes in technology, along with changes in regulation and global competition, affected firm boundaries, competition, human-resource management, regulation, sources of financing, and the assignment of property rights?
We will then turn next to a series of specific applications for in-depth analysis, looking at information goods, network effects and path dependence, the economics of the internet (and of networks more broadly), and the legal, regulatory, and public-policy implications of networks and information technology. Throughout, we will ask to what extent economic theory — in particular, the economics of the Austrian school — can help us understand these issues and phenomena. One of our main themes will be that what appears to be new, on the surface, may not be as new as it seems!
Course outline:
Week 1: The World Is Changing. Or Is It?
Readings:
- Carl Shapiro and Hal R. Varian, "The Information Economy," in Information Rules: A Strategic Guide to the Network Economy (Cambridge, Mass.: Harvard University Press, 1998).
- Council of Economic Advisers, "The Creation and Diffusion of the New Economy," pp. 95–120 in Economic Report of the President (Washington: US Government Printing Office, 2001).
- Yochai Benkler, "Introduction: A Moment of Opportunity and Challenge," in The Wealth of Networks: How Social Production Transforms Markets and Freedom (New Haven: Yale University Press, 2007).
- Peter G. Klein, Review of Benkler, The Independent Review 13, no. 3 (Winter 2009).
- Kevin Kelly, "New Rules for the New Economy," Wired, September 1997.
- Hal R. Varian, "A New Economy With No New Economics," New York Times, January 17, 2002.
Week 2: Information Goods
Readings:
- Hal R. Varian, "Markets for Information Goods," manuscript, April 1998.
- "Knowledge Is Power," The Economist, September 21, 2000.
Week 3: Network Effects
Readings:
- Stanley J. Liebowitz and Stephen G. Margolis, "Network Externality," New Palgrave Dictionary of Economics and the Law (London: MacMillan, 1998).
- Douglass Puffert, "Path Dependence," EH.Net Encyclopedia of Economic and Business History, 2010.
Week 4: Economics of the Internet
Readings:
- Peter G. Klein, "Government Did Invent the Internet, But the Market Made It Glorious," Mises Daily, June 12, 2006.
- Nicholas Economides, "The Economics of the Internet," in Steven N. Durlauf and Lawrence E. Blume, eds., The New Palgrave Dictionary of Economics, second edition (London: Palgrave Macmillan, 2008).
Week 5: Intellectual Property, Regulation, and Public Policy
Readings:
- Murray N. Rothbard, "Patents and Copyrights," pp. 745–54 in Man, Economy, and State with Power and Market (Mises Institute, 2004).
- Stephan Kinsella, "The Case Against IP: A Concise Guide." Mises Daily, September 4, 2009.
- Thomas M. Jorde and David J. Teece, "Innovation, Dynamic Competition, and Antitrust Policy," Regulation 13, no. 3 (Fall 1990).
- Robert Hahn and Scott Wallsten, "The Economics of Net Neutrality," Economist's Voice, June 2006.
This is the first-ever online course using an Austrian perspective to explore the economics of the online world. It begins on January 19, and you can sign up right now.
