Background for the « Ecology of Information Exchanges » session

Disclaimer

The background presentation and the questions have been prepared by Philippe Aigrain. The included statements do not necessarily represent the official position of the European Commission.

Definitions and scope

Information exchanges: Many activities of the human mind result in some inscription or encoding of an intermediate product, which can then be processed, transmitted, displayed, perceived by other humans thanks to technical mediations. In the following, information exchanges will designate the processes that go from the human intention of creating these intermediate products to convey some information, knowledge, thought, beauty or pleasure to the human activities of using them. These intermediate products can be analogue (such as letters and analogue coding of sound signals in telephone conversation) or digital (such as encoded text in email messages, HTML Web pages or digital broadcasting). Sometimes information is directly produced by humans (e.g. when someone writes a paper); sometimes humans set up an automatic process to produce it, for instance the collection of meteorological data. There is no strict border between information and non-information physical goods, but it is hoped that common sense can sort out where to draw the limit in specific instances. When discussing how people use their time, it may be worth to include also many direct exchanges (such as face-to-face conversation), since important activities are conducted using a combination of mediated and direct exchanges. By focusing on human activities of producing, processing, distributing, accessing and using information, it is intended to avoid entering into philosophical debates on the limits between data and information or about why something acquires the quality of being « information ». In contrast, issues such as information quality and the quality of the relation users have to information appear to be more interesting description layers.

General Background

Human beings and organisations are engaged in a wide variety of information exchanges, using different technical mediations. This has been a fact for many centuries. Through time, a variety of memory and communication media have been developed, each characterised by its own production and transport techniques, its mechanisms for accessing and using information, its funding mechanisms. Human activities as a whole organised themselves around and by making use of these forms of information exchanges (for instance person-to-person communication has undergone major changes further to the apparition of telephone). At a given time, and in a given geographical area, a balance is established between how these information exchanges species make use of some rare resources, most notably the time of people, financial resources, and the ability of people and organisations to contribute to the creation of new information. This is a dynamic equilibrium but it exhibits remarkable structural stability other relatively long periods of time.

Present on-going technical revolutions introduce major disruptions in the balance between various forms of information exchanges. All memory and communication mediation progressively use digital representations and common transport infrastructures. This represents for information a change similar to the birth of an immaterial transportable (in space and time) monetary general equivalent (through escompte and lettres de change) at the end of the Middle Ages. The result of such a major change is that some species of information exchanges will disappear or more probably be confined to restricted niches, other will appear. The respective share of each type of information exchange in the economy and its role in human activities inside and outside the economical sphere will be redefined. But how? What drives it? How should policies try to handle these processes? If there is value in the ecological or evolutionary analogy - as all analogies one should handle it with care - it is in teaching us that early differentiation after an environmental change, and the resulting occupation of some niches by given species can durably drive the further development and structural balance of evolution. The forms of information exchanges that appear today, and the linkage between themselves and their environment (funding mechanisms, taxation, behaviours, etc.) may lock in the future development of an information society.

Foundations for value and valuing processes

One major aspect of the digital coding of information is that the marginal cost of duplicating information is very low, while the cost of producing meaningful information is still high. While this is not totally new (it was already present with analogue large-scale reproduction techniques) it obviously challenges the economical thinking with regards to price formation and its relation with the foundations for value. The positions in presence range from claiming that the value of information is null (equal to the marginal cost of duplication) to claims (in debates on right ownership) that the value of each copy is « potentially » the value of the full set of copies of information. One of our speakers (Rishab Aiyer Ghosh) has claimed that value of information in a digital networked world can no longer be expressed by a market of repeated identical transactions, because it can be fixed only in the individual transaction in which someone accesses the information produced by someone else. But whatever is the foundation for value, if there is a new form of economy, this value will have to be mapped through a process to some reusable value equivalent.

Economic and non-economic aspects of new information exchanges

New information exchanges such as those occurring in Usenet groups, freeware publishing, the non-electronic commerce usage of the World Wide Web have developed in a largely non-economic manner. Of course these activities incur costs, but these costs are funded in an indirect and largely invisible manner. The processes involved do not aim at profit for many actors of such information exchanges (individuals, not-for-profit, cultural or political groups, etc.). Many information exchanges that were previously handled in the private or semi-private sphere, using media such as correspondence and more recently fax are now conducted using these media. Recently, there has been a major trend towards investment of the new information exchange media by economic activities using pre-existent business models (advertising, marketing) or developing new ones (direct electronic commerce of contents). The resulting balance appears unstable.

Creative destruction

The concept of creative destruction was introduced by Joseph Schumpeter in « Capitalism, Socialism and Democracy ». He used it to describe the periodic processes by which innovation leads to new patterns of growth, thanks to the destruction of previously dynamically stable configurations of the economy. This has been since then widely used by thinkers, either to support the acceptance of disruptions caused by new technologies and criticise the resistance to dismantling existing strongholds, or to analyse the conditions for keeping the benefits of the creative side while minimising some of the drawbacks of the destructive side. For an account of how these concepts fit in modern economic thinking for a key domain, one can refer to Marco Vivarelli, « The economics of technology and employment: Theory and empirical evidence ».

Like any major technical change the present process is one of creative destruction. Some forms of information exchanges are strongly challenged (the record music publishing industry, or broadcasting as we know them for instance). Other forms have appeared in embryonic forms without attaining a stabilised sustainable reality yet, such as the World Wide Web as a low entry cost publishing and information service basis.

Measurement

Measuring is key to the functioning of the economy and to its insertion in society at large. It is needed for pricing (more generally as input to micro-economic decisions) and for the global representation of the state of the economy and society at various geographical scales, as well as to set the basis for the application of tax. Which information is produced, aggregated, used in models and when discussing policies has always been a major political choice. Measuring intangibles and their exchanges in a fast moving technological world is difficult. Should one measure bits, time spent by users, transactions, relative choices, etc.? How can one compare systems that differ not only in price and performance, but also in functionality?

Increasing returns, competition and diversity

Information and communication technology hardware and software tools often offer an added value that grows with the number of people who use them. This is not only a matter of economy of scale leading to reduced costs: the value of owning a fax machine is very low if nobody has one and on the contrary high if everyone uses one. The same can be true for operating systems, word processors, graphical user interfaces and other software tools. The ease of exchanging documents, the certainty of finding similar tools in a variety of environments, or the fact that one has already learned to use one can very well compensate for severe shortcomings in a dominant product. This, together with very low marginal cost for intangibles leads to markets acting as amplifiers of unbalance promoting monopolies rather than open competition. If at an initial stage it can favour the dissemination of some innovation, when the dominant situation is installed it can lead to strong interest in delaying new innovation, or re-projecting it into existing products rather than having it lead to new well-differentiated product. Dominant players are also likely to emulate innovations by creating permanent change in their products without clear user benefits. This permanent change in turn makes it very difficult for innovators to invest in new developments that can be doomed instantly by a simple opportunity decision from a monopolistic player, or will be salvable only through costly adaptation. Policies and non-dominant industry players have tried to promote both the ground for diversity and some minimum degree of foreseeable nature for the technology infrastructure. This has been tackled both by support to standardisation and by innovation in open inter-operability layers. There has been debate on whether stronger intervention would be necessary to achieve significant results in front of such powerful trends.

Symmetry and access

One of the main differences between media is with regards to symmetry of information exchanges, ranging from pure distribution such as classical broadcasting to total symmetry such as person-to-person communication media. The symmetrical or asymmetrical nature of media is reflected in the underlying network infrastructure. There is a strong inertia in that regard. The so-called return channels for interactive television are still designed with a bandwidth much lower than for down channels (though with technologies such as ADSL one comes closer to symmetry). One of the most interesting aspects of recent ICT applications has been to enable a continuum of positions, from active access to full publishing/posting. This has been theorised under the idea of a prosumer society, in which individuals would be at the same time producers and consumers of intangible products and services. Asymmetrical media are characterised by low access costs and very high publishing entry costs. Thus, they lock in durably, since new symmetrical media that appear are in competition (for people’s time and resources) with low (often zero) marginal cost media.

Empowerment, tools and skills

Usability, accessibility, affordability and user empowerment are major mottoes of information society policies. Some have pointed to the immediate problems of access to equipment and affordability of telecommunication or information services, in particular in developing countries. In these countries, affordability of services (for instance for access to scientific information) might be the major issue. Others have claimed than the most serious divisions between have and have-not in the developed world might be between those who are able to make intelligent use of the diversity of media and information exchange mechanisms because they master the relevance of each for given tasks or projects and the skills needed to efficiently use them, and those who are simply terminal consumers of information networks. If we look back at the civilisation of printing and reading, the time needed to develop the tools that enabled critical reading and to obtain widespread literacy was very long. Information technology has the potential to empower users with ability to select, access, discriminate, analyse, assess, critic, re-use information embedded in various media forms, including time-based media that are traditionally associated with passive perception. But how this potential will materialise is still unclear.

Time budgets and other time issues

A landmark study by one of our speakers (Arnulf Grübler) has shown that, in the long run, time budgets evolution is characterised by remarkably stable trends at the macroscopic level. There is a powerful, general and steady trend towards decrease of time used (over a lifetime) for work and regular increase of time used for non-work and in particular for leisure type of activities. But when analysed at a more microscopic level (for instance time budget allocated within non-work activities to various types of information exchanges or interaction activities) the picture is less clear. At this level, there seems to be more flexibility, as illustrated by the speed at which television viewing has conquered a very large share of time budgets just after World War II, or how it recently receded in favour of time spent playing video games and using personal computers. In the field of transport, studies have shown that time budgets are often explaining transport and commuting behaviours at the level of individual decisions: an individual cannot afford to use some sustainable way of transportation because of lack of time. But they are explained by them at the level of the society as a whole: time spent commuting grows as a result of the building up of a car centred transportation and habitat infrastructure accommodating these individual « preferences ».

Taxation and government resources

The debate on taxation of information exchanges is tangled between two conflicting requirements. On one side, in order to encourage innovation and new products or services whose development has a positive impact on growth and employment, governements often wish to avoid any new specific tax, or even to create favorable taxation regimes for emerging information exchanges. On the other side, since there is a general trend towards a greater share of the economy and activities being based on information exchanges with intangible mediations, and thus escaping traditional taxation mechanims, many a commenter has pointed to the risk of erosion of the tax basis. These two vision are based on visions at different time scales. How to reconcile these two time scales is a difficult problem.

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