Author(s)
Peter G. Klein
Source
GMU/Microsoft Conference on the Law & Economics of Innovation, May 8, 2009
Summary
This paper asks if new business developments mean that old economic ideas no longer work.
Policy Relevance
Familiar economics concepts work well to explain new types of businesses and today’s economic problems.
Main Points
- The economy today is different from earlier decades, in several respects. Key factors are the growing importance of intangible assets, services (as opposed to manufacturing), and networks.
- Some have argued that businesses today enjoy more economies of scale, producing more for less.
- Information goods have high costs to create, but low costs to reproduce. These goods are interesting, but information goods (like books) are not new.
- E-commerce studies show that competition between online sellers puts downward pressure on prices, as ordinary economics would predict. But not so much pressure that there is “hyper-competition” that drives all prices down to cost.
- Networks are important, but some scholars have noted that they behave much like other firms and reports that they affect competition differently may be exaggerated.
- The use of information technology has improved productivity, but improvements in productivity are not new and can be studied using standard concepts.
- New types of organization that use volunteers, like Wikipedia, have problems such as quality control, and traditional forms of organization still dominate.
