Public Policy Towards the Internet and Development

Innovation and Economic Growth, Networks, the Internet, and Cloud Computing and Internet

Article Snapshot

Author(s)

Jacques Crémer

Source

Presented at TIPS Forum, Johannesburg, South Africa, September 10, 2001

Summary

This paper looks at how the Internet affects businesses and consumers.

Policy Relevance

The Internet will open up new opportunities for growth in developing countries.

Main Points

  • The Internet changes the way that modern economies function.

  • Different technologies such as TCP or UDP, standards that determine how information travels online, can be thought of operating at different layers of the Internet.

  • Information costs affect how economies operate, and the Internet changes this cost.
    • The effect of having the option of sharing information online cheaply is hard to predict. Buyers can look for the lowest priced product, but sellers can make that hard to figure out.
  • The Internet has “network externalities,” meaning that some goods are most useful to consumers when other consumers also use them. One phone is not useful, but it becomes more useful when others have phones. This can lead to a snowballing effect if one technology takes the lead.

  • Some thought that the Internet would lead to “virtual firms,” that continually re-organize themselves, but long-term relationships between workers in a firm benefit the firm, so this has not happened.
    • The Internet will affect productivity, the supply chain, and distribution.
  • The development of network infrastructure for the Internet is important and government can play a role.

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