Perhaps we can get to the root of the paradoxical character of information technology markets by asking a fundamental question: Is knowledge an economic good?*(posted 8758 days ago)The distinctive characteristic of an economic good is its "scarcity," i.e., the act of making use of one of its possible benefits excludes making use of its other benefits or those of other goods. For example, a piece of land is "scarce" because it can be used as farmland, or as the site of a home or of a store, but none of these three uses can be realized immediately on the ame plot of ground. The uses exclude one another. Or again, an apple may be scarce, because in order to obtain, I must sacrifice some other good or goods, such as the leisure forgone in searching for and picking an apple; or the greater amount of leisure and the expenditure of fertilizer, seeds, etc. necessary to grow an apple tree. These two factors of "scarcity" fall under the same formula: A good is scarce when its use to achieve one end means the sacrifice, at least for a time, of other ends. By contrast, under preindustrial circumstances such things as air and sunlight are not economic goods, because there is no "exclusion of uses," nor can they be "produced" by expenditures of land, labor or capital.
Now, economic knowledge is in one way scarce, in another way not. Hence, it is a quasi-economic good, or perhaps a quasi-commodity, and so falls between the two categories of "the economic" and "the non-economic."
Consider the mere existence of some content of knowledge; say, a design for an internal combustion engine, or a demographic analysis of a certain market. As such, there are no "mutually excluding uses" for a piece of knowledge, as there is for a piece of land, or for a given worker or capital tool. The same piece of knowledge can be a factor in several different productive operations, and can be shared by several people at the same time, without any diminishment. Just as with other common goods, such as peace or justice, my making use of the design of an engine does not prevent someone else from making use of that same design to build an engine.
On the other hand, the knowledge or information that is relevant for economic processes is scarce in its production. We are not born with knowing how to build an internal combustion engine, or with the knowledge of the buying patterns of American 21 year olds. For these bits of information to be made available to society, a number of persons had to expend time, labor and capital to discover them. Thus, "bringing information into existence" does impose economic costs.
This is radiclly different with all other economic goods. They are both scarce in their production, and scarce in their use. Even our apple, for example, could be eaten directly, made into apple juice or apple sauce, or be thrown into the pig's mash. Or, even if the only use lies in eating it, one still must choose among the various times when it could be eaten- if all I have to eat is one apple, then I literally must choose between breakfast and lunch. Furthermore, as noted previously, it was scarce in its production, even if the cost was so little as spending thirty seconds to pluck an apple off of a tree in my back yard.
Since economic knowledge is scarce in its production, its producers need to derive revenue from controlling it as if it were a private good; but once produced, it is (at least potentially) common good. Hence, it is difficult to fit into the market, without the aid of such "artifices" as patent and copyright laws.
*(To be a stickler: there is a fundamental difference between two kinds of economic knowledge: one is technological knowledge, such as the knowledge of how to build an operate a machine; and the other is knowledge of a particular fact, such as "this worker has those skills," or "these possible consumers have this much disposable income." The former should be called "technology," the latter "information," and the whole comprehended under "economic knowledge.")
Contributed by James van Boom (comrade_cossack@yahoo.com) on July 19, 1999.