Equilibrium after information

This is an old article which I found just now. It was published on March 22, 2002 in The Pioneer, one of the national newspapers in India, known for its open right reactionary allegiance. I remember sending a letter to the editors, after its publication, asking why it was titled “Equilibrium after information”. And I am still wondering why. – Pratyush

Pick up any elementary book on Economics; the first thing one comes to know is that a good becomes a commodity (to be sold and purchased) only when it is scarce. “Scarcity is central to the logic of market.” Further, property rights are supposed to induce people to economise on scarce resources. Scarcity makes a thing ‘rivalrous’-If I drink more from your bottle of wine, you will get less.

But the supposed dawning of an information age has sent the academia into turbulence. It has brought a good in the market which is essentially not scarce and the whole global politics is in perspiration to make it scarce artificially. Information is such a ‘commodity’. As Kenneth Arrow, a neo-classical economist of repute noted while trying to construct an “economics of information”: “Patents and copyrights are social innovations designed to create artificial scarcities where none exist naturally”. We do not consume information or it does not depreciate in the same way as any other durable or non-durable goods. As another American economist, Michael Perelman, who has come out with his recent testament baptised as The End of Economics, notes, “With information, you can have your cake and eat it too.” If I sell information to you, it still remains in my possession. It is essentially, in economic terms, non-rivalrous.

Exclusion of people from access to information would not increase our information, but it would definitely spread ignorance. In fact sharing would have given you an opportunity to further enrich it, by gaining from my experience.

Further, in economics we read that goods are priced at their marginal cost (MC)-the cost of producing one more unit of production. In the case of information, despite the substantiality of the initial cost of producing or gathering information, the cost of its further transmission is minimal-MC is effectively zero. “A scientist could simply post it (his discovery) on the internet for all to read”. Hence, the pricing of information, which is characteristically heavily priced, clearly violates economic laws. Its patenting or making it a private property is immoral by the logic of market itself. Perelman states the modern paradox in economics very succinctly in his Class Warfare in the Information Age, “when information becomes the dominant resource, the laws of economics tell us that the laws of economics themselves are invalid”.

Another basic economic principle, as noted by Arrow, is flouted in the process of marketing information. Markets require a rational consumer who is perfectly informed. Information can be gathered by browsing through a store, or going through a brochure, etc. But, information about information is information itself. In the information market, there is a complete identity between the information about the product and the product itself. Hence in order to market an informational product, the secrecy maintained by the owner prevents a prospective consumer to do shopping for information in an informed manner. Hence, ethically, information should be freely accessible to all. Further, even if we allow its marketisation it cannot work well since the value of information could not be assessed by the consumers without first bringing it under their possession. In the scenario of generalised commodity production, where production is essentially targeted for sale and that too to gain profit, if one wishes away the markets for information, no one would invest their time and energy into it, unless some kind of subsidy is granted from somewhere. (Or else a different kind of social order is required, the symptoms of whose plausibility and preparedness could be witnessed in various kinds of initiatives as free software movements, etc). As a response to this market failure, various kinds of legal regulation like patenting and intellectual property rights are construed to create artificial scarcities. One could not imagine an unregulated markets for information as all economics fail to justify its existence in principle. Liberalisation loses all charm for its ideologues when we demand a free flow of information like other goods.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s