The Network Economy: New Economy
[pic]
THE NETWORK ECONOMY
The Network Economy
The history of economics of the Industrial Revolution since its beginnings is based on growth. Growth of people meant more customers and growth of production, which lead to growth in profits. This so-called “old” or traditional economy was based on bulk production, demanding large quantity of resources and limited know-how. The traditional economy, according to Alfred Marshall was based on diminishing returns. According to him producers with expansion of production will always run into limitations in the form of shrinking profits or rising costs. However, the industrial mass production of goods became less important in the last 30 years. Wriston’s prediction that “the technology upon which the market is based will not only not go away, but it will get better and faster and easier to use” (1998, p.343) came true. The bond between the computers and telecommunications created global market from money to commodities. The existence of a ”new” economy became more than evident. Few versions define the “new” economy in terms of “two principal developments: first, an increase in the economy 's maximum sustainable growth rate and, second, the spread and increasing importance of information and communications technology” (Meyer, 2000). The purpose of this paper is to discuss the relationship between the “old” and “new” economy, the key players in each of them, the demand, supply and scarcity and the relevance of few economic experts and their theories. The terminology that will be used for the two distinguished economies will be industrial and traditional for “old” economy and information, knowledge and network for “new” economy.
Relationship between “Old” and “New” Economy
When looking at the relationship between the industrial and information economy one can notice that in the former object’s value is the sum of its obvious parts, while in the latter the additional value is given to the
THE NETWORK ECONOMY
The Network Economy
The history of economics of the Industrial Revolution since its beginnings is based on growth. Growth of people meant more customers and growth of production, which lead to growth in profits. This so-called “old” or traditional economy was based on bulk production, demanding large quantity of resources and limited know-how. The traditional economy, according to Alfred Marshall was based on diminishing returns. According to him producers with expansion of production will always run into limitations in the form of shrinking profits or rising costs. However, the industrial mass production of goods became less important in the last 30 years. Wriston’s prediction that “the technology upon which the market is based will not only not go away, but it will get better and faster and easier to use” (1998, p.343) came true. The bond between the computers and telecommunications created global market from money to commodities. The existence of a ”new” economy became more than evident. Few versions define the “new” economy in terms of “two principal developments: first, an increase in the economy 's maximum sustainable growth rate and, second, the spread and increasing importance of information and communications technology” (Meyer, 2000). The purpose of this paper is to discuss the relationship between the “old” and “new” economy, the key players in each of them, the demand, supply and scarcity and the relevance of few economic experts and their theories. The terminology that will be used for the two distinguished economies will be industrial and traditional for “old” economy and information, knowledge and network for “new” economy.
Relationship between “Old” and “New” Economy
When looking at the relationship between the industrial and information economy one can notice that in the former object’s value is the sum of its obvious parts, while in the latter the additional value is given to the
References: Achrol, Ravi S., & Kotler Philip (1999). “Marketing in the Network Economy”, Journal of Marketing. Chicago, Vol. 63, pp. 146-164 Arthur, Brian W Ghosh Rishab & Soete, Luc (November 3, 2006). “Information and Intellectual property: the Global Challenges”, Industrial and Corporate Change, Volume 15, Number 6, pp. 919-935 Glick Byron & Plisch Sandy (February 4, 2004) Klemperer Paul (May 1987). “Markets with Consumer Switching Cost”, The Quarterly Journal of Economics, pp. 375-394 Mauboussin, Michael (October 11, 2004) Meyer, Laurence (June 6, 2000). The New Economy Meets Supply and Demand, Retrieved from http://www.federalreserve.gov/boarddocs/speeches/2000/20000606.htm/ Samuelson, Paul & Nordhaus, William (2010) Schenk, Robert E., “Scarcity and Choice”, Retrieved from http://ingrimayne.com/econ/Introduction/ScarcityNChoice.html Singh Nirvikar, (April 19, 2000) Steward, S., Callaghan, J. & Rea, T. (July 3, 1999). “The eCommerce Revolution”, BT Technology Journal, Vol. 17, pp. 124-131 Wriston Walter B., (Winter 1998) Zuboff, Shoshana (July 2, 2009). The Old Solutions Have Become New Problems”, Bloomberg Businessweek. Retrieved from http://www.businessweek.com/managing/content/jul2009/ca2009072_489734.htm [pic]