Information good

Information good in economics and law is a type commodity whose main market value is derived from the information it contains. It may also include services (information services). The typical examples of information goods include a CD containing pieces of music, a DVD containing a movie, a computer file which is a piece of program, a book containing short stories, and so on.

In information goods, the valuable part is a pattern in which the material is arranged - the arrangement of ink on paper, paint on canvas, magnetic elements on a tape, a series of dents (pits) on a compact disc, etc. Those patterns might be either directly consumed by humans (through reading, viewing, etc.) or may be used to operate other devices such as a cassette player or a computer. The working of device, in turn, may produce some consumable pattern of information (such as visual, sound, or text), another pattern for the use of other devices, or both.

Information goods are often contrasted with material goods such as clothes, food, and cars. The market values of these goods typically rely on both the nature of material and its arrangements. When a car is made of wood instead of metals, for example, the market value of the car would be very limited.

Information goods and market failure

Information goods and uncertainty

Some information goods, such as novel, movie, and newspaper are said to have a peculiar property. Before the consumption of the goods, a consumer may not be able to assess the utility of the goods very accurately and reliably. The process of evaluating utility indeed may be the very process of consumption.

This uncertainty of utilities is considered a source of market failure by many.says who
Advertisements, brands, third-party reviews and other secondary sources of information may play a bigger role in determining the demand curve, possibly resulting in a sub-optimal equilibrium of supply and demand.

Information goods and scarcity

Some information goods can be reproduced and distributed relatively inexpensively. Copying recorded music from radio, cassette player, CD player, etc. to a tape or computer hard disc is, for example, widely-practiced in many societies.

What is more, information goods are not consumed by the act of copying. On this basis, some argue that information (but not necessarily information goods) should be provided without cost and limitations to copying.

Information goods and excludability

As digital technologies and digital electronic network in some countries became very popular, it became very easy to reproduce and widely distribute some information goods. However, due to the difficulty of control on copying and distributing activities of individuals using such technologies, it is often harder for the producer of such good to prevent proprietary works to be illegally distributed.

Economic Theory and the treatment of Information

(From: James Boyle, 1996, chap. 4 "Information Economics")

In Economics, information plays at least a double role. On one side, perfect information is a key element to explain efficient market hypothesis. Here, information is understood to be instantly available for everybody at no cost and being complete.

On the other side, actual markets often depend on information as a commodity: information goods. Here, information is understood to be restricted in access, costly and often only partially available.

Thus, economic theory faces the problem of constantly dealing with two contradictory concepts of information at the same time. If "efficiency" is the dominant aspect of analyses, it is likely that commodification is considered to be harmful. If "incentive for creation" is the dominant aspect of analyses, the protection of the creator is likely to be dominant.

But Economists seem to lack a general principle according to which this decision can be made systematically. Thus, Boyle concludes that in economic analyses "the nature of information is 'in a state of doubt'".

References

* Boyle, James. Shamans, Software, and Spleens: Law and the Construction of the Information Society. Cambridge: Harvard UP, 1996.
* Shapiro, Carl and Varian, Hal R. Information Rules: A Strategic Guide to the Network Economy. Harvard Business School Press, 1st edition (November 1998). http://www.inforules.com/

ee also

* copyright
* Digital Millennium Copyright Act
* file sharing
* private good
* public good