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The word Digital describes electronic technology that generates, stores, and processes data in terms of two states: positive and non-positive. Positive is expressed or represented by the number “1” and non-positive by the number “0”. Thus, data transmitted or stored with digital technology is expressed as a string of 0’s and 1’s. Each of these state digits is referred to as a bit (and a string of bits that a computer can address individually as a group is a byte).
Prior to digital technology, electronic transmission was limited to analog technology, which conveys data as electronic signals of varying frequency or amplitude that are added to carrier waves of a given frequency. Broadcast and phone transmission has conventionally used analog technology.
Digital technology is primarily used with new physical communications media, such as satellite and fiber optic transmission. A modem is used to convert the digital information in your computer to analog signals for your phone line and to convert analog phone signals to digital information for your computer.
The system of production, distribution, and consumption of goods and services that a society uses to address the problem of scarcity. The essential task of an economy is to transform resources into useful goods and services (the act of production), then distribute or allocate these products to useful ends (the act of consumption). Virtually all economies accomplish this task through a combination of decisions made through voluntary market exchanges and involuntary government rules and regulations.
The Digital Economy
Thus, the digital economy refers to an economy that is based on digital technologies, including digital communication networks (the Internet, intranets, and private value-added networks or VANs), computers, software, and other related information technologies. The digital economy is also sometimes called the Internet economy, the new economy, or the Web economy.
In this new economy, digital networking and communication infrastructures provide a global platform over which people and organizations devise strategies, interact, communicate, collaborate, and search for information. A vast array of digitizable products databases, news and information, books, magazines, TV and radio programming, movies, electronic games, musical CDs, and software which are delivered over the digital infrastructure any time, anywhere in the world Consumers and firms conducting financial transactions digitally-through digital currencies or financial tokens carried via networked computers and mobile devices Physical goods such as home appliances and automobiles, which are equipped with microprocessors and networking capabilities.
The term digital economy also refers to the convergence of computing and communication technologies on the Internet and other networks, and the resulting flow of information and technology that is stimulating e-commerce and vast organizational change. This convergence enables all types of information (data, audio, video, etc.) to be stored, processed, and transmitted over networks to many destinations worldwide. The digital economy has helped create an economic revolution, which was evidenced by unprecedented economic performance and the longest period of uninterrupted economic expansion in history from 1991 until 2007.
Differences between doing business in the new economy and the old one.
Buying and selling text book
Visit the bookstore
Visit web site for publishers and retailers
Registering for classes
Walk around campus to Departments, Registrar’s office, etc.
Access campus web site
Buy film, use camera, take picture, take it for processing
Use digital camera
Paying for Gasoline
Fill up your car, go inside, pay cash or credit card
Use speed pass token wave over the sensor and go
Paying the Transportation
Pay cash, metal tokens
Metro cards electronic cards
Paying for goods
Visit store, take the item, pay , go
Use self – service kiosks
Supplying commercial photos
Use newspapers, paper, catalog or on line
Use hub-like supply chain with digitized picture
Economic Value of Information
“Information” is stimuli that have meaning in some context for its receiver. When information is entered into and stored in a computer, it is generally referred to as data. After processing (such as formatting and printing), output data can again be perceived as information. When information is packaged or used for understanding or doing something, it is known as knowledge.
“Value” generally refers to the worth of some thing or service in terms of something else, such as the “fair market value.” “Economy” and “economic” generally relate to the production, development, and management of material wealth, as of a country, household, or business so that the “economic value” of information relates to the ability of information to produce wealth.
Cost of Producing Information: Information is costly to produce but cheap to reproduce. Million dollar movies can be copied on a video tape for a few cents.
How much information is produced in the world each year?
The cost of magnetic storage is dropping rapidly; as of Fall 2003 a gigabyte of storage costs less than $10 and it is predicted that this cost will drop to $1 by 2008. Soon it will be technologically possible for an average person to access virtually all recorded information. The natural question then becomes: how much information is there to store? If we wanted to store “everything,” how much storage would it take? We have conducted a study to answer this question. In particular, we have estimated yearly US and world production of originals and copies for the most common forms of information media. We have also attempted to estimate the cumulated stock of information in various formats. Finally, we have described the magnitudes of some communication flows that are currently not stored but may well be
Three striking facts emerge from these estimates. The first is the “paucity of print.” Printed material of all kinds makes up less than .003 percent of the total storage of information. This doesn’t imply that print is insignificant. Quite the contrary: it simply means that the written word is an extremely efficient way to convey information. The second striking fact is the “democratization of data.” A vast amount of unique information is created and stored by individuals. Original documents created by office workers are more than 80% of all original paper documents, while photographs and X-rays together are 99% of all original film documents. Camcorder tapes are also a significant fraction of total magnetic tape storage of unique content, with digital tapes being used primarily for backup copies of material on magnetic drives. As for hard drives, roughly 55% of the total are installed in single-user desktop computers. Of course, much of the content on individual user’s hard drives is not unique, which accounts for the large difference between the upper and lower bounds for magnetic storage. However, as more and more image data moves onto hard drives, we expect to see the amount of digital content produced by individuals stored on hard drives increase dramatically. This democratization of data is quite remarkable. A century ago the average person could only create and access a small amount of information. Now, ordinary people not only have access to huge amounts of data, but are also able to create gigabytes of data themselves and, potentially, publish it to the world via the Internet, if they choose to do so.
The third interesting finding is the “dominance of digital” content. Not only is digital information production the largest in total, it is also the most rapidly growing. While unique content on print and film are hardly growing at all, optical and digital magnetic storage shipments are doubling each year. Even today, most textual information is “born digital,” and within a few years this will be true for images as well. Digital information is inexpensive to copy and distribute, is searchable, and is malleable. Thus the trend towards democratization of data—especially in digital form—is likely to continue.
What is Information Worth?
Information has become an element of commerce. In earlier times, success was based on such criteria as control of finance, physical resources, writing, food, fire or shelter. Today, successful people and businesses are those who control information: its development, access, analysis and presentation. We refer to our era as the “Information Age.” We buy and sell information, sometimes with money and sometimes by trading it for other information. There are various frameworks in which we try to view and define information, various attempts to measure it, decide what kind of value it has, and determine how much it is worth. For example, disciplines such as economics, accounting, sociology and behavioral science regard information in very different ways. Economists define information as phenomena that reduce uncertainty, and measure it in terms of exchange rates based on supply and demand. Accountants think of costs and benefits (debits and credits), while sociologists concern themselves with the net public good of information. Behaviorists study cognitive and behavioral change brought about by information. Clearly, placing value on information is not a straightforward, single-step process.
Information passes through many stages before it has value to anyone. It exists first in a latent state, waiting for the right paradigm or perspective, long before anyone recognizes it to be information. Then we realize that raw, unorganized data may be of some use. We collect it, organize it, analyze it and draw conclusions from it. Both the information and our conclusions can be communicated. Only when information has been comprehended, can we value it and respond to it. A determination of the actual value of information can be made only at this final stage. Information has no value in itself; its value is derived from its understanding and subsequent application. Before this last stage we can do no more than estimate the value we expect it to have. Society values only the product, or result, of information.
Information as Commodity
Business regards information as a commodity and the possession of it as an asset. Economists would like to treat and account for information in the same way as physical assets. However, no discipline has given us an accepted model for such treatment although analogies abound.
Information can, to some extent, be valued and costed in the same way as the other assets of organizations, and included in their financial reports. As inventory, information goes through the value-added stages of raw material (events or processes to be measured), work-in-progress (information in development), and finished goods (marketable information). Information gathering and presentation require capital investment and human labor. Besides being costly to acquire, information incurs management costs. Like physical assets, information faces quality control inspection before it can be distributed. Information is subject to just-in-time requirements, just like physical inventory. Left on its own, its value may depreciate over time.
At each stage or level of information, there are specialized vendors and customers. Seekers of information may overpay and providers of information may undercharge because they do not differentiate among levels and varieties of information transactions. This is due to problems in identification and measurement of information. Here are some examples of the trade in information goods and services:
A newly invented machine is patented, and the patent is licensed to a company that plans to build and sell the machine.
A new edition of a best-selling travel guide is published.
A public library buys 3 copies of the travel guide to lend (free) to its patrons.
A financial advisor offers his clients advice and opinions about profitable investments in return for a commission on their investment transactions.
An investor consults a World-Wide Web page for the values of “leading economic indicators” (key economic statistics) supplied by the U. S. Commerce Department. There is no charge.
A collection of photographs of great paintings in world museums is put on CD-ROM and sold by a computer software company.
What these examples have in common is that information goods and services are being sold (or given away). For the purposes of this chapter, information goods and services share these properties:
a) An information product is a collection of symbols.
b) Its utility depends on the arrangement of the symbols, not on the material form that they take.
Technology Vs Economics
Every day brought forth new technological advances to which the old business models seemed no longer to apply. Yet some how, the basic laws of economics asserted themselves. Those who mastered these laws survived in the new environment. Those who did not, failed.
What happened a hundred years ago when the twentieth century industrial giants emerged? Using the infrastructure of the emerging electricity and telephone networks, these industrialists transformed the US economy, just as today’s Silicon Valley entrepreneurs are drawing on computers and communications infrastructure to transform the world’s economy.
“Technology Changes, Economic Laws do not”. If you are struggling to comprehend what the internet means for you and your business, you can learn great deal from the advent of the telephone systems a hundred years ago.
Today’s business world is different in many ways from that of a century ago, but many of today’s managers are so focused on the trees of technological change that they fail to see the forest (the basic economic forces that determine success and failure.
Information technology is rushing forward, apparently uncontrollably, and it is difficult to differentiate patterns to guide business decisions. But there is order in the confusion; a few basic economic concepts go a long way towards explaining how today’s industries are evolving.
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