Upstream and Downstream Choices
It is fairly well understood that information and communications technologies (ICT) tools expand choice. We all have access to a very large set of information and have the freedom to choose what we want to read, watch, listen to, etc., etc. ICT expands our “downstream” choice. What is not as well understood is that it expands our “upstream” choice also. It is a two-way medium, unlike say broadcast and print media which only allows us downstream choice: using ICT we send back information indicating our choice and …

A magazine article in the New York Times of April 13th has the rather mistaken and misleading title “Can the Cell Phone End Global Poverty?” (Hat tip: Abhishek Sarda). The article title is misleading because it doesn’t even remotely attempt to answer that question. It is instead about what is called a “human-behavior researcher” or “user anthropologist,” in this case someone who works for Nokia and essentially tries to figure out how people actually use their phones and thus how phone companies should design phones for greater usability.

In my last post I claimed that the fundamental role of ICT is reduction of transaction costs. What, you may ask, is transaction costs? The answer is this: pretty much everything is transaction costs, with a little bit of physical stuff thrown in.
In California, you can buy a loaf of bread for about $2. The basic materials that go into the making of the bread — wheat, primarily — is about $0.07. Then there is some energy required for baking it and transporting it. Add …

It is worth pondering this question: What exactly is the role of ICT in any economy?
This week, I would like to address myself to that question in detail. The answer can be succinctly stated as: It reduces transaction costs. It will take a pretty long time to explore that answer. But first a few personal experiences to set the stage would be appropriate.
Today I called up a local store which sells “white goods” (major appliances such as washing machines, etc.) …

An ironic bit of popular wisdom goes

Don’t sweat the small stuff.
It’s all small stuff.

In the context of economic development, I totally agree with the latter bit, but strongly disagree with the former bit. If we don’t sweat the small stuff, we don’t have much hope of managing the big stuff since the big stuff is exactly what arises from an aggregation of all those small bits of stuff.

It is important to remind ourselves from time to time what poverty is all about. Poverty has something to do with production. Not exactly the most esoteric bit of knowledge but often it gets forgotten in the shuffle. To produce you need to have what we call factors of production which are usually broadly classified into land, labor, and capital.

Rambling on about transaction costs from the last post.
Transaction costs are all over the place. When I travel to talk with someone, the cost of the travel in terms of time and money is the transaction cost of the talk. I could use the phone to have a talk. That reduces the transaction cost of having the talk. Telephones are a lower cost substitute for transportation in this case. This is one way that information and communications technologies reduce transaction costs. It is cheaper to move electrons …

In my last post (Transaction Costs — Part 1) I claimed that the fundamental role of ICT is reduction of transaction costs. What, you may ask, is transaction costs? The answer is this: pretty much everything is transaction costs, with a little bit of physical stuff thrown in.

It is worth pondering this question: What exactly is the role of ICT in any economy?
This week, I would like to address myself to that question in detail. The answer can be succinctly stated as: It reduces transaction costs. It will take a pretty long time to explore that answer. But first a few personal experiences to set the stage would be appropriate.