Seminar on the role of information in an economy

Presenter :
103) Mukti nath rijal 102) Mukesh rijal 104) Prattikchy acharya

Presented to: Bibu Ratna Tuladhar

"information economy"

"information economy" has been widely used in the development literature to reflect the new development stage of the advanced countries. "information society" is also used instead of the term information economy. It does not matter which term is used, a different economic and social development stage has come out. The US, Japan and some European Union countries have transformed from the industrial society to the information society/information economy since the early 1950s. Hence, the characteristics of the new economy shaped after 1950s. Although some sociologists and economists such as Weber, Marx and Schumpeter saw main characteristics of the new society before 1950s- their explanations were Utopian because the characteristics of the new society did not come out clearly at that time.

Contd..
After the industrialization spread all over the world, some countries such as the UK, Germany and the US reached the advance level of industrialization The characteristics of the new economy were defined by looking at economic and social structures of these countries The widely known characteristics in the literature can be found in Bell's post-industrial society paradigm. These are (Bell, 1973, p. 14): (i) Economic sector; the change from a good producing to a service economy,

(ii) Occupational distribution; the pre-eminence of the professional and technical class, (iii) Axial principle; the centrality of theoretical knowledge as the source of innovation and policy formulation for the society. (iv) Future orientation; the. control of technology and technological assessment, (v) Decision-making; the creation of a new 'intellectual technology'.

Transaction Costs
Those costs associated with bringing buyers and sellers together. The costs associated with taking exchange possible are TC (transaction Cost) such as Travel cost Negotiation cost Property rights enforcement cost Cost of acquiring information TC are those costs associated with bringing buyers and sellers together Uncertainty about current or future prices and product quality.

Information cost
Costs of acquiring information on prices, product qualities, and product performance. costs of telephone, shopping, checking credentials, inspecting goods, monitoring honesty, placing ads, consumers reports ,consumer reports in order to acquire more economic information.

Information is costly because of limited capacity to acquire, process, store and retrieve facts and figures about prices, qualities and location of products. Information is distributed over the populations in bits and pieces.

Internet reduced information cost

Contd..

TC are affected by IC. Economic transactions cannot take place without information about buyer and seller Information about the prices charged by different retail outlets were free assuming that no location is more convenient than other, the same commodity would sell for the same price, as predicated by the theory of perfect competition.

Contd..

Information is not free; real resources must be devoted to gathering information. Each individual has unique information of which beneficial use might be made.

Information is typically a scare and valuable commodity

The economy of search

all buyers pay the same price for the product: competitive market. Prices of homogenous goods differ from store to store. Transaction costs of going to cheapest store may exceed the advantage of lower price. Same good in a different location is considered a different product. Information gathering and price dispersion

Conclusion
TC are those costs associated with bringing buyers and sellers together. IC are the costs of acquiring information on prices, product qualities, and product performance. TC are affected by IC all buyers pay the same price for the product: competitive market.

THANK YOU