Information Economy - Real Economy
I am in a state of confusion, I am trying to answer the question whether the information economy helps or hurts the real economy. With the advent of the information economy in the last 12 to 13 years (probably the duration of the public availability of Internet). Two big recessions and two slowdowns (1996&2005)have occured probably faster than anytime in history. I am trying to explain this in a series of hypothesis below:
Hypothesis I: Information Economy has led to gross misallocation of capital. Since a large amount of capital is concentrated in information economy, it has starved the real economy of capital for its renewal, leading to stagnation of real economy which forms a large part of economy.
Hypothesis II: Information Economy creates myths that can hurt real economy in the long run. In information economy it is easy to create myths like housing prices will go up infinitely or dot com stocks never fails, which will come back to haunt the real economy.
Hypothesis III: Information Economy creates a culture of nothing is of value. Look at people expecting news, music, movies and books for free, one can see people have lost the sense that these products have value. (one can argue new talent has sprouted in information economy, but the notion remains there is no need to pay for many products).
Hypothesis IV: Information Economy is supposed to "Creatively Destruct" but looking at long range employment and per capita income in the recent past it appears that Information Economy's ability to destruct is more than create.
I couldn't find evidence contrary to what I have said. Probably Information Economy needs some more time.
Comments