Why the US and EU are failing to set information free
Susan Ariel Aaronson 14 July 2014
The internet promotes educational, technological, and scientific progress, but governments sometimes choose to control the flow of information for national security reasons, or to protect privacy or intellectual property. This column highlights the use of trade rules to regulate the flow of information, and describes how the EU, the US, and their negotiating partners have been unable to find common ground on these issues. Trade agreements have yet to set information free, and may in fact be making it less free.
Tim Berners-Lee, the architect of the World Wide Web, taught us that the internet we have is a function of the choices we (users, companies, policymakers, etc.) make about information flows. For example, in 1995, Berners-Lee chose not to patent his work on the World Wide Web because he feared patenting it could limit its universality and openness. He continues to advocate this. In March 2014, he called for an online bill of rights and created a new organisation to ensure that the web would remain the “web we want” – open, free, and neutral.
EU policies Global governance International trade
US, EU, WTO, information technology, trade, technology, internet, Human rights, national security, Information, free trade agreements, data protection, privacy
Net neutrality: A simple goal with some difficult implementation ahead
Joshua Gans 11 June 2014
Netflix recently agreed to pay Comcast for faster access to Comcast’s customers, intensifying the debate over ‘net neutrality’ – the principle that internet service providers should treat all data equally. This column argues that without net neutrality regulation, ISPs can capture the benefits of higher-quality content, thereby discouraging innovation from content providers. To be effective, net-neutrality regulation must prevent content-based price discrimination on both sides of the market.
Net neutrality has a simple goal – to ensure that consumers face an undistorted choice in choosing where to devote their attention on the Internet. The rationale for that goal is to ensure a ‘level playing field’ for those who provide content, applications, or anything else via the Internet.
Competition policy Industrial organisation Microeconomic regulation
US, technology, market power, regulation, internet, price discrimination, net neutrality, Federal Communications Commission
Did the internet prevent all invention from moving to one place?
Chris Forman, Avi Goldfarb, Shane Greenstein 23 May 2014
The diffusion of the internet has had varying effects on the location of economic activity, leading to both increases and decreases in geographic concentration. This column presents evidence that the internet worked against increasing concentration in invention. This relationship is particularly strong for inventions with more than one inventor, and when inventors live in different cities.
Reading the technology press, it often seems as if the media think all high-tech invention happens in Silicon Valley. This parochial viewpoint highlights the ‘agglomeration’ advantages that the Valley provides to inventors because so many technology firms are located in the same place. These advantages include easier access to funding from local venture capitalists, sharing of fixed costs such as specialised patent lawyers, and easier exchange of ideas between researchers.
Frontiers of economic research Productivity and Innovation
patents, information technology, technology, agglomeration, internet, economic geography, invention
Politics 2.0: Short-run and long-run effects of broadband internet on political participation
Francesco Sobbrio, Ruben Durante, Filipe R Campante 12 June 2013
What has been the impact of high-speed internet on political participation? This column reports new evidence from Italy and the formation of Beppe Grillo’s Five Star Movement. Largely through social media, broadband internet has enabled a fledgling political movement to reach a large number of people, overcoming the costly barriers to entry usually associated with new political parties. And it is this reach that has encouraged some disillusioned voters back to the ballot box.
The internet has dramatically transformed the way individuals obtain, produce, and exchange information. There is a widespread belief that such a revolution is likely to have a profound impact on various dimensions of social life, not least on politics. In particular, deep transformations have been predicted for the ability to organise collective action.
Frontiers of economic research Politics and economics
Can trade policy set information free?
Susan Ariel Aaronson 22 December 2012
The internet is an expanding opportunity for growth. This column argues that in recent years, however, policymakers and market actors have been undermining its potential. Governments and market actors are reducing both access to information and freedom of expression, as well as moving towards a splintered, non-global internet. Commitment to an open, free and global internet will be hard, but if bilateral, regional or multilateral trade agreements encourage interoperability, we might see some harmony among signatories’ privacy, online piracy, and security policies.
Although the internet is creating a virtuous circle of expanding global growth, opportunity, and information flows (Lendle et al. 2012), policymakers and market actors are taking steps that undermine access to information, reduce freedom of expression and splinter the internet (Herald 2012). Almost every country has adopted policies to protect privacy, enforce intellectual property rights, protect national security, or thwart cyber-theft, hacking, and spam.
Frontiers of economic research International trade
globalisation, trade, technology, internet
The next productivity revolution: The ‘industrial internet’
Marco Annunziata 07 December 2012
Today’s technological innovation is regarded by many as all about social media and entertainment, with no impact on economic growth. This column argues that such scepticism is premature. A closer look at selected industries suggests that the ‘industrial internet‘ – a network that binds together intelligent machines, software analytics and people – through accelerated adoption of sensors and software analytics, will have a powerful impact on productivity and growth.
The largest advanced economies are struggling with weak growth prospects and daunting fiscal challenges. Looking at the macroeconomic equation, there is no easy way out. Looking at the microeconomic level, however, suggests that it is innovation that might come to the rescue.
Frontiers of economic research
global crisis, internet, jobs, industrial internet
Unbundling the incumbent: Evidence from UK broadband
Mattia Nardotto, Tommaso Valletti , Frank Verboven 25 November 2012
In many countries, incumbent broadband providers are required to let new entrants access their network, what is called ‘local loop unbundling’ (LLU). This column uses data from the UK to ask whether such a policy stimulates broadband penetration. In contrast to what is commonly believed, local loop unbundling doesn’t provide more choice. However, it does raise both the quality of service and the speed of internet connections.
Like other communication networks, broadband is seen as a main driver of economic activity and growth (Czernich et al. 2011). The potential benefits of broadband are considerable, but so are its rollout costs. Large, sunk infrastructure investments also create market power. Thus the telecom industry has traditionally been subject to some form of regulation.
Frontiers of economic research Industrial organisation Productivity and Innovation
regulation, internet, local loop unbundling, local exchanges, broadband
Taking advantage of the vast amount of data generated on the internet
Liran Einav, Theresa Kuchler, Jonathan Levin, Neel Sundaresan 18 September 2011
The internet has reduced dramatically the cost of varying prices, displays, and information provided to consumers. This column discusses how this change enables both passive and active experimentation by retailers, and how this experimentation can be used by economic researchers in a way that takes advantage of the scale and heterogeneity of online markets.
Since the early days of the internet, it has been clear that the vast and detailed data being collected in online markets would provide opportunities to study consumer behaviour, to test theories of competition and market structure, and to analyse the effects of changes in search costs, product variety, and market organisation, all in relatively structured environments. While in theory the scale and diversity of many internet markets should be ideal for this purpose, in practice it has not always been easy to leverage these advantages.
Frontiers of economic research Productivity and Innovation
internet, retail, eBay
Federico Etro 11 June 2011
The Internet has opened up a whole new realm in advertising, with Google at the helm. Within this, search advertising has recently come under investigation from competition authorities. This column seeks to aid the understanding of this special market, its definition, its structure, and the role of its leader.
The European Commission’s investigation of Google is focusing a lot of attention on search advertising. Another interested party in this area is the academic community, particularly theoretical and empirical economic researchers (see for example Athey and Ellinson 2011). Understanding this special market, its definition (that is, its borders with other markets), its structure, and the role of its leader is crucial for antitrust analysis.
Frontiers of economic research
internet, Google, search advertising
E-commerce and the market structure of retail industries
Chad Syverson 25 July 2010
The internet is changing the way people do business. This column looks at how e-commerce has affected market structure among travel agencies, bookstores, and car dealerships. It suggests that low-cost firms will gain market share and may even become more profitable as e-commerce spreads, while higher-cost firms will be hurt, perhaps fatally.
E-commerce accounts for hundreds of billions of dollars in sales annually in the US and in Europe, and that figure is growing rapidly. The price effects of internet shopping, and e-commerce in general, have received a lot of research attention (see for example Brynjolfsson and Smith 2000, Scott Morton et al. 2001, Brown and Goolsbee 2002, Baye et al. 2007, and Ellison and Ellison 2009). The findings of this research have been drawn on in policy discussions of subjects like net neutrality and the tax treatment of online sales.
Competition policy Productivity and Innovation
internet, market structure, retail, E-commerce