Economics was developed to deal with atoms, not bits (paraphrased from
NicholasNegroponte). Some very fundamental assumptions present in what people think of as "economic laws" simply don't apply here:
- Limited Resources: NetworkExternalities work the opposite way. Example: The more people use the internet, the more it is worth to any of them.
- Variable cost for another copy (or 10, or 100000) of a piece of software: practically zero.
- Cost of Transportation: With bits, there virtually isn't any.
- Moore's Law: The price/performance improvement regarding chips is so strong and predictable that it causes economic effects of its own.
--
FalkBruegmann
The inapplicability of "conventional economics" to these issues is often
overstated. People who are really interested in this kind of thing might
look at:
http://www.stern.nyu.edu/networks/site.html (warning--although this
site has lots of useful information, it also has really annoying animated
icons and sound effects, so be prepared!) --
MatthewWilbert
I dunno, when people say, "This time it is different," I think automatically, "Hold on to your wallets." -- Anon