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Overview
  • This Mises Academy course from 2011 remains relevant today. In today's networked world, will centralized managerial hierarchies be replaced by decentralized, peer-to-peer communities? Does the new economy call for a new kind of economics, or is traditional economics still useful? The Austrian paradigm allows us to separate the marvelous realities from the fallacies being spread by pop futurists. This course features 5 weekly lectures and materials are available free online. 

  • Does the new economy call for a new kind of economics, or is traditional economics still useful? Read and analyze these issues:

    • The World Is Changing. Or Is It?
    • Information Goods
    • Network Effects
    • Economics Of The Internet
    • Intellectual Property, Regulation, And Public Policy
  Dishes  - Course Outline & Instructor
  • Dish 1 : Networks and the Digital Revolution: Economic Myths and Realities | academy.mises.org

  • What is the new, networked economy all about? What are “information goods” and how do they differ from traditional goods? How are online businesses different from brick-and-mortar establishments? Is the large firm with its centralized managerial hierarchy obsolete, to be replaced by decentralized, disaggregated, peer-to-peer communities? Is government regulation needed to keep digital markets free, fair, and open? More generally, does the new economy call for a new kind of economics, or is traditional economics still useful?

    This course suggests answers to these and related questions, focusing on recent examples, applications, and illustrations, while grounding the discussion on basic economic principles. We begin by studying the growth of the Internet, wireless communication networks, and related technologies, trying to assess just how widely information technology has diffused throughout the economy. We then explore how these changes in technology, along with changes in regulation and global competition, have affected firm boundaries, competition, human resource management, regulation, sources of financing, and the assignment of property rights.

    Course outline:

    WEEK 1: THE WORLD IS CHANGING. OR IS IT?

    Readings:

    • Carl Shapiro and Hal R. Varian, “The Information Economy,” in Information Rules: A Strategic Guide to the Network Economy (Cambridge, Mass.: Harvard University Press, 1998).
    • Council of Economic Advisers, “The Creation and Diffusion of the New Economy,” pp. 95–120 in Economic Report of the President (Washington: US Government Printing Office, 2001).
    • Yochai Benkler, “Introduction: A Moment of Opportunity and Challenge,” in The Wealth of Networks: How Social Production Transforms Markets and Freedom (New Haven: Yale University Press, 2007).
    • Peter G. Klein, Review of Benkler, The Independent Review 13, no. 3 (Winter 2009).
    • Kevin Kelly, “New Rules for the New Economy,” Wired, September 1997.
    • Hal R. Varian, “A New Economy With No New Economics,” New York Times, January 17, 2002.

    WEEK 2: INFORMATION GOODS

    Readings:

    • Hal R. Varian, “Markets for Information Goods,” manuscript, April 1998.
    • “Knowledge Is Power,” The Economist, September 21, 2000.

    WEEK 3: NETWORK EFFECTS

    Readings:

    • Stanley J. Liebowitz and Stephen G. Margolis, “Network Externality,” New Palgrave Dictionary of Economics and the Law (London: MacMillan, 1998).
    • Douglass Puffert, “Path Dependence,” EH.Net Encyclopedia of Economic and Business History, 2010.

    WEEK 4: ECONOMICS OF THE INTERNET

    Readings:

    • Peter G. Klein, “Government Did Invent the Internet, But the Market Made It Glorious,”Mises Daily, June 12, 2006.
    • Nicholas Economides, “The Economics of the Internet,” in Steven N. Durlauf and Lawrence E. Blume, eds., The New Palgrave Dictionary of Economics, second edition (London: Palgrave Macmillan, 2008).

    WEEK 5: INTELLECTUAL PROPERTY, REGULATION, AND PUBLIC POLICY

    Readings:

    • Murray N. Rothbard, “Patents and Copyrights,” pp. 745–54 in Man, Economy, and State with Power and Market(Mises Institute, 2004).
    • Stephan Kinsella, “The Case Against IP: A Concise Guide.”Mises Daily, September 4, 2009.
    • Thomas M. Jorde and David J. Teece, “Innovation, Dynamic Competition, and Antitrust Policy,” Regulation13, no. 3 (Fall 1990).
    • Robert Hahn and Scott Wallsten, “The Economics of Net Neutrality,” Economist’s Voice, June 2006.
  Chops  - 5 Weeks Worth of Readings
  • Chop 1 : Week 1, Reading 1/6: Information Rules | businessweek.com

  • A prophecy for the next decade? No. You have just read a description of what happened a hundred years ago when the twentieth-century industrial giants emerged. Using the infrastructure of the emerging electricity and telephone networks, these industrialists transformed the U.S. economy, just as today's Silicon Valley entrepreneurs are drawing on computer and communications infrastructure to transform the world's economy.

  • Carl Shapiro and Hal R. Varian, “The Information Economy,” in Information Rules: A Strategic Guide to the Network Economy (Cambridge, Mass.: Harvard University Press, 1998).

  • Chop 6 : Week 1, Reading 5/6: Feature | wired.com

  • Twelve dependable principles for thriving in a turbulent world

    "The Digital Revolution gets all the headlines these days. But turning slowly beneath the fast-forward turbulence, steadily driving the gyrating cycles of cool technogadgets and gotta-haves, is a much more profound revolution - the Network Economy."

  • Kevin Kelly, “New Rules for the New Economy,” Wired, September 1997.

  • Chop 8 : Week 2, Reading 1/2: Markets for Information Goods | people.ischool.berkeley.edu

  • Much has been written about the difficulties that ``information'' poses for neoclassical economics. How ironic that ICE--information, communication, and entertainment--now comprises the largest sector in the American economy. If information poses problems for economic theory, so much the worse for economic theory: real markets seem to deal with information rather well.

    This paradox is the central theme of this essay: information, that slippery and strange economic good, is, in fact, handled very well by market institutions. The reason is that real markets are much more creative than those simple competitive markets studied in Econ 1. The fact that real-life markets can handle a good as problematic as is a testament to the flexibility and robustness of market institutions.

  • Hal R. Varian, “Markets for Information Goods,” manuscript, April 1998.

  • Chop 9 : Week 2, Reading 2/2: Knowledge is power | economist.com

  • HOW many Microsoft computer programmers does it take to change a light bulb? None. Bill Gates will simply call a press conference and announce that the new standard is darkness. Every revolution has its enemies, and this time Microsoft has been cast as the main villain of the information economy.

    Whatever the outcome of the battle between Microsoft and the American government, some economists worry that because of the very nature of information and knowledge, which form the building bricks of the new economy, more and more monopolies like Microsoft are likely to emerge. But how does that fit with the accepted wisdom that IT and the Internet will make markets more efficient, and will therefore boost competition?

  • “Knowledge Is Power,” The Economist, September 21, 2000.

  • Chop 10 : Week 3, Reading 1/2: Network Externalities (Effects) | utdallas.edu

  • Network externality has been defined as a change in the benefit, or surplus, that an agent derives from a good when the number of other agents consuming the same kind of good changes.

    As fax machines increase in popularity, for example, your fax machine becomes increasingly valuable since you will have greater use for it. This allows, in principle, the value received by consumers to be separated into two distinct parts. One component, which in our writings we have labeled the autarky value, is the value generated by the product even if there are no other users. The second component, which we have called synchronization value, is the additional value derived from being able to interact with other users of the product, and it is this latter value that is the essence of network effects.

  • Stanley J. Liebowitz and Stephen G. Margolis, “Network Externality,” New Palgrave Dictionary of Economics and the Law (London: MacMillan, 1998).

  • Chop 11 : Week 3, Reading 2/2: Path Dependence | eh.net

  • Path dependence is the dependence of economic outcomes on the path of previous outcomes, rather than simply on current conditions. In a path dependent process, “history matters” — it has an enduring influence. Choices made on the basis of transitory conditions can persist long after those conditions change. Thus, explanations of the outcomes of path-dependent processes require looking at history, rather than simply at current conditions of technology, preferences, and other factors that determine outcomes.

  • Douglass Puffert, “Path Dependence,” EH.Net Encyclopedia of Economic and Business History, 2010.

  • Chop 12 : Week 4, Reading 1/2: Government Did Invent the Internet, But the Market Made It Glorious | mises.org

  • Libertarians often cite the internet as a case in point that liberty is the mother of innovation. Opponents quickly counter that the internet was a government program, proving once again that markets must be guided by the steady hand of the state.

    Peter Klein says that government involvement accounts for the internet's continuing problems, while the market should get the credit for its glories.

  • Peter G. Klein, “Government Did Invent the Internet, But the Market Made It Glorious,”Mises Daily, June 12, 2006.

  • Chop 16 : Week 5, Reading 3/4: Innovation, Dynamic Competition, and Antitrust Policy, | Mises.org v13n3-4.pdf

  • Antitrust law has undergone significant changes since the passage of the Sherman Act in 1890, but the U.S. and world economies have undergone far greater changes. Although we do not advocate its abolition, we suggest that antitrust may be anachronistic in certain contexts, and, indeed, may inhibit effective competition. Specifically, we suggest that if society wishes to promote competition, the best way to do so is to promote innovation.

  • Thomas M. Jorde and David J. Teece, “Innovation, Dynamic Competition, and Antitrust Policy,” Regulation13, no. 3 (Fall 1990).

  Desserts
  References and More

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