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Information economics is a theory that applies the unique properties of information to economic theory. Unlike physical goods, consuming information does not prevent others from doing the same. The value of information must be presented in a way that creates a business opportunity, such as grouping it in a more useful way. This is why some people choose to go to college instead of studying on their own.
Information economics is a theory of microeconomics that has developed simply because of the unique nature of information. While nearly everything in the world has become a commodity, including information, not everything is treated equally. Information economics takes those unique properties of information and applies them to more acceptable economic theory.
In the normal economy, the buying and selling of goods means that those goods can no longer be used by others, at least not under the same conditions. If one person buys a shirt, others are naturally deprived of the use of that shirt. This theory of deprivation is central to most economic theories.
This simply doesn’t exist in the information economy. A person consuming information does not prevent another person from consuming that information. Everyone can share consumption equally, according to the theory of the information economy. While it may be true that buying a book deprives other people of buying it, that doesn’t stop the information from being consumed. Rather, it just deprives others of the use of that particular copy of the information.
In ordinary economic theory, trade items are usually valued according to their scarcity and demand. If products become scarcer or demand increases while supply remains the same, value increases. However, with the information economy, this is not the case. Information is not scarce and is becoming less and less scarce. Again, a normal economic theory would not do in this case since.
The information economy thus indicates that the monetary value of information must be presented in such a way as to create a business opportunity if this is the ultimate desire of the provider. Otherwise, those seeking the information will go to sources where the information is free. One way to achieve this is to group information in a way that makes it more useful, thus giving the consumer an edge over others without the aggregated information.
This is why people may choose to go to college, for example, rather than study a subject or course on their own. While the same information they would learn in class may be available in other applications, it won’t be presented or grouped in the same way. Therefore, there is a greater chance of retention and practical application if you go to a class, some believe. The information economy predicts that some will choose college based on this grouping. However, the theory stops at saying that everyone will choose this alternative.
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