Sunday, November 9, 2014

Michael Spence and the economy

Michael Spence is the Professor and Dean, Emeritus at Stanford University in Palo Alto, California. He has received degrees from Harvard, Oxford, and Princeton University. His main point of research is the study of economic growth and development, dynamic competition and the economics of information. He has also served on a multitude of board groups and has also received many awards on his work. I believe that after reading his bio and the amount of accolades and positions he has won from his work, it is easy to see that he is very well respected in his field and his theories and concerns over economics can be considered extremely credible.

In Spence’s article,  “Information technology and the integration of the global economy,” was written in 2011 with the purpose of laying out reasons for the expansion of the economy and the effects that have technology have on the economy. Spence talks about how much the global economy has expanded and benefitted from technological progress and development. This technological expansion has given the economy the ability to be even more productive and profitable than ever before by eliminating the constraints that time and space have on business interaction, therefore speeding up each process.

Spence brings up how the Web has become the platform for a wide range of knowledge-intensive services, which do not require proximity to be carried out. He states , “Before the Internet, the costs of doing so many of these things were so high that they simply didn’t get done.” This exhibits how important the Web has been in economic expansion. The web has opened up many doors for business opportunity and profitability. He uses many examples of technologies that have facilitated in the development of the economy.

Specifically, he uses the example of the cell phone and how it has contributed to the development of the economy. He states that its own expansion was to a lack of regulation and excess competition, which gave rise to most of the abilities it has today. The mobile phone accomplishes most of what consumers and producers want in business and technology: it diminishes the cost of access to information and communication while also reducing giving users a portable and durable access point.

He talks about how use of the networks created by information and communication technologies gives it an exponential value. So as more and more users gain access, that is gain the ability to purchase the access, to these technologies, the value increases more and more as each user gains access. Which makes the question of whether or not purchasing a mobile phone is worth it or not a moot point because if more and more people are using the network, your value will far outweigh the cost of purchasing it.

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