ECONOMIC VALUE OF DIGITAL AGE

ATIF HASSAN
Apr 20 - 26, 2009

"Information" is stimuli that have meaning in some context for its receiver. When information is entered into and stored in a computer, it is generally referred to as data. After processing (such as formatting and printing), output data can again be perceived as information. When information is packaged or used for understanding or doing something, it is known as knowledge.

"Value" generally refers to the worth of some thing or service in terms of something else, such as the fair market value." "Economy" and "economic" generally relate to the production, development, and management of material wealth, as of a country, household, or business so that the "economic value" of information relates to the ability of information to produce wealth.

Society regards information as a commodity and the possession of it as an asset. Economists would like to account for information in the same way as physical assets, but no discipline has given us an accepted model for such treatment. Disciplines regard information differently, and it is more difficult to develop systems to measure information than physical commodities.

Soon it will be technologically possible for an average person to access virtually all recorded information. The natural question then becomes: how much information is there to store? If we wanted to store "everything," how much storage would it take? Three striking facts emerge from various researches on this issue. The first fact the printed material of all kinds makes up less than .003% of the total storage of information. This doesn't imply that print is insignificant. Quite the contrary, it simply means that the written word is an extremely efficient way to convey information. The second striking fact is that a vast amount of unique information is created and stored by individuals. Original documents created by office workers are more than 80% of all original paper documents, while photographs and X-rays together are 99% of all original film documents. Camcorder tapes are also a significant fraction of total magnetic tape storage of unique content, with digital tapes being used primarily for backup copies of material on magnetic drives.

As for hard drives, roughly 55% of the total is installed in single-user desktop computers. Of course, much of the content on individual user's hard drives is not unique, which accounts for the large difference between the upper and lower bounds for magnetic storage. However, as more and more image data moves onto hard drives, we expect to see the amount of digital content produced by individuals stored on hard drives increase dramatically. A century ago the average person could only create and access a small amount of information. Now, ordinary people not only have access to huge amounts of data, but are also able to create gigabytes of data themselves and, potentially, publish it to the world via the Internet, if they choose to do so.

The third interesting finding is the dominance of digital content. Not only is digital information production the largest in total, it is also the most rapidly growing. While unique content on print and film are hardly growing at all, optical and digital magnetic storage shipments are doubling each year. Even today, most textual information is "born digital,'' and within a few years this will be true for images as well. Digital information is inexpensive to copy and distribute, is searchable, and is malleable. Thus the trend towards democratization of data---especially in digital form---is likely to continue.

Information has become an element of commerce as well. In earlier times, success was based on such criteria as control of finance, physical resources, writing, food, fire or shelter. Today, successful people and businesses are those who control information: its development, access, analysis and presentation. We refer to our era as the "Information Age." We buy and sell information, sometimes with money and sometimes by trading it for other information. Information, as an element of commerce, is a commodity, yet there are no cogent, universally accepted accounting, or economic theories of information.

There are various frameworks in which we try to view and define information, various attempts to measure it, decide what kind of value it has, and determine how much it is worth. For example, disciplines such as economics, accounting, sociology and behavioral science regard information in very different ways. Economists define information as phenomena that reduce uncertainty, and measure it in terms of exchange rates based on supply and demand. Accountants think of costs and benefits (debits and credits), while sociologists concern themselves with the net public good of information. Behaviorists study cognitive and behavioral change brought about by information. Clearly, placing value on information is not a straightforward, single-step process.

Information passes through many stages before it has value to anyone. It exists first in a latent state, waiting for the right paradigm or perspective, long before anyone recognizes it to be information. Then we realize that raw, unorganized data may be of some use. We collect it, organize it, analyze it and draw conclusions from it. Both the information and our conclusions can be communicated. Only when information has been comprehended, can we value it and respond to it. A determination of the actual value of information can be made only at this final stage. Information has no value in itself; its value is derived from its understanding and subsequent application. Before this last stage we can do no more than estimate the value we expect it to have. Society values only the product, or result, of information.

Business also regards information as a commodity and the possession of it as an asset. Economists would like to treat and account for information in the same way as physical assets. However, no discipline has given us an accepted model for such treatment although analogies abound.

Information can, to some extent, be valued and cost in the same way as the other assets of organizations, and included in their financial reports. As inventory, information goes through the value-added stages of raw material (events or processes to be measured), work-in-progress (information in development), and finished goods (marketable information). Information gathering and presentation require capital investment and human labor. Besides being costly to acquire, information incurs management costs. Like physical assets, information faces quality control inspection before it can be distributed. Information is subject to just-in-time requirements, just like physical inventory. Left on its own, its value may depreciate over time.

(The writer is Lecturer, Defence Authority College of Business, Karachi)

atif.hassan@dacb.edu.pk