Tuesday, November 13, 2007

An economic ramble

If one were to take a economic geography perspective of the Internet and imagine places where people meet, converse and trade ideas, products and services (OK... Facebook is an example) then the picture of different Internet Domians and their values changes. These places are large 'real' cities. Microsoft (in part) and NewsCorp bought cities. NewsCorp is, in effect, the City Fathers of MySpace.

The value of a city is one of many faces and is not comparable with a value chain of raw materials, manufacturer, wholesaler, retailer or consumer.

Paying to buy a city, and countries and nations have done this in the past, is not part of the rest of conventional economics and should not go into calculations about the value of the properties and interactions in them.

Now, if you separate the nature of knowledge and things (Evans a & Wurster) the value of the Internet (and the value of the trade in the virtual cities) can be included in economic calculation.

If the value of a raw material is dependent on knowledge to turn it into a commodity, it has no value. The value is in the knowledge.

The extent to which that knowledge is dependant on the Internet, gives one a view of the value of the Internet.

The extent to which conversion of things is dependant on an Internet mediation in a 'virtual city' is a real value and so 'virtual cities' can be identified as a component of the 'real' economy.

If Facebook has markets trading in 'real things' it has an entrepĂ´t value. It is a component of the real economy.

Perhaps we have to learn to think about these online 'places' and 'services' in a different light.