THE FUTURE OF MONEY Bernard A. Lietaer - library.uniteddiversity ...

- In other important respects, information economics sets traditional
economic theory completely on its head. One breakthrough is the
realisation that information and knowledge are the only factors of
production not subject to the law of diminishing returns." They
enjoy a law of increasing returns." In practice, this means that as
information becomes more available, it also becomes more
valuable. This has also been called the 'fax effect'. Imagine that you
have bought the first fax machine ever produced. What is the
value to you of that device? Practically nil, because there is no one
else with whom to communicate at that point. However, every
newly installed fax machine increases the value of your fax
machine. This is an exact reversal of traditional economics, where
scarcity determines value. For instance, gold or diamonds, land or
any other traditional commodities are valuable because they are
scarce.
What are the consequences of these characteristics for a society that
uses information as its primary economic resource? First, such an
economy is literally dematerialising. In 1996, Alan Greenspan noted:
'The US output today, if measured in tons, is the same as one
hundred years ago, yet the GDP?" has multiplied by a factor of
twenty over that time.' The average weight of one real dollar's worth
of US exports is now less than half of what it was in 1970. Even in
'manufactured' goods, 75% of the value now consists of the services
embedded in it: research, design, sales, advertising, most of which
could be 'delocated' anywhere in the world and transmitted via high-
speed data lines. Along with the other factors, this dematerialization
process makes it much harder for governments or regulatory
agencies to measure, tax or regulate what is going on. For instance,
the French government will find it more difficult to keep US media
products out of France using import controls when these products
can be channelled through satellite TV or the Internet. The switch to
information-as-resource means that governments are less able to