Digital economy

Digital economy refers to an economy that is based on digital computing technologies. The digital economy is also sometimes called the Internet Economy, the New Economy, or Web Economy. Increasingly, the "digital economy" is intertwined with the traditional economy making a clear delineation harder.

Definition

The term 'Digital Economy' was coined in Don Tapscott's 1995 book The Digital Economy  : Promise and Peril in the Age of Networked Intelligence.^[1] The Digital Economy was among the first books to consider how the Internet would change the way we did business.^[2]

According to Thomas Mesenbourg (2001),^[3] three main components of the 'Digital Economy' concept can be identified:

• e-business infrastructure (hardware, software, telecoms, networks, human capital, etc.),
• e-business (how business is conducted, any process that an organization conducts over computer-mediated networks),
• e-commerce (transfer of goods, for example when a book is sold online).

But, as Bill Imlah^[4] comments, new applications are blurring these boundaries and adding complexity; for example, consider social media and Internet search.

In the last decade of the 20th century. Nicholas Negroponte (1995) used a metaphor of shifting from processing atoms to processing bits. "The problem is simple. When information is embodied in atoms, there is a need for all sorts of industrial-age means and huge corporations for delivery. But suddenly, when the focus shifts to bits, the traditional big guys are no longer needed. Do-it-yourself publishing on the Internet makes sense. It does not for a paper copy."^[5]

In this new economy, digital networking and communication infrastructures provide a global platform over which people and organizations devise strategies, interact, communicate, collaborate and search for information. More recently,^[6] Digital Economy has been defined as the branch of economics studying zero marginal cost intangible goods over the Net.

Impact

The Digital Economy is worth three trillion dollars today. This is about 30% of the S&P 500, six times the U.S.’ annual trade deficit or more than the GDP of the United Kingdom. What is impressive is the fact that this entire value has been generated in the past 20 years since the launch of the Internet.

It is widely accepted that the growth of the digital economy has widespread impact on the whole economy. Various attempts at categorizing the size of the impact on traditional sectors have been made.^[7][8]

The Boston Consulting Group discussed “four waves of change sweeping over consumer goods and retail”, for instance.^[9]

In 2012, Deloitte ranked six industry sectors as having a “short fuse” and to experience a "big bang” as a result of the digital economy.^[10]

Telstra, a leading Australian telecommunications provider, describes how competition will become more global and more intense as a result of the digital economy.^[8]

Response

Given its expected broad impact, traditional firms are actively assessing how to respond to the changes brought about by the digital economy.^[11][12][13] For corporations, the timing of their response is of the essence.^[14] Banks are trying to innovate and use digital tools to improve their traditional business.^[15] Governments are investing in infrastructure. In 2013, the Australian National Broadband Network, for instance, aimed to provide a 1 GB/sec download speed fiber-based broadband to 93% of the population over ten years.^[16]

Cashless society

See also

• National Broadband Network
• Canada 3.0
• Electronic business
• Electronic commerce
• Industry 4.0
• Information economy
• information society
• Knowledge economy
• Knowledge management
• Knowledge market
• Network economy
• Virtual economy
• Digitization economics

References

Further reading

• Huws, Ursula. iCapitalism and the Cybertariat - Contradictions of the Digital Economy, in Monthly Review, Volume 66, Issue 08 (January 2015)