Governance of the E-conomy


Political Science 138D

Fall 2002

Wednesdays and Fridays, 4:00 - 5:30 pm

100 Lewis

Wednesdays 6:00 - 7:30 pm

100 Moffitt


Professor John Zysman    Professor Steven Weber

BRIE       BRIE

2234 Piedmont Ave.     2234 Piedmont Ave.

(510) 642-3067      (510) 642-3067

email: johnz@socrates.berkeley.edu   email: sweber@socrates.berkeley.edu



GSIs:   David Bach, bach@socrates.berkeley.edu 

Jennifer Bussell, jbussell4@hotmail.com 

David Lancashire, david@socrates.berkeley.edu


Office Hours: TBA


Is a new digital economy-an E-conomy- emerging in the advanced industrial countries?  Does the digital economy pose new and distinctive governance problems and policy issues?  Is the explosion of information networks, and the Internet in particular, changing the political economy of the advanced countries?  Are these developments transforming the character of the international economy?  How can we explain the emergence of these economic changes and which analytical tools can we use to understand their importance?  This course will address these questions from the perspective of comparative political economy.


The course will explore the literature on the political economy of the Internet to determine what policy choices-and hence which political debates-are and will be most important. In part, the course is intended to review and evaluate the quality of our knowledge about concepts like “the information society” and “the knowledge economy.” We also will examine the impact of the burgeoning digital economy on the political economy of the advanced countries.  We will inquire into what we really know about the digital economy, how do we know it, and what important questions remain unanswered.


The course will ask:

  1. All students must take a take-home mid-term exam.  The exam will comprise 25% of the final grade for this course.
  2. All students must write a substantial research paper of 15 to 20 pages.  Individual topics must be approved in advance by the instructors.  The project should demonstrate knowledge of the theoretical materials assigned and the ability to use them to explore an empirical area of the digital economy and associated policy issues.  As indicated on the syllabus, students should submit draft paper topic ideas in section during Week VI to enable the instructors to help formulate a workable topic by Week VIII.  Students must have an approved paper topic by Week VIII.  The paper will comprise 35% of the final grade for the course.  
  3. All students must take the final exam.  The exam will be closed book and held in class at the time and place set forth in the schedule of classes.  The final exam will comprise 30% of the final grade.  
  4. Class participation counts.  The class as a whole will suffer if students fail to do the reading and do not participate in class and section discussions.  Therefore, class participation in both lecture and section will constitute 10% of the final grade.  Twice during the semester, GSIs will organize debates within section on a current policy topic covered in the course.  All students must submit within a week of these debates a short (one page or less, bullet points suffice) summary of the critical arguments in favor and against a certain policy, and sketch out their own position.  We intend to be constructive, not coercive; class participation will only count towards raising a student's grade.  


Materials:





PART I: Welcome to the Revolution? 

Perspectives on Economics, Technology, and Politics



The first two class meetings will feature an overview of the course as a whole and a glimpse of the research project that lies behind it.  Administrative and organizational details will be addressed.  The readings will provide an introduction to the political and economic context for the course.



Week I

Origins: A Brief History of the Internet


What do we mean by an information economy, E-commerce, or the Internet economy?  What, if anything, is new and unique about these phenomena?  The readings introduce some of the ways that contemporary scholars are answering the key questions: Do the changes brought about by information technologies require distinctly new concepts and methods of analysis and measurement? Do they raise new kinds of economic or political questions requiring new policy and political processes?




Recommended:


Week II

Architectures: Code as Law and the Law of the Code


The design-or architecture-of the Internet and the telecommunications system become increasingly important as they occupy an increasingly central place in social and economic life.  How should a network and a communications system be structured?  How might different architectures embody or favor different value choices?  How does legal theory conceive of property and how do these conceptions play out in an economy based on networked organizations and information?  Each of these profound and deeply theoretical questions bear directly on the policies we will be considering in the remainder of the course.  Under conditions of upheaval and uncertainty, theories provide essential guidance and orientation in how to grapple with and shape an emerging political, economic, and social order.  In short, one cannot avoid theoretical inquiry.



Readings:



Questions:  


Week III 

Transformations: Does Technology Drive Social Change?


The next two weeks deal with historical and institutional explanations of political economic development and that of the digital economy in particular.  What are the different theoretical perspectives we use to analyze the digital economy?  How do these explanations differ?  What are their political, economic, and social implications?  What are the relations between the state and law, on the one hand, and economic and technological development, on the other?  What evidence supports each of these explanations?  Do they support the view that the digital economy is a revolutionary development on par with the creation of capitalist markets or the invention of moveable type?  Do they contradict such sweeping characterizations?



Readings:


Recommended Advanced Reading:



Questions:



Week IV

IT and the Internet: Critical Juncture or the Same Track at Higher Speed?


How do institutions shape the course of economic development and the adoption and use of technologies?  How might we apply the lessons of institutional analysis to the emerging phenomenon of the digital economy?  How does economic theory address the technological upheaval we are experiencing and its economic consequences?  In what ways do information technology and the digital economy challenge existing institutional and legal structures?



Readings:


Questions:



Week V

Getting Down to Business-

A Sectoral View of the Impact of Digital Networks


This week's readings are case studies of the impact of digital communications technologies on different industrial sectors. These studies provide you with some concrete evidence of what is happening in the "real world." There is little careful, detailed, and systematic empirical research on the digital economy and this is some of the best available. You should review the empirical information contained in these readings throughout the course. It will provide some useful grounding and evidence for the policy arguments we will confront throughout the semester.



Readings:


Recommended:


Questions:




PART II

Policy and the Market in the Internet Age


The second part of this course will focus on a succession of specific, though often overlapping and interrelated policy areas and their relation to the structure, operation, and development of the digital economy.  We will explore these areas with respect to three fundamental lines of inquiry:

  1. What are the current policies and institutional context in different countries?
  2. How do these conditions affect the structure and competitive dynamics of markets and the strategies and behaviors of political and economic actors?
  3. What are the alternative policies and policy mechanisms available to state officials and private actors in governing technological, economic, legal, and political relations in these policy areas?  What should these policies be?



Week VI

Information & Infrastructure Policy


This week begins the section of the class dealing with specific policy issues raised by information technologies and the digital economy.  We begin with an examination of the state's role in the regulation and provision of the essential infrastructure of network communications.  The Internet revolution was, in no small part, the unintended consequence of telecommunications liberalization in the United States.  Today, the ownership, control, and architecture of data transmission networks are rapidly becoming crucial issues in the development and future of the digital economy.  What are the core issues in the construction of digital communications infrastructure?  Which policy options are open to the state?  What are the political economic preconditions and likely consequences of different policy choices? 



Readings: 


Recommended:



Questions:



**Draft paper topic ideas due in Lecture**



Week VII:

THE DIGITAL FIRM: MARKETS, HIERARCHIES AND NETWORKS IN THE NEW ECONOMY



The explosive development and diffusion in digital network technologies has had a tremendous impact on business. However, the enduring features of this impact and the changes in firm structure and strategy it has wrought remain uncertain amid the flux and rapidly changing economic circumstances of recent years (remember the Great Dot.Com Bubble?). Markets and businesses alike are being transformed, and this week's readings build on those in Week III to analyze these changes and their underlying logic. In doing so, we deepen our understanding of the changes that are rocking the political economy today by looking at the "micro" level of economic actors, their interests, strategies, and adaptive responses to a vastly changed technological environment.


Readings:


Questions:



Week VIII

Intellectual Property or, Who Owns What in Cyberspace?


Who owns what on the Internet?  What is the scope of ownership rights in information and what are the implications of broadening intellectual property rights?  Who are the winners and losers under different property rules?  What are the most important conflicts over the definition of intellectual property rights?  Are traditional legal principles adequate to address the issues created by the development of digital technologies and network economies?



Readings:


On the web:

Economic and Public Policy Issues,” also available at http://www.infoindustry.org/ppgrc/doclib/grdoc016.htm

http://www.arl.org/info/frn/copy/psamlet.html



Questions:


**Final paper topics due for instructor approval**


**TAKE-HOME MID-TERM EXAM**



Week IX

The Network economy and Competition Policy


How far does competition in the computer, Internet, and (potentially) the E-commerce markets resemble the theories and historical experiences examined earlier in the course?  What is the impact of digital technology on market structure and industrial organization?  As the case of Microsoft shows, the intersection of intellectual property and network industries and markets threatens to create extraordinarily powerful monopoly effects.  There is a possibility that this problem is endemic to the digital economy.  We must therefore briefly venture into the fields of competition policy and antitrust law to understand the policy options and responses to this threat.  Can traditional regulatory approaches adequately address competition problems generated under contemporary technological and economic conditions?  A second problem area is emerging in the telecommunications industry-the owners of “pipe” through which digital information flows to consumers.  The increasing concentration and potential closure of transmission networks creates another class of competition issues that are only now becoming apparent.  How should we deal with them?  What policy mechanisms are at our disposal?



Readings:


Recommended:


You can also look through the judicial decisions in the Microsoft antitrust case (be forewarned, it is not easy going for the uninitiated):


Questions:



Week X

Privacy, Surveillance, and Free Speech


This week provides an example of the high stakes involved in the development of the digital economy. The rise of the Internet is commonly described as one of the greatest boons to communication and free speech in human history.  Yet surveillance is also a form of communication.  Does the prevailing discussion of the Internet reveal an adequate awareness of these risks?  Does the new information technology and the economic structures to which it gives rise liberate or oppress?  What are the risks of ubiquitous surveillance in networked society?  What threats to privacy interests in personal data are posed by the emergence of the digital economy and information technologies?  What dangers might result from the erosion of privacy?  What regulatory and other legal means can be adopted to protect privacy interests?  What arguments can be advanced in favor of increasing privacy protection?  Do these justifications conflict with the trend in the U.S. towards expanding the scope of intellectual property and contract rights? 



Readings:


Recommended:


Questions:



Week XI

One or several E-conomies?


This week examines whether and how business experimentation and policy adaptation in the E-conomy might vary across states.  The readings in Week III and IV showed that markets are embedded in institutions, and that these institutions shape both the development of new technologies and the impact new technologies have.  Are digital technologies driving a convergence toward a single set of most efficient business practices and national rule-systems?  Or are we witnessing the rise of several distinct E-conomies as experimentation and adaptation progress along institutionally determined trajectories?  How do institutional differences across political economies provide firms within the same sector with different incentives and constraints?  What are the critical institutions?  How do governments leverage their institutional capacities to make policy in the E-conomy, and how do institutions limit how governments can meet their objectives?   



Readings:


Recommended:


Questions:




Part III

Transformations at the Macro-Level



Week XII

Sovereignty and the nation state in a networked world


To return to the questions with which the course began-do the basic concepts, values and political institutions that have shaped American information policy in the past still work, or does information technology imply (and require) a new kind of politics as well?  The vast increase in cross-national communications and the possibility of substantial anonymity pose great challenges for the traditional state in terms of collecting revenue and exercising basic social control.  These challenges and potential threats to state power will have an impact at both the domestic and international levels.  We must consider how the new communications technologies and networks affect state power and how the nation state, as traditionally structured, can address the problems created by a truly global communications medium.



Readings:



Recommended:


Questions:



Week XIII

growth and development in the digital era


The emergence of the digital economy has and will continue to have a substantial impact on social and economic life.  Two dimensions of this impact are the distribution of communications resources throughout societies, i.e., access to networks, and the growing relative demand for skills in the workforce.   Both point to the increasingly acute issue of growing socio-economic inequality.  Here we explore the relationship between diffusing digital technologies and digitally enabled economic processes and inequality.



Readings:


Recommended:


Questions:





Week XIV

governing the global economy 


Even a decentralized and open-ended network like the Web must be organized around common organizing rules and principles.  Yet, reaching agreement on these “coordination rules” is difficult in such a decentralized, centerless environment.  How can this contradiction be resolved?  ICANN is an institution developed to perform this function, but it remains highly controversial.


A second set of critical questions emerges from the continued political economic differences among countries.  An important way to analyze the position of the state in the evolution of the digital economy is through comparison of economic and policy development in different countries and regions.  Further, we cannot assume that the digital economy is one unitary or homogenous phenomenon.  Questions of cross-national convergence and divergence in economic structures, institutions, and policies are among the most important outstanding questions concerning the digital economy.


Readings:


Questions:




Week XV -- Conclusion

Is there a new political economy?


The readings in this last week look ahead and pick up some of the themes spelled out at the very beginning of the course.  Is there something fundamentally different about this digital transformation that lets it stands out among all previous ones?  Is the move from atoms to bits a watershed for economics, politics, and societies?  How might we think about these questions twenty years from now, when digital information technologies will have been around for a generation and the biotech revolution might have transformed the world once more?  The digital revolution came as a surprise to many, and we are still trying to comprehend its long-run transformative effects.  But can we draw general lessons, lessons independent of the technology itself, that help us prepare better for the next round of challenges?  How do we plan in a world where we anticipate the next big thing to be just around the corner?


Readings:



Questions: