Information, capital, well-being

Abstract

Don Lamberton asked many questions about the nature and role of information, without expecting to be able to provide tidy or neat answers. The issues he raised have not gone away or been resolved. Some have re-appeared in modified or new form. This paper first focuses on the analysis of information at the macro-level, starting with the ill-fated ‘information sector’ studies and leading on to current attempts to use neoclassical economics to measure macro-level capital stocks in the context of the debate about sustainable development, also known as ‘wealth accounting’. Wealth accounting has no place for information-as-capital that goes beyond very primitive proxy measures for intangible capital other than human capital. Often, information-as-capital is neglected completely by denoting such capital stocks as ‘enabling assets’ that are assumed to be reflected in what turn out to be unmeasurable shadow prices. Next, an issue mostly neglected by Don Lamberton is discussed – the normative assessment of information and innovation. It is argued that neither mainstream economics nor evolutionary economics, information studies, innovation studies and so on currently has an appropriate normative theory of innovation. Increased output, innovation counts, productivity, competitiveness and consumption-related utility (what economists call ‘welfare’) are poor indicators of what really should be measured, which is the objective and subjective impacts of innovation on people’s well-being.

Notes

1. The terms ‘capital’ and ‘wealth’ are used synonymously in this literature and throughout this paper.

2. The project’s outputs were mostly primary information sector studies for various Pacific countries. They were published in Jussawalla et al. (1988).

3. OECD (2015, p.25), for example, defines ‘information industries’ as covering International Standard Industrial Classification Revision 4, Division 26 (manufacturing of computer, electronic and optical products) and Section J (information and communication services), and analyses employment growth in these industries.

4. For example, Ståhle et al. (2015) find that intangible capital over the period 2001–2011 accounted for 45% of world GDP, which they argue is much higher than the proportion obtained from previous attempts to measure intangible capital using firm-level studies. In contrast, World Bank (2011) reports that intangible capital accounted for 76% of total wealth (not GDP) in 1995. Not only is the percentage derived from the World Bank data much higher, but total wealth itself is much larger than GDP.

5. They also try to account for some other items, such as oil net capital gains and carbon damages.

6. Also see Hamilton (2012), who comments on the overwhelming importance of health capital when comparing empirical estimates for the US in 2000 provided by Arrow et al. (2012) and World Bank (2011).

7. Given the data shown in Table 1, total wealth minus inclusive wealth (the residual of the residual) amounts to US$136,532. Human capital then accounts for 47.1% of total wealth and the ‘residual of the residual’ for 27.4% of total wealth.

8. Also see Menou (1999), who recognised the importance of exploring the links between information and SWB.

9. A standard neo-classical response would be to continue using constrained optimisation and simply expand the utility function to include utility derived from C-innovation. In a similar vein, Arrow et al. (2012, p.322) argue that utility is derived from consumption of not only marketed goods and services, but also ‘leisure, various health services, and consumption services supplied by nature’. This is little more than a semantic trick as it does not change the assumptions of constant returns to scale, perfect competition, etc.