HOW INFORMATION TECHNOLOGY UNDERMINES ECONOMY: THE DIGITAL PIRACY CASE

Abstract

Science and technology have always had an impact upon economic, social and cultural life. However, the nature and consequences of this impact have been highly unpredictable Sociological studies of usage show that users frequently employ the technology to specific ends, which were neither intended nor foreseen by the developers of that technology. Here is an example. When technology made possible for paints to be bottled in tin tubes, painters left their studios and started to paint outside; “plein air” landscape was born. Moreover, scientific research on light performed by Chevreul suggested the division of tones and thus fostered impressionism. This is an interesting case when science and technology, although working independently from one another, unexpectedly concur in offering the means for the users to develop a new art form. Information and communication technology have dramatic impacts on every aspect of life, economy included. From a production-based economy, the world moved on to a knowledge-based economy. ICT completed the virtualization of money and lowered the transaction costs. Intangible assets are exchanged against intangible products. The fundamental economic laws, based on scarcity of offer and demand seem not to work any longer. The equilibrium point, tenaciously hunted for by economists is, by now, unreachable. Software and, more general, digital piracy is the unexpected result of ICT and it clearly undermines the economy. Up to now, the fight against this phenomenon uses the instruments of law. The legal protection of intellectual property is continuously enforced. Digital Millennium Copyright Act in the US and the Hadopi law recently adopted in France are examples of how society reacts to technological threats. We try to prove that such actions are bound to fail, because they go against the trends set, albeit unwittingly, by technology and its social uses. It is pointless to promulgate laws which cannot be enforced because technology makes it easy to circumvent them. This is not to say that we should passively assist to the wreckage of the cultural industries. We suggest new business models based on the interaction between the marginal costs of virtual products and the transaction costs. Moreover, we consider the information asymmetry enhanced by ICT and propose ways to make use of it instead of just ignoring it Economy is drastically challenged by technology. It should react not by force, but by adjustment.