Information cost as a determinant of system architecture

Abstract

Information is characterized as an ordinary economic commodity, and an information system as an information factory. Production of information is suggested as the subject of the field of information systems, and cost of producing information as the first step in an economic analysis. A cost function for information is derived from basic assumptions about information, and it is shown to have the same basic shape as the cost functions for other commodities. It is conjectured that the choice of information system to produce a particular piece of information will affect the production cost of that piece of information. The sensitivity of the cost function to the changes in the information system architecture is studied. It is found that an optimum system architecture for each application environment can be determined through a purely economic analysis.