ICFC Conference on the Digital Economy
Some Economics of Personal Activity and
Implications for the Digital Economy
Douglas A. Galbi
Senior Economist
Federal Communications Commission
June 28, 2001
** This presentation (including a better-looking pdf version) is freely available from http://www.galbithink.org **
Note: This presentation reflects only the views of the author. This presentation does not necessarily reflect the views of the Federal Communications Commission, its Commissioners, or staff members other than the author.
Different Perspectives on the
Digital Economy
1) The digital economy is about re-arranging bits
rather than re-arranging atoms.
Creating attractive digital content is key economic challenge.
The Internet is a delivery platform for digital content.
Send messages to sell goods.
2) The digital economy is about creating
new patterns of personal activity.
How persons spend time shapes the digital economy.
Attention to media doesn’t depend strongly on content or technology.
Create new activities to create new economic value.
Thesis
You can understand more about the digital economy if you consider it from the second perspective
as well as from the first.
Habitual Ways of Spending Time
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Table 1 US Trends in Media Use Based on Time Studies (hours per week as primary activity)
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Year |
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Time Use |
c. 1925 |
1965 |
1995 |
|
Reading |
6 |
4 |
3 |
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Newspapers |
2.5 |
2.5 |
0.8 |
|
Television |
0 |
10 |
16 |
|
Other Media |
1 |
1 |
1 |
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Total Discret. Time |
26 |
35 |
41 |
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media time |
7 |
15 |
20 |
|
non-media time |
19 |
20 |
21 |
Sources: See paper “Communications Policy, Media Development, and Convergence,” available on http://www.galbithink.org and http://www.ssrn.com
Advertising’s Share of the Economy:
Constant Long-Term
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Table 2 Advertising’s Share of the Economy (ad spending as % of GDP)
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Year |
||||||
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Location/Type |
1925 |
1938 |
1952 |
1998 |
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UK |
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|
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Press |
1.2% |
1.0% |
0.7% |
0.9% |
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Radio & television |
0.0% |
0.0% |
0.0% |
0.5% |
|||
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Other |
0.5% |
0.5% |
0.3% |
0.3% |
|||
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Total |
1.7% |
1.5% |
1.0% |
1.7% |
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US |
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|
|
|
|||
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Press |
1.5% |
1.2% |
1.0% |
0.7% |
|||
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Radio & television |
0.0% |
0.2% |
0.3% |
0.7% |
|||
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Other |
1.0% |
0.9% |
0.7% |
0.9% |
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Total |
2.6% |
2.2% |
2.0% |
2.4% |
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Sources: See paper “Communications Policy, Media Development, and Convergence,” available on http://www.galbithink.org and http://www.ssrn.com
Real Advertising Spending Per Media Hour:
Constant Long-Term
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Table 3 US Real Advertising Spending/Media Hour (print, radio, & TV)
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Year |
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1925 |
1965 |
1995 |
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Media Hours/Person-Year |
208 |
728 |
962 |
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Persons Ages 15-64 (ths.) |
73,342 |
115,752 |
171,676 |
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Ad Spending/Year (mil.) |
$1,433 |
$9,761 |
$97,622 |
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Purchase Power of $ (1998=1) |
9.50 |
5.28 |
1.09 |
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Real Ad Spending/ Media Hour (1998 $/mil. hrs) |
$0.89 |
$0.61 |
$0.65 |
Sources: See paper “Communications Policy, Media Development, and Convergence,” available on http://www.galbithink.org and http://www.ssrn.com
Forecasting Patterns of Personal Activity
1) Phatic communication: “Get Phat!”
discussion forums, messaging services
purposeful in fundamental sense: mutual recognition and acknowledgement of persons
2) “Propensity to truck and barter” (A. Smith)
participation in on-line auctions as enjoyable
activity, like shopping; acquiring things not because they are needed but as expression of personal significance in shaping external world
3) Context is queen.
Going to a movie as a “social” activity?
Gives persons common experience:
“we were there together.”
4) Payment based on habits and norms, not value.
Much more difficult to disaggregate services into
recognized value/price components: no physical
boundaries, integral quality of personal relationships.
Need recognition of legitimate pricing practices.
“data tone” business model not equal to “dial tone”.