Journal of Documentation

ECONOMIC ANALYSIS OF INFORMATION SERVICES

D.J. URQUHART
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To cite this document:
D.J. URQUHART, (1976),"ECONOMIC ANALYSIS OF INFORMATION SERVICES", Journal of
Documentation, Vol. 32 Iss 2 pp. 123 - 125
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 June 1976 DOCUMENTATION NOTES
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ECONOMIC ANALYSIS OF INFORMATION SERVICES

D. J. URQUHART
(formerly Director-General, British Library Lending Division)
Bardsey, Leeds

I HAD SOME difficulty in deciding what title to use for this note. Perhaps I
should have called it 'Economic Science and Information Science' but I have an
old-fashioned prejudice against using the word 'science' for disciplines less
rigorous than those of the natural sciences. Moreover, my real purpose is to exam-
ine how far we are justified in applying the concepts of economics to decisions
about information services. Of course I appreciate that with the growing cost of
information services and with the growing profusion of possible types of services
it would be very useful if we could use the concepts of any discipline to make
rational decisions about information services. If we could, then 'information
science' would become truly 'scientific' in the sense I normally use that word.
My approach to this problem is simplified by a recent publication by Flower-
dew and Whitehead entitled Cost-effectiveness and cost/benefit analysis in information
science (OSTI Report 5206, Oct. 1974). The objective of the report is stated as
follows: 'To critically summarize previous research that has been done both in
the UK and overseas on cost-effectiveness and cost/benefit measures of scientific
and technical information and the various informal and formal communication
channels by which this information passes from the originator to the user; to
identify promising areas for future research in this field and to report.'
123
 JOURNAL OF DOCUMENTATION Vol. 32, no. 2
The authors began by defining their use of the terms in the report. As regards
information they decided to exclude the transmission of information specifically
for educational purposes and the use of information by people in their 'daily' as
distinct from their 'professional' lives.
This limitation is a reasonable one for the information excluded is probably
something less than that required for other purposes.
Cost-effectiveness is defined as an attempt to measure the effectiveness or per-
formance of a policy or investment relative to its cost. They state that 'effective-
ness measures may relate to a single aspect of the decision in question or to more
than one'. They observe that 'there are considerable problems in defining
objectively an effectiveness index combining more than one performance charac-
teristic' and they conclude: 'But a cost-effectiveness ratio, however well defined,
is only a method of making comparisons and cannot give any indication of
whether any particular project is worthwhile. To do this effectiveness and cost
must be compared in terms of a common unit, and this is cost/benefit analysis.'

Cost/benefit analysis
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Cost/benefit analysis we are told 'seeks to analyse the worth of a policy or project
by comparing all the costs of the project (social as well as private) with all the
benefits. This involves finding a way of expressing different costs and benefits in
common, monetary, terms'. The report describes some of the difficulties of doing
this. Amongst these is the fact that 'there is no obvious measure of a unit of
information and it is not easy to define one'. It is admitted that the problem of
evaluating information is somewhat 'complex when the use to which the infor-
mation is to be put is not yet known'.
After reviewing the work done in the field the report comes, not surprisingly
to the conclusion: 'Despite much interesting work, no really satisfactory cost/
benefit study has yet been carried out.' However, the authors, no doubt because
they were trained economists were not prepared to admit that further economic
'research' work could not be useful. They did, however, come to the conclusion
that it was not yet possible: 'to specify the whole or even a substantiated part of a
desirable research programme in the economic evaluation of information
services'.
To remedy this they specified two prerequisitions: 'A first essential seems to us
to be a study of the resources currently devoted to information transfer.'
This we are told: 'would show which type of expenditure are greatest and
hence where research into cutting costs might produce the maximum savings. It
would also reveal which services were consuming most resources and hence
where it would be most desirable to compare benefits and costs'.
But the report states that in general it has not been possible to compare costs
and benefits. Of course if there are two or more ways of producing the same
benefits a study of costs would be relevant. However, this so rarely happens that
a global study of information transfer costs is not justified.
Complementary to this study of cost we are told that there should be: 'a basic
demand analysis. Who are the present consumers of these services: how much do
they consume and what does it cost them: also what services would they be
likely to consume if the resources were available at various prices?'
These proposals arise from a source, which believes implicitly in the 'economic
man' and the concept that demand creates supply. But the absence of any useful
results from previous attempts at economic research into information transfer
124
 June 1976 DOCUMENTATION NOTES
suggests that the basic tests of the economist do not apply in this field. The
position appears to be that the 'information man' is substantially different from
the 'economic man'. Undoubtedly he lives in a world where supply can create
demand.
The economists appear to have been misled by the often repeated statement
that information is a commodity'. The speakers have usually forgotten to add
that if information is a commodity it is unlike any other commodity. For instance
information can be transferred from A to B without A being any poorer and,
unless B has some use for the information, B may not be any richer.
The concept that information is a commodity suggests that there is some unit
by which it could be measured. So far no one has evolved such a unit and nobody
is every likely to do so for there are several quite different kinds of information.
I may, for instance, need the density of a liquid or a liquid with a given density.
In the former case I could make a measurement to obtain the density of the liquid
and I might equate the value of the information with what it would cost to do the
measurement. In the later case it would be almost impossible in general to dis-
cover by measurement what I wanted so there is no simple way of evaluating
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this information. Whilst in some specific instances I may evaluate some informa-
tion by considering its value in use such instances are very rare. In general, informa-
tion cannot be evaluated by considering its value in use.
This conclusion can be verified by considering the story of atomic energy. At
present we do not know what the total value the development of atomic energy
will be to mankind. But supposing we did, considering the theoretical and experi-
mental steps which led up to the development of atomic energy, how could we
divide the value of atomic energy between information and research?
The truth is that scientific activity may be likened to that of a gaggle of geese
some of which sometimes lay golden eggs. It is impossible to say which goose
may lay a golden egg or when. You cannot judge by its previous habits or its
ancestors. All you know is that if you have a number of geese of the right kind,
and if you give them adequate accommodation and food and a plentiful supply
of information, some will lay golden eggs. Eventually the total value of the eggs
will be far greater than the total cost of providing for the geese.
Possibly the economists have a sound method of considering such a situation
but I suspect that they will have to content themselves with the thought that the
'information man' behaves quite differently from the 'economic man'.
Nevertheless despite this relevant difficulty the British Library, according to
Research and Development Newsletter No. 5 of 5 September 1975, has made
further grants for economic studies of library and information systems. This no
doubt illustrates the triumph of hope over experience. Perhaps it is time for the
British Library to support some research on the economics of economic research
in the information transfer field. Such research could begin by asking the simple
question whether any of the economic research into information transfer has
produced any results of practical value. For in the information field the problem
is not to describe the world but to improve it.

125
 This article has been cited by:

1. Suggested readings 195-208. [CrossRef]

2. Tom WhitehallLecturer in the Department of information and Library Studies, Loughborough
University, Loughborough, UK. 1995. Value in library and information management: a review.
Library Management 16:4, 3-11. [Abstract] [Full Text] [PDF]
3. Werner Schwuchow. 1977. The economic analysis and evaluation of information and documentation
systems. Information Processing & Management 13:5, 267-272. [CrossRef]
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