Chapter One

Information Society and Information Economy

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Overview of Information and Society

A. Data vs. Information

 Data:
 Raw facts about the organization and its business transactions.

 Most data items have little meaning and use by themselves.

 Information:
 is data that has been refined and organized by processing and purposeful
intelligence
 Collection of facts organized in such a way that they have value beyond the facts
themselves.

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Overview of Information and Society (cont. )

B. Definition of Information Society

 Society : is a group of people who live in a definable community and share the same cultural
components.

 Example : hunting & gathering , horticultural, pastoral, agricultural, industrial and post industrial
(information society).

 Information is critical and vital in every society.

 It has become a critical resource needed for the survival of any given society.

 The world is fast moving from a stage where steel and miles of railways were important to a stage
where the size and complexity of information and communication systems will be the indicator of a
country's development.

 No country or individual can continue to afford to remain in isolation and ignore rapid
developments in the field of information and communications technology.

 ThisInformation
so called “Information Society" has
Systems and Society its genesis
Complied in the postH.industrial era.
By: Desiyalew
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Definition of Information Society (cont. .)

 An “Information society” is a society where the creation, distribution, use ,

integration and manipulation of information is a significant economic ,
political and cultural activity.
 Society has always been an information society, it has always been
dependent on information.

Reading Assignment
 The Historical Background of Information Society

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Definition of Information Society (cont. .)

Definition by Webster (2002)

 It is possible to identify 5 ways of distinguishing an information society.

 Technological (technological innovation and diffusion);

 Economic (economic value)

 Occupational(occupational change | knowledge worker);

 Spatial (space | information flow)

 Cultural (the expansion of symbols and.

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Characteristics of Information Society

3 Main Characteristics of Information Societies

 First, information is used as an economic resource.
 Organizations are using information to:
 increase their efficiency,

 stimulate innovation, and

 increase their effectiveness and competitive position.

 Secondly, it is possible to identify greater use of information among the general

public.
 People use information more intensively in their activities as consumers:

 to inform their choices between different products,

 to explore their entitlements to public services,

 exercise their civil rights and responsibilities, and

 to take greater control over their own lives.

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Characteristics of Information Society (Cont.)

3 Main Characteristics of Information Societies

 The third characteristic of information societies is the development of an information
sector within the economy.
 The function of the information sector is to satisfy the general demand for information
facilities and services.

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Origins and causes of Information Society
 The collocation “information society” as it is now used, first emerged in Japanese social
science(s) in the early 20th C.

 The origins and causes of information societies lie in two interrelated developments: long-term
economic development and technological change.

 In the long term, the structure of economies changes.

 It begins with a reliance on the primary sector: agriculture, forestry and mining.

 Gradually, the secondary sector – manufacturing industry becomes more important, contributing
a larger proportion of Gross Domestic Product (GDP) and usually also contributing to exports.

 GDP: is the final value of goods and services produced within the geographic boundaries of a
country during specified time.

 The rise of the secondary sector is then followed by an expansion of the tertiary sector.

 The commercial and service sector grows and makes a greater contribution to the national
income.
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Origins and causes of Information Society (cont.)

 At each stage in this progression, the productivity of labor grows, more value is
added by each worker, capital investment increases and the economy expands.

 Just as significantly, the relative importance of the different sectors of the economy
changes.

 The effect of this is shown quite clearly in the United Nations Development
Programme (UNDP)’s Human Development Report(1994).

 This shows that in economies as diverse as Singapore or Senegal, Hong Kong or

Hungary, the service sector accounts for more than 60% of the nation’s economic
activity.

 Even in the world’s least developed economies, the share of the service sector (43%)
is higher than agriculture (37%) or industry (20%).

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 Origins and causes of Information Society (cont.)

 These changes have been taking place throughout the world for the last 100 years.

 Over the last 50 years, however, as economists like Fritz Machlup, Marc Uri Porat
and Daniel Bell have shown, the tertiary or service sector has become ever more
concerned with processing information in different forms.

 Technological change is a major contributor to this process of economic

development.

 Certainly in recent years, the rapid development of ICTs has vastly increased our
capacity to process information and in so doing has undoubtedly accelerated growth
in the information-intensive tertiary sector.

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 Origins and causes of Information Society (cont.)

 Some economists claim that in addition to relatively short-term economic cycles it is

possible to identify periods of sustained economic growth that are caused by
technological change.

 The development of steam power, activated the expansion of economies in Europe

and America during the Industrial Revolution.

 Electricity and the internal combustion engine accounted for the dramatic economic
expansion during the mid-20th c and now we have ICTs.

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 Origins and causes of Information Society (cont.)

 The impact of IT arises from three of its characteristics.

 First, it is an enabling technology.

 It can be applied in a wide range of different circumstances and can itself

contribute to further technological change.
 Second, the capacity of the technology has been increasing at an exponential rate for nearly
20 years and shows no sign of slowing down.
 Finally, and perhaps most important, the cost of the technology has fallen rapidly over the
same period and, again, seems likely to continue to do so.
 These three factors have led economists like Chris Freeman to reason that ICT will trigger a
new long wave of economic growth stimulating the development of information societies.

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 Key Sectors of Information Society

 Machlup (1962) distinguishes five sectors of the knowledge economy:

 education,

 research and development,

 mass media,

 information technologies, and

 information services.

 Under Porat’s scheme, the information sector is further subdivided into two
 The primary information sector (PRIS) which is engaged in the production of information goods and
services; and

 The secondary information sector (SIS) which represents the part of the value created by information
workers, information capital, and information activity of the proprietor in the process of production
of a material good or a material service.

 The total value added of an industry belonging to the PRIS is counted as part of the information domain
of the economy.
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 Key Sectors of Information Society

 For example, the total value added generated by the semiconductor industry
(semiconductor is an information product) and the telecommunication industry
(telecommunication is an information service) will be part of information economy
value added.

 In case of an industry belonging to SIS, only a part of the value added is counted
towards information economy.

 Thus, information value added of an SIS industry includes

 (1) employee compensation of information workers,

 (2) part of proprietors’ income and corporate profits earned for performing informational
tasks, and
 (3) capital consumption allowances on information machines .

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 Definition of Information Economy

 Information Economy is an economy with an increased emphasis on informational

activities and information industry, where information is valued as a capital good.

 An Information Economy is a global economy based on combined data from

products, prices and customers throughout the world.

 The general idea of an “Information Economy (IE)” includes two interrelated

notions.
 On the one hand, the information economy refers to the industries primarily producing,
processing, and distributing information;
 these industries form together a so-called “information sector” which contributes an
increasing share to wealth and job creation .

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 Definition of Information Economy (Cont.)

 On the other hand, the information economy also encompasses the idea that
every industry makes an increasing use of information and IT to reorganize,
make themselves more productive, and create new ways of doing business.

 To clarify matters further, it is convenient to divide the objects of economic

transactions in the IE into two complementary sides:
 the content (or information) side and
 the infrastructure (or technology) side.

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 Major Characteristics of the New Economy

 “New Economy” is an expression which encompasses high-technology

industries such as IT including computer software, hardware, Internet-based
businesses and associated technologies, biotechnology and aerospace.

 In general, the term “New Economy” relates to the transition from a manufacturing-
based to a service-based, technology-enabled economy.

 This transition, which started in the late 1990s, has been mostly driven by the rapid
and massive introduction of new ICT technologies (Internet, social media,
telematics, etc.), biotechnologies and nanotechnologies

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 Major Characteristics of the New Economy

Main features of new economy

 New Horizon (prospects)

 Growth opportunities

 Customer driven

 Enhanced competition

Benefit of the new economy

 The new economy can be categorically stated to have the following major benefits.

 Knowledge driven
 Creation of new job among others

 It is a digital world, there is high digitization of technologies

 Teaming up with other forms to complementary resources
 Time, space and distance irrelevant to activities due to ICTs
 There is low capital to start business.
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