THE INTERNET INFRASTRUCTURE: A GENERAL PURPOSE TECHNOLOGY
Far from what traditional economic theory would tell us, we cannot treat the Internet as a top-down market that will reach equilibrium. Its value derives from the actions of billions of individually motivated agents, collaborating and innovating in unexpected ways.
This network is facilitated by some wise - and lucky - design principles that go back to the earliest days of the Internet’s development. The Internet emerged as the ‘most fit’ technology for global networking, and now itself serves as a platform for further evolution and growth. The fact that it has become the infrastructure for countless economy-growing activities calls for an infrastructure-oriented understanding of its value (Frischmann, 2012).Some economists have identified a special class of technologies that serve as platforms for endogenous growth because they allow a great deal of follow-on innovation. Steam power and electricity are classic examples. The concept of a ‘general purpose technology’ (GPT) was first articulated by Bresnahan and Trajtenberg (1995), and has been the subject of considerable subsequent scholarship (Lipsey et al., 2005; Bresnahan, 2010). GPTs play a role of ‘enabling technologies’ by opening up new opportunities rather than offering complete, final solutions. The result is ‘innovational complementarities’, meaning that ‘the productivity of R&D in downstream sectors increases as a consequence of innovation in the GPT technology’ (Bresnahan and Trajtenberg, 1995, p. 84).
Looking back at the development of the IT industry more than ten years after his key GPT paper, Bresnahan (2007, pp. 114, 118) noted:
The lesson here for Schumpeterian Economics is far more general than the narrow and specific point about ‘open architecture,’ which seems like a technical concept from computing. Instead, the point is about the role of a permissive, forward-looking system of innovation in which inventions can come from multiple sources... The most economically important use of a general purpose technology need not be determined by the inventors of the GPT, but rather by the inventors of complements, applications.
The economic value of the Internet derives in large part from its general-purpose nature. It has great ‘capacity to produce unanticipated change through unfiltered contributions from broad and varied audiences’ (Zittrain, 2008, p. 70). The lesson for economists and policy-makers is to preserve this open platform - most often by refraining from government interference, but occasionally by discouraging those who would seek to make it less ‘general’.
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