Chapter 8:

Economic and Social Significance of Information Technologies

Information Technologies

IT reflects the fusion of two key technological changes: the development of digital computing and the ability to transmit digital signals through telecommunications networks. The foundation of all information technologies and products is the ability to represent text, data, sound, and visual information digitally. By integrating computing and telecommunications equipment, IT offers the ability to access stored (or real-time) information and perform an extraordinary variety of information-related tasks.

IT does not represent a single technology as much as it does systems of interactive technologies used for information processing. There are literally hundreds of commercial products-ranging from telephones to supercomputers-that can interact in an information processing system. The distinctly different functions of many of these products contribute to a sense of fuzziness about IT's technological boundaries. Keen (1995) suggests, however, that IT can essentially be grouped into four basic technological elements of information processing:

Figure 8-1 illustrates the more common technologies that are used for each of these elements and reinforces the understanding of IT as an interactive system of multipurpose technologies rather than a single class of products.

The rapid social and economic diffusion of IT since 1980 has been stimulated by threshold technical changes in computing power, applications, telecommunications, and networks as well as concurrent reductions in the cost of technology. Text table 8-1 illustrates advances in computing power (measured as million instructions per second) that have occurred since the introduction of the first microprocessor, while text table 8-2 presents trends in the relative cost of this power for popular commercial microprocessors. Notably, the computer price deflator calculated by the U.S. Department of Commerce has declined more than fortyfold since 1977 (Warnke 1996).

The other key development in IT is the growing connectivity of computers and information—and, by logical extension, people. Computerized data exchange is the basis for automated teller machine (ATM) transactions, credit card authorizations, airline reservation systems, electronic commerce, and overnight delivery services. A more advanced system, electronic data interchange, is becoming a standard form of communication between suppliers and customers to streamline ordering, purchasing, distribution, and billing operations. The extent of this growing networking is evident in the diffusion indicators—one study estimates that the number of installed local area networks was just over 1 million in 1981, about 12 million in 1990, and close to 40 million in 1995 (Morrison and Schmid 1994).[1]  Use of the World Wide Web, a subsystem on the Internet (see "History of the Internet"), exploded with the introduction of the Mosaic search engine in 1993. Market experts estimate that the Web had 69 million users in 1997 and about 80,000 servers; by 1996, about half of all U.S. companies had sites on the Web (IDC 1997). [Skip Text Box]

History of the Internet top

For many Americans, nothing epitomizes IT as much as "the Net." The Internet is a meta-network for a variety of subnetworks and applications such as the World Wide Web, bulletin boards, Usenet newsgroups, e-mail, scientific data exchange, and more.

The foundation for the Internet was ARPANET, a network that started as four computer nodes in 1969. ARPANET was initiated by the U.S. Defense Advanced Research Projects Agency, and was based on a then-new telecommunications technology called "packet switching." ARPANET flourished as a medium for information and data exchange among universities and research laboratories. Moreover, it stimulated the development of TCP/IP, a communications protocol distributed with the UNIX operating system which has now become the standard for the Internet and other types of commercial telecommunications. By the late 1970s, ARPANET represented hundreds of computer nodes and had integrated several separate computer networks, including one based on satellite technology.

The "real" Internet resulted directly from the National Science Foundation's (NSF's) sponsorship of CSNET, and later, NSFNET (a high-speed network funded by NSF to link its supercomputing centers). NSFNET replaced ARPANET in 1990 and expanded to include a variety of regional networks that linked universities into the backbone network. Large numbers of smaller networks quickly linked into NSFNET—albeit without any planning, control, management, or security. By early 1994, commercial networks became widespread; almost one-half of all registered users of the network were commercial entities. Additionally, the amount and variety of information carried by NSFNET escalated.

Two related events dramatically reshaped the character of the Internet. First, scientists at the European Center for Particle Research (CERN) developed the World Wide Web and introduced it in experimental form in 1989. Second, in 1993, a team of programmers at NSF's National Center for Supercomputing Applications at the University of Illinois introduced Mosaic, a graphical (hypermedia) browser for exploring the Web. Because Mosaic was free and available to the public on the Internet, use of the Web (via Mosaic) soared. The number of Web users doubled annually from 1993 to 1996, and was estimated to be 69 million worldwide in 1997. (See figure 8-3.) Netscape, the leader in commercial Web browser software (accounting for 70 percent of the market), reported that in mid-1997, about 600,000 new users per week were accessing its software (NUA Ltd. 1997). And, compared to other countries, the United States has more Internet servers per capita than any other nation except Finland. (See figure 8-4.)

NSFNET was decommissioned in 1995, when there were enough commercial Internet service providers, Web browsers, and search engines to sustain the network's operations and management; the Internet is now fully privatized. After transforming from ARPANET to NSFNET to the Internet, the next stage of evolution is the "information superhighway"—a telecommunications infrastructure that would allow all national public networks and education and research institutions to link with one another at higher speeds than today. Promoted first by the federal National Information Infrastructure Initiative, and now by the Next Generation Internet Initiative, the new information superhighway will be a higher speed, more functional telecommunications network. For more information on the Internet, see Keen (1995) and Cerf (1997).

The Information Society top

The development, diffusion, and consequences of IT are part of a larger context: that of the "information age" or "information society." What exactly these concepts mean is uncertain, as they are not consistently used or explained in scholarly and popular discussions of the emerging information revolution.[2]  In an extensive review of writings about the information age, Webster (1997) concludes that it has five distinct analytical dimensions: technological, economic, occupational, spatial, and cultural.[3]  While not all analysts agree that human civilization is undergoing an information revolution, there is a pervasive sense that "information and communications will become the dominant forces in defining and shaping human actions, interactions, activities, and institutions" (Alberts and Papp 1997, p. 1).

The present amount, variety, and accessibility of information within American society is unprecedented. Indicators of the economic and social diffusion of IT reveal that the technological capacity for information consumption has increased dramatically in the United States. The volume of IT is most substantial in the economic sector, where the real net computing capital stock was 200 times greater in 1995 than it was in 1975, and the real net communications equipment capital stock was five times greater than in 1975.[4]  (See figure 8-2.) In many industries, the number of workers who use a computer at their job now ranges from 50 to 85 percent (for more detail, see "Impacts of IT on the Economy"). In the manufacturing sector, U.S. Census data indicate that by the late 1980s, 83 percent of firms with 500 or more employees in the metals, machinery, electronics, transportation, and instrument industries used computer-aided design; 70 percent used numerically controlled machine tools (Berman, Bound, and Griliches 1994).

Extensive diffusion of IT is likewise found in the education sector. By 1985, more than three-quarters of all elementary and secondary schools had at least one microcomputer for student instruction. By 1992, all K-12 schools had at least one instructional microcomputer, and 80 percent had 15 or more computers. (See figure 8-5.) The median number of students per computer correspondingly declined from 42 in 1985, to 20 in 1989, to 14 in 1992—essentially the equivalent of one computer per classroom.[5]  As addressed in the last section of this chapter, educational access to computers and other IT is not equitable in terms of race, ethnicity, or income.

Use of computers in the home lags behind the economic and education sectors. U.S. Bureau of the Census (1993) data indicate that although the number of homes with a computer nearly tripled from 1984 to 1993, this amounted to only 23 percent of all households by 1993. Household use is clearly linked to income and ethnicity. Nearly twice as many adult whites had a computer at home in 1993 as did blacks (27 versus 14 percent, respectively); and 62 percent of all households with incomes of $75,000 or more had a computer-double the rate of households with incomes of $35,000 to $49,999 and well over triple the rate of lower income groups. (More detail on the significance of ethnicity and class is discussed later in "Equity Issues.") The comparatively low level of access to home computers in the early 1990s may be changing quickly, however. Data discussed in chapter 7 indicate that 43 percent of adults in a 1997 survey have a computer at home. (See appendix table 7-26.) In addition, a number of PCs priced less than $1,000 were commercially introduced in 1997, and 80 percent of PC shipments are now expected to be for the home market (Pargh 1997 and IDC 1997).

Determining the social and economic effects of this growing use of IT in society is complicated. First, the scope of such effects—both positive and negative-is immense. For example, over a decade ago, Michael Marien (1986) of the World Future Society compiled and categorized 125 expected effects of IT, ranging from the individual to the international system. Second, many types of effects are hard to measure-such as productivity in the service sector or the psychological, emotional, and cognitive impacts of prolonged exposure to computing environments. As discussed in the next section, it is easier to measure and develop indicators for the diffusion and uses of IT in society than it is to isolate and examine the consequences of that use.

Issues in Measurement and Research top

The measures and indicators used here are unlike those found in other chapters of this volume in several ways. First, data on IT are rarely collected on a systematic basis. Accordingly, there are no extensive time-series data on IT diffusion and its effects-the type of indicators available reflect ad hoc interests rather than ongoing analytical needs. (Two notable exceptions are the time—series data on IT investments and capital stock reported by the U.S. Bureau of Economic Analysis and the data on IT in schools collected by Quality Education Data, Inc.) Second, IT as a concept is not clearly defined, and available data are frequently not comparable. In contrast, such indicators as research and development (R&D) expenditures and scientists and engineers are both well-defined and clearly documented not only in the United States, but in the international community as well.

Third, some subjects of interest have not been quantified, such as labor productivity for several key IT industries, including computing and data services. Fourth, it is often extremely difficult to isolate the effects of IT from other factors, such as industrial deregulation; management practices; employee attitudes; and the myriad conditions affecting student learning and achievement: individual ability, teaching skill, classroom environment, nutrition, affinity for the subject matter, and so on. Fifth, there is a time factor. The effects of a technology on human behavior may take years to show up and often may be reliably detected only through controlled, longitudinal study of a set of individual subjects. Finally, much insight on the effects of IT comes from case studies-a useful form of analysis but one that cannot be used to generalize to a larger group or population.

When new areas of inquiry emerge in the social sciences (such as the social and economic impacts of IT), it can take years to develop a dominant "heuristic" (models, theories, and methods) with which to organize research and empirical findings. The field of study surrounding the social and economic impacts of IT is consequently characterized by the full spectrum of social science research methods and techniques. Research and analyses range from qualitative (the use of historical analysis, guided observation, case studies, pattern matching, metaphors, and other narrative information) to quantitative (controlled experiments, cross-sectional or longitudinal data collection and analysis, survey research, content analysis). In all instances, the objective is to determine patterns of regularities in human behavior and the causes of those patterns.

Two "decision rules" were used when evaluating research for inclusion in this chapter:

Diffusion indicators are relatively abundant because they can be easily obtained through conventional survey methods, and there is considerable commercial interest in the demographics of the IT market. Economic effects have been widely studied, but empirical research frequently tends to result in contradictory findings. Quantitative research on the effects of IT on student achievement is extensive (bibliometric searches yield thousands of citations), but diverse research designs make it extremely difficult to cumulate findings. The educational findings discussed here are the results of "meta-analysis," a technique used for integrating multiple studies (this technique is discussed more in the section on "IT, Education, and Knowledge Creation"). Judgments about the impact of IT on equity and privacy are largely inferred from descriptive data and qualitative analysis because of the difficulties in quantifying political power and levels of individual privacy.

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[1] Local area networks are devices (computers, telephones, security systems, automated cash registers, etc.) connected into an information network, typically in a single building or very small geographic area.

[2] For a thorough and up-to-date treatment of many of the issues surrounding the concept of the information society, see Alberts and Papp (1997).

[3] The cultural dimension includes education, governance, religion, values and ethics, and popular culture.

[4] In 1995, the total net capital stock of office, computing, and accounting machinery was $155.8 billion; for communications equipment, it was $388.5 billion (in current dollars). See U.S. BEA (1997), pp. 79-81.

[5] See U.S. Bureau of the Census (1996), table 262. Data are based on the Computers in Education Study conducted by the International Association for the Evaluation of Educational Achievement.

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