Information Technology Reference
In-Depth Information
before passing any legislation [70]. Even though it appears unlikely that Congress will
pass any net neutrality legislation in the near future, Internet backbone providers are
unlikely to move toward tiered service without getting some kind of approval from the
FTC [73].
The Declaration of Independence states that “all men are created equal,” but we live in
a society in which some people have far more wealth and power than others. What if
everyone were guaranteed roughly the same amount of income? The traditional answer
to this question is that there would be little motivation for people to exert themselves,
either mentally or physically. If everyone were paid the same, there would be no point in
getting an education, taking risks, or working hard. Productivity would be low, and the
overall standard of living would be poor. For this reason, many people believe a superior
alternative is a market economy that rewards innovation, hard work, and risk taking by
compensating people according to the value of the goods they produce.
In
The Winner-Take-All Society
, economists Robert Frank and Philip Cook explore
the growth of markets in which a few top performers receive a disproportionate share of
the rewards. Their book is the primary source for this section [74].
Frank and Cook observe that the winner-take-all phenomenon has existed for quite
a while in the realms of sports, entertainment, and the arts. A few “superstar” athletes,
actors, and novelists earn millions from their work and garner lucrative endorsements,
while those who perform at a slightly lower level make far less. However, the winner-
take-all phenomenon has now spread throughout our global economy. Sometimes the
qualitative difference between the top product and the second-best product is very slight,
yet that can be the difference between success and failure. Hence corporations compete
for the top executive talent that can give them the edge over their competition. The
compensation of CEOs at America's largest corporations has risen much faster than the
wages of production workers (Figure 10.13) [75].
Several factors have led toward winner-take-all phenomena in our economy:
1.
Information technology and efficient transportation systems make it easier for a leading
product to dominate the worldwide market.
For example, consider a music studio that has a digital recording of the world's best
orchestra playing Beethoven's Symphony no. 5 in C Minor. The studio can produce
millions of perfect copies of this recording, enough for every classical music lover
on the planet. Why would anyone want to listen to the second-best orchestra when
a CD of the best orchestra is available for virtually the same price?
2.
Network economies encourage people to flock to the same product.
If by chance you should need to use someone else's computer, it is far more likely
that person will own a Windows PC than a Macintosh. In this respect, knowing
how to use a Windows computer has greater utility than knowing how to use a
Macintosh. If a person cannot decide which computer to purchase, this factor alone
may encourage someone to buy a Windows PC.
