What do you mean by an information economy ? Explain with example.

Ans.

Information economy is a term that characterizes an economy with an increased emphasis on informational activities and information industry.

The vagueness of the term has three major sources. First, not surprisingly, there is no agreed-upon definition regarding the threshold of when an economy is information economy and when it is not, just as there is no agreed threshold for an agricultural or industrial economy. This is partly because research has been focused on various “increases” in informational activities, rather than the level it has achieved. It is rare to see research seriously discussing whether a certain level of “informatization” in an economy is enough to label it as information economy.

Second, there are many different kinds of measurements of information-related economic indicators that are used by researchers. Unlike the first problem, the second problem is not the lack of attention, but the lack of agreement among various opinions.

Two related questions regarding the term are also noteworthy. In particular, there is some argument, most notably by Manuel Castells, that information economy is not mutually exclusive with manufacturing economy. He finds that some countries such as Germany and Japan exhibit the informatization of manufacturing processes. In a typical conceptualization, however, information economy is considered a “stage” or “phase” of an economy, coming after stages of hunting, agriculture, and manufacturing. This conceptualization can be widely observed regarding information society, a closely related but wider concept.

Third, there are numerous characterizations of the transformations some economies have undergone. Service economy, high-tech economy, late-capitalism, post-fordism, and global economy are among the most frequently used terms, having some overlaps and contradictions among themselves. Closer terms to information economy would include knowledge economy and post-industrial economy.

The process of economic evolution from agriculture to manufacturing to services is nearing its end in the developed economies. The major evolution along a different dimension is now underway that is from a material based economy to an information-based economy. Information economy is an economy in which knowledge is the primary raw material and source of value. It is characterized by:

(1) Convergence and integration of communication and data processing technologies into information technology (IT),

(2) Pervasive influence of IT on economic activity such that the most workers are information workers and most products are information products, and

(3) Application of IT networks throughout the economic institutions, organizations, and processes resulting in a very high degree flexibility, weakening of regulatory control, and acceleration of globalization.

However, since every IT-based economy must coexist with a vast manufacturing sector in which knowledge is not the basic raw material, the claim that the new economy differs fundamentally from the traditional economy remains continuous.