Fostering Research on the Economic and Social Impacts of Information Technology (1998) / Chapter Skim
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Appendix C: Commissioned Papers
Appendix C: Commissioned Papers
Pages 163-210
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From page 163... ...
CCommissioned Papers
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From page 165... ...
state prison in a flamboyant attempt to demonstrate that AC was unsafe. The incident is perhaps the best-known episode in the socalled "War of the Systems," which came to an end with the invention of the rotary converter in 1892, which enabled existing DC distribution systems to be integrated into the more efficient AC systems, and completion of the Niagara Power Project in 1895, which showed that large generating plants and associated transmission lines capable of meeting regional needs could, indeed, be built.)
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From page 166... ...
Moreover, the late nineteenth and early twentieth centuries saw prices fall so that construction of the physical infrastructure of electricity, for example the generating plants, transmission lines, power stations, and substations took place in an environment of declining real costs which could be passed off to consumers as lower rates while the companies still turned a profit. The flip side was wages.
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From page 167... ...
Even the transcontinental land grants to the railroadswhich amounted to an area greater than California and Nevada combined were modest relative to the total cost. Carter Goodrich concluded that combined state and federal financial assistance to the transcontinental railroads amounted to about 13.5 percent of their total construction cost, and that this assistance was substantially less than that provided for canals.4 Sustained intervention by the government in American daily lives, as measured by per capita increase in government revenues and expenditures, appears to have increased consistently after 1890 and to have begun with local not federal authority.5 Federal regulation, marked by the organization of the Interstate Commerce Commission (ICC)
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From page 168... ...
His lamp and associated DC generating and distribution system represented the most successful in a series of attempts to challenge the gas companies by producing superior interior illumination at a competitive price.7 Thus, the great nineteenth-century infrastructures arose by processes of competition, compromise, and consensus in which the public presence was, at best, a facilitator and at times a mediator. What Falls Out?
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By the end of that year, however, AT&T, then under the jurisdiction of the Interstate Commerce Commission (ICC) , had bought 223 of the 234 independent telephone companies subject to the agency's jurisdiction.~° Electricity tells a similar story.
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By 1924, 7 holding companies controlled 40 percent of the nation's generating capacity, and 16 holding companies generated three-fourths of the nation' s electrical power. Thus, even the publicly owned municipal utilities, which provided service to end-users, were dependent on private power providers and transmission line companies for access to bulk power.
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From page 171... ...
In general, though, competition between rail and water tended to lower all freight charges. Similar inter-product competition also tended to keep electric utility rates relatively low and encouraged utility executives to cooperate with regulatory agencies, thus distancing themselves from the contentious and adversarial positions taken by the gas companies.
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From page 172... ...
Given the scale of their facilities and the importance of the heat byproduct (e.g., steam) to their industrial processes, managers of these industries tended to install self-contained electric generating plants when they did decide to go electric after 1919.~6 Electricity thus offered small-scale enterprises access to power that formerly they did not have.
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. The advent of electricity and the electric motor enabled a restructuring of industrial processes to a more efficient, decentralized unit drive system where energy was made available at the point of use.
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He found that independent telephone companies offering combinations of local and long-distance services both cooperated and competed with each other. Successful companies enjoyed cooperative relationships within a technological standard, even though that standard was not necessarily the most sophisticated technology available.
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Lipartito found that Southerners did not necessarily want the sophisticated and expensive service offered by AT&T. When telephone service was introduced to Huntsville, Alabama, a local newspaper editor observed that residents wanted connections to nearby towns not to New York City or Washington, D.C.22 175 Whither "Natural Monopoly"?
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A second group of subscribers saw its social value; this group contained a disproportionate number of women and rural residents, precisely the group left out of the AT&T business plan, which, based on the example of Western Union, emphasized national service for businesses. But Fischer found that telephone service tended to be adopted first among professional and socially elite households and then to percolate more slowly through the local socioeconomic structure.27 Fischer's underlying interest concerns the diffusion of technology, and he sees in the example of the telephone evidence that consumer behavior and demand affect technological development and expansion of service.
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From page 177... ...
Thus, telephone service offered by one company necessarily diminished the potential market of a second company. Neither AT&T nor the independent companies recognized that the distinct communication needs of urban businessmen and those of small-town and rural residents might in principle have been served by overlapping telephone service areas.3i Physical Plant and Service Bell's business model was consciously patterned on Western Union: highend, national service to business clients under a single corporation that controlled both the wired plant and the service delivery.
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From page 178... ...
Transmission line companies did not have to bear the extremely high cost of constructing power generating plants but controlled access to bulk power by the local utilities. In this case, the profitability was in segmenting the service and controlling the intermediary function.
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From page 179... ...
in Massachusetts was one response to the problem of shaky bank notes and represented an attempt to stabilize the system by increasing confidence, or trust, in bank notes. The Suffolk Bank intended to reverse Gresham' s Law by driving out bad money with good; to a large extent the bank succeeded, partially by threatening to redeem large numbers of notes issued by irresponsible banks, and partially by compelling other banks to participate in the system and to maintain reserves with the Suffolk bank as security for their notes.33 Free banking (1837 to 1863)
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And what can be done about cream-skimming, that is, offering services that skim off the lucrative end of the market so that serving the entire market becomes unprofitable? Historically, both the telephone company and the electrical power companies have used cross-subsidization among market segments as a pricing strategy.
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In some instances, the power companies skimmed off the most lucrative customers by building their lines through the most profitable areas, thus depriving local cooperatives of an important segment of their customer base. Moreover, in the late 1940s, efforts by the Truman administration to continue to expand public power were frustrated by Congress' refusal to fund construction of transmission lines.
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From page 182... ...
They will be services that clearly meet users' immediate needs product substitution and enable consumers to begin to do things differently, just as small consumers of central power sources took advantage of fractionalized delivery of power to obtain interior illumination and to begin to mechanize their labor-intensive processes. We have already seen this in the introduction of word processing and spreadsheet programs as well as the deployment of intranet and e-mail technologies.
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Sylla, and J.J. Wallis, "United States City Finances and the Growth of Government, 1850-1902," Journal of Economic History 48 (1988)
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Moreover, a single canal barge could haul a load ten times the size of that drawn by a four-horse Conestoga wagon on the best toll roads. Robert William Fogel, "Notes on the Social Saving Question," Journal of Economic History 39 (1979)
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24. Kenneth Lipartito, "System Building at the Margin: The Problem of Public Choice in the Telephone Industry," Journal of Economic History 49 (June 1989)
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: 1-15; Gary Gorton, "Clearinghouses and the Origin of Central Banking in the United States," Journal of Economic History 45 (1985) : 277-83; Gary Gorton and Donald J
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Benston, The Separation of Commercial and Investment Banking: The Glass-Steagall Act Revisited and Reconsidered (New York: Oxford University Press, 1990) , 136-38; White, "Before the Glass-Steagall Act," 34-37; "The Political Economy of Banking Regulation, 18641933," Journal of Economic History 42 (1982)
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The ultimate purpose of the paper is to challenge the community of scholars engaged in research on the profound socio-economic and socio-technical changes under way. The audience for the paper includes scholars in the social sciences, broadly defined, including economics, sociology, political science, psychology, communications, and management.
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These assumptions justify our selection of the categories of enterprise and civil society as the two levels of discussion for our purposes. We acknowledge that other conceptual schema can work to organize this discussion.
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The onus, from this perspective, is on showing that impacts from those technologies are real, significant, and lasting. Civil society refers to the larger social order that makes economic rationality, social tractability, and political stability possible at the local level of groups, organizations, and production sectors.
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These objectives are meaningless unless understood within a context of civil society that embodies abiding social values, and thus must be seen as derivative of rather than generative of those values. It might therefore seem that the organization of enterprise is determined by civil society, but this is not the case.
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Yet, as recent history has shown, organizations such as AT&T, IBM, and GM have by no means been pushed aside by the changes of the information age. They have adopted and adapted the technologies and harnessed them in ways that have allowed radical "downsizing" of work forces while retaining and in some cases enhancing top management control over firms' performance and profitability.
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The political position that derives from this is that the market should govern as much of production and distribution as possible, while hierarchies serve as a kind of back-up in the event of market failure. Given that we have already segregated civil society from this discussion, it is not necessary to argue this point in detail at the level of organization of enterprise.
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From page 194... ...
If this infrastructure also provided the means for effecting real-time transactions such as sales based on such information, whole classes of intermediaries such as sales clerks, stock brokers, travel agents, and so on, whose function is to provide an essential information link between buyers and sellers, might be eliminated. Removal of intermediaries would not only prune the existing hierarchies that now govern buying and selling, but would also reduce the costs in the production and distribution value chain, further encouraging the shift toward markets.
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From page 195... ...
Mediators often survive through successful exploitation of information asymmetries, such as the knowledge necessary to match a cargo carrier's excess capacity to the needs of a onetime shipper. In principle, computers and communications technologies can facilitate disintermediation by linking the parties along the value chain and reducing information asymmetries.
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The examples above appear to reduce the operation of markets and result in vertical integration or at least vertical channel partnerships, wherein suppliers and retailers develop close and perhaps collusive relationships. Market dominance could only reemerge if exclusive vertical partnerships proved to be unsustainable.
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The companies that own the reservation systems were originally owned by the airlines, and they kept tight hold on travel agents through incentives and constraints, such as forgiving costs of terminal rentals and discouraging agents from using more than one system. This behavior was so common that federal regulation was enacted to make reservation systems "neutral" in order to reduce anticompetitive practices.
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The exceptions appear in certain types of factory floor and clerical work, in which the use of the technologies has resulted in some deskilling if not elimination of such jobs. Social interaction in organizations has been affected by the use of computers and communications technologies.
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Establishment and Maintenance of Civil Society Civil society is the social order in which the "rules of the game" are articulated and enforced for individuals, groups, organizations, and sectors.
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Democratic Governance Computers and communications technologies have taken on a highly visible role as tools of government and as symbols in the ongoing debate about how government ought to function. There has been considerable speculation over whether use of these technologies can and will alter the functioning of democratic government.
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Assume that, as a result of its greater computing, information, and analytic capabilities, the executive branch gains power over the smaller, less experienced, and diffuse bureaucracies supporting the legislative branch. The legislative branch can limit and control executive branch computerization by stopping the purchase of new computer systems through legislation, by strangling the procurement process through audits and inquiries, and by raising politically damaging questions of faulty procurement, cost overruns, mismanagement, and other evils resulting from executive computerization.
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The most powerful response of the executive branch is the ability of the executive to take his or her viewpoint directly to the citizens, thereby marshaling popular support and potentially nullifying the effects of oversight by the legislature. The use of computers and communications technologies is unlikely to produce power shifts from the executive to the legislative branch in this area either.
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From page 203... ...
The controversy is likely to persist due to the creation and interconnection of large systems containing personal information and the relatively weak enforcement of existing privacy legislation. Effects on the Political Process Computers and communications technologies do not appear to be serious agents of change in democratic government, at least as seen thus far.
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It is possible that computing-based changes in the conduct of political contests will eventually have an effect on the ways the Constitution is interpreted and implemented. An orthogonal view of technology and its impact on social life implies more subtle and possibly more important concerns for democratic government.
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Blackouts of national long-distance telephone service, credit data systems, electronic funds transfer systems, and other such vital communications and information processing services would undoubtedly cause widespread economic disruption. Dependency can also result in unanticipated, downstream consequences in the form of negative externalities such as pollution.
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The Impacts of Computers Are Seldom as Predicted. Common predictions about the effects of using information technology frequently fail to materialize as expected.
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Political perspectives are essential for understanding technology's role in organizations. Technocratic politics helps explain the relationships between the technologists and end-users; pluralistic politics helps explain the relationships among various user interests vying for access to computing resources; and reinforcement politics helps understand the effects of computing on power and authority in organizations.
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The work reviewed has used perspectives from the social sciences (political science, economics, sociology, psychology, communications, and management) and from the social analysis of computing in the information and computer sciences.
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Since the true consequences of using information technology are unforeseeable, the actions of individuals in organizations are always based to some extent on faith, social pressure, perceived political advantage, and other factors, in addition to "cost-benefit" calculi covering applications to given activities. Research Requires a Critical Perspective.
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The fourth is to concentrate on long-term study of organizational and social impacts. Such impacts cannot be studied over the short term because changes occur slowly, the effects of the use of technology are indirect more often than direct, and the organization and the technology are interactive.
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