{"id":12754,"date":"2021-06-18T09:00:00","date_gmt":"2021-06-18T08:00:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=12754"},"modified":"2021-06-17T10:42:09","modified_gmt":"2021-06-17T09:42:09","slug":"digital-economy","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/digital-economy","title":{"rendered":"Digital economy"},"content":{"rendered":"\n

Newsletter from 18 June 2021<\/strong><\/p>\n\n\n\n

It is a long time since I was first seized by an interest in digital technology, wanting to understand what it is doing to our economies and societies. It was the mid-1990s when I first saw a webcam showing me \u2013 in London \u2013 live traffic driving along San Francisco\u2019s Golden Gate Bridge. It sounds dull now, but many were equally enthralled at the time by a webcam showing how much coffee was left in the pot of the University of Cambridge computer science department<\/a>. I for one was hooked.<\/p>\n\n\n\n

A quarter of a century on, one of the many lessons to emerge from the pandemic is how much we rely on digital technology. The availability of digital services \u2013 from online shopping to Zoom, Teams and other platforms \u2013 has meant that many people have been able to continue to work and sustain their social contacts since March 2020.<\/p>\n\n\n\n

Recent figures from Ofcom<\/a>, the UK\u2019s regulator of the communications sector, show a surge in the amount of time the average Briton spends online: 3 hours and 37 minutes a day (excluding TV watched by streaming online). That\u2019s over a day a week. It is hard to imagine how we would have coped without it.<\/p>\n\n\n\n

This dependence raises many questions for economists. One is the basic reliability of digital infrastructure, and access to stable and adequate broadband. That there are vulnerabilities was revealed recently when the content delivery network service Fastly, one of the jigsaw of companies enabling access to websites, brought down swathes of the internet for more than an hour, seemingly because of a single software bug<\/a>.<\/p>\n\n\n\n

Overall though, the communications networks have proven wonderfully robust and able to cope this past 15 months. In an upcoming Observatory article, Will Stewart, a telecommunications engineer, discusses how our digital infrastructure has expanded to meet rising demand. But the big policy and economic challenge is extending coverage: access needs to be reliable and ubiquitous. The need for universal access also points to issues concerning distribution in terms of devices and affordability of services. These are economic and political challenges, not engineering ones.<\/p>\n\n\n\n

For in addition to reliability and resilience, there are major distributional questions. School pupils have needed to access their lessons online, and those in low-income families or rural areas have been significantly disadvantaged. Around one in seven adults in the UK does not use the internet, generally older and poorer people. And there are still gaps in service coverage around the country.<\/p>\n\n\n\n

A second set of issues concerns the fact that digital markets are so concentrated. In a recent Observatory piece, William Quinn and John Turner (both Queen\u2019s University Belfast) discuss the extent to which there is currently a tech bubble<\/a>. Have share prices for technology companies risen far beyond the level justified, even by the extent to which we all use them?<\/p>\n\n\n\n

There\u2019s a big difference between \u2018crypto-assets\u2019, the purpose of which is, to say the least, unclear, and companies such as Alphabet (Google) and Amazon that deliver genuinely highly valued services<\/a>. This is highlighted in an article by Andrew Urquhart (Reading) on the meme cryptocurrency Dogecoin<\/a>. Started as a joke, Dogecoin is now the sixth largest cryptocurrency. Yet its value is extremely precarious and ultimately tied to interest in the meme.<\/p>\n\n\n\n

Figure 1: Price of Dogecoin<\/h4>\n\n\n
\n
<\/div>\n\n