Information: An Emerging Dimension of Institutional Analysis

Abstract

The functioning of society depends upon information and its effective communication among society's members. Information, and the means for its communication, have a fundamental and pervasive influence upon all institutions. The economic characteristics of information and communication systems affect the nature of the information that is generated and the conditions under which it is used and interpreted. In the broadest sense, the social, cultural, political and economic institutions in any society are defined according to the characteristics of the shared information within those institutions. In the narrower economic sense, perhaps the most important resource determining the economic efficiency of any economy, industry, production process, or household is information and its effective communication. The characteristics of information define the state of knowledge that underlies all social and economic processes. They provide the foundation upon which explanations of social reality are structured. Information is as central to the study of the functioning of economic systems as is air to the study of the functioning of the human body. Yet throughout the history of economic thought, information has received relatively little direct attention. Like air, information generally is assumed to be absolutely essential, but nevertheless pervasive, costless, and seldom worthy of special attention. If, in some circumstances, information is artificially restricted, economists of all stripes generally conclude that this is undesirable. It is assumed, sometimes naively, that

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