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Computer Mediated Transactions


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Computer Mediated Transactions
Topic: Technology 7:11 am EST, Mar  1, 2010

Hal Varian:

Every now and then a set of technologies becomes available that sets off a period of "combinatorial innovation." The component parts of these technologies can be combined and recombined by innovators to create new devices and applications.

It is hardly novel to suggest that contractual form depends on what is observable. What is interesting, I think, is the way that progress in information technology enables new contractual forms.


These days nearly every economic transaction involves a computer in some form or other. What does this mean for economics? I argue that the ubiquity of computers enables new and more efficient contractual forms, better alignment of incentives, more sophisticated data extraction and analysis, creates an environment for controlled experimentation, and allows for personalization and customization. I review some of the long and rich history of these phenomena and describe some of their implications for current and future practices.

Ross Anderson:

Many of the problems [of information insecurity] can be explained more clearly and convincingly using the language of microeconomics: network externalities, asymmetric information, moral hazard, adverse selection, liability dumping and the tragedy of the commons.

Dee Hock:

Inherent in Visa is the archetype of the organization of the 21st century.


The tempting answer is to try to wriggle free from the dilemma with a compromise that would permit innovation but exert just enough control to squeeze out financial failure.

It is a nice idea; but it is a fantasy.

Financial progress is about learning to deal with strangers in more complex ways.

Computer Mediated Transactions

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