Early Networks The creation of railroad networks helped fuel tremendous growth in the interior portions of the United States in the mid 19th century. See, for example, The City Transformed, Railroads and their Influence on the Growth of the City of Chicago in the 1850s by Benjamin W. Dreyfus. Later, the telephone networks emerged. The history of the Bell System, hosted by MIT, recounts Bell's moves to dominate the first major telecommunications network. (See esp. the section titled "Competition and Consolidation-The National Network Emerges")

       The central thesis of Information Rules is that even though technology moves forward at an ever-quickening pace, the economic (and business) implications of technological change can be understood by reference to historical examples. According to Shapiro and Varian the nature of the info-economy is rooted in the special qualities of information as a "good", and how those qualities influence competition within a network based distribution system.

       The coming of the industrial age saw the creation of new network economies, albeit not based on digital technology. "If you look back to 1840, the railroads had a lot of the same effects that we see now in terms of the value of the network to the users," says Hal Varian. "Actually, an IPO frenzy surrounded the extension of the railroads, both in the U.S., and in Europe somewhat earlier."

       During the middle of the twentieth century relatively few new networks came into being, and Varian thinks we lost touch with the lessons that can be drawn from what happened during the development of the first industrial networks. "At the turn of the last century, the telephone, the telegraph, and electric lighting caused a lot of the same effects. What's curious is that in the fifties and sixties, we didn't see any prominent new networks. So based on the time that we remember, recent history, we say, these networks are brand new things!"

       Beginning in the 1980s and continuing through the 1990s a new wave of network technologies blossomed. First it was ATM networks, the rise of home video and the popularization of fax machines, and then most significantly, the Internet. "They've really sprung into the front of our consciousness," says Varian, "but the same thing we saw in the network growth of the eighties-battles of interconnection, standardization, competitive tactics-we also saw in these earlier epochs."

Confusing In Context I found Shapiro and Varian's economic definition of information troubling. There's nothing wrong with re-defining a word for a specialized application (making it a "term of art"). However, creating an economist's definition of information that is fundamentally at odds with its generally accepted use in cyberspeak is apt to create confusion and misunderstanding. [ed.]

       Information, as Shapiro and Varian define it, is any communication or information product. These products are therefore, goods, and could include written words, sound recordings, movies, games, computer software, lists of telephone numbers, or tables of IP addresses. These could be fictional, erroneous or even fraudulent. What matters is that information (as defined by Shapiro and Varian) is not inextricably linked to any physical object like a brick or a tuna salad and therefore information is amenable to distribution in digital format on a network.

       Normally, information means facts presented in a manner that helps a person understand or know about something. When Shapiro and Varian say information, they mean something quite specific: a product.

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