40 PagesPosted: 7 Aug 2023Last revised: 23 Apr 2024
See all articles by Danxia Xie
Tsinghua University - Institute of Economics
Tsinghua University - Institute of Economics
Tsinghua University - Institute of Economics
Date Written: July 1, 2023
Abstract
The digital economy’s functioning hinges upon the close collaboration of various core elements. Data, as a pivotal production factor, derives its value not in isolation but rather from its intricate connection to physical media, like data processors and storage devices. This paper introduces a comprehensive equilibrium model that unifies critical components of the digital economy, including computing power, storage, data, and algorithms, within an integrated analytical framework, forming a more general theory. In the general digital economic model, data accumulation is restricted by data storage capability, while the efficiency of data utilization depends on rival computing power. When data is shared and utilized non-rivalry across all production and innovation sectors, the volume of data generated, total computing power, and distribution of computing resources mutually influence each other, culminating in a market competition equilibrium. However, this equilibrium may give rise to potential issues, such as excessive investment in computing power, unequal distribution of computing resources, and insufficient innovation during market competition. Moreover, under different parameter settings, the market competitive equilibrium may experience inadequate data sharing or data misuse. In conclusion, this paper extends the model to include algorithm innovation and dynamic accumulation of storage and computing power. This comprehensive analysis provides valuable insights into the intricate dynamics of the digital economy, facilitating a deeper understanding of its core mechanisms and implications for policy making and industry practices.
Keywords: Digital Economy, Computing Power, Storage, Data Infrastructure, Data Elements
Suggested Citation:Suggested Citation
Tsinghua University - Institute of Economics
FAQs
The digital economy is a portmanteau of digital computing and economy, and is an umbrella term that describes how traditional brick-and-mortar economic activities (production, distribution, trade) are being transformed by the Internet and World Wide Web technologies.
What is the concept of digital economy? ›
The digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes.
What are the three main components of the digital economy? ›
Components of Digital Economy
- e-business.
- e-business infrastructure.
- e-commerce.
Don Tapscott first coined the term digital economy in his 1995 bestselling book The Digital Economy: Promise and Peril in the Age of Networked Intelligence.
What is the digital economy quizlet? ›
Digital Economy. an economy based on digital technologies, including communication networks, computers, software, and other related technologies.
What are the problems with the digital economy? ›
Many developing countries continue to face significant challenges to participate in and benefit from the digital economy. These include inadequate laws and infrastructure, limited financial resources, regulatory complexities and a lack of digital skills.
What is the objective of digital economy? ›
The priority is to support effective measures to facilitate investment in innovative digital technologies. The economy should exploit the possibilities of digital technologies and the Internet and promote innovation of products, services, processes, organizations and business models.
What is the future of the digital economy? ›
The digital economy is booming. Annual smartphone shipments have more than doubled since 2010, hitting 1.2 billion in 2023. Internet of things (IoT) devices are projected to surge 2.5 times from 2023 to 39 billion by 2029.
What are the positive effects of the digital economy? ›
The digital economy can reduce the cost of key factors, exert the network radiation effect, improve the allocation efficiency of production factors, and ultimately improve the efficiency of regional resource allocation.
What is digital economy strategy? ›
The strategy extends support to critical technology industries, including AI, quantum computing, and robotics. Recognising the potential for job creation, economic growth, and enhanced competitiveness, the government is committed to fostering these industries' development and adoption.
The Digital Economy is developed through various economic endeavours that significantly depend on digitally transformed knowledge and information. Data analytics, AI, blockchain, IoT technology, cloud computing, or any internet-based service are the primary technologies used for the digital economy.
What is the theory of digital economy? ›
In the general digital economic model, data accumulation is restricted by data storage capability, while the efficiency of data utilization depends on rival computing power.
What are the disadvantages of digital economy? ›
The cost to implement and maintain ever-changing digital technology solutions can be prohibitive to smaller business and organisations. Data storage and use can lead to a risk of data loss, protection and privacy violations. Cloud computing and use of the Internet carries the threat of cybersecurity breeches.
Which is the largest digital economy in the world? ›
In the SIDE 2024 report, the US ranks first with a score of 65 and China a close second with 62, India is third with a score of 39, followed by the UK (29), Germany (24) and South Korea (22).
What is the digital theory? ›
A comprehensive conceptualization of subject areas such as digital reality, simulation, and virtuality; interactivity and agency; media archaeology and migration; subjectivity, race, gender, and online identity; the politics of cyberculture; indigenous interventions; globalization and the political economy of digital ...
What is the concept of economy theory? ›
An economic theory is a model that is used to explain how economies function as well as describe various economic phenomena. Some well-known economic theories are classical economics and Keynesian economics.
What is the theory of the digital revolution? ›
The digital revolution converted technology from analog format to digital format. By doing this, it became possible to make copies that were identical to the original.
