Ag
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Information
Economic theory recognizes that information impacts business; this is most obvious in the list of characteristics of perfect competition. Economic theory suggests that information (presumably market opportunities and production technologies) needs to be readily available to all participants in the market for the market to be perfectly competitive.
- Recognize that this discussion will subsequently focus on not having information readily available to all. Why? Perfect competition means minimum profit. Imperfect competition creates an opportunity to increase profit. Will businesses try to control information as a way to break out of perfect competition and into imperfect competition? Will businesses try to control information as a way to increase profit opportunities?
It has been suggested in these materials that information can be explicitly recognized as an economic input and that royalty is the return for someone who contributes information, whether it is market information or production technology.
- Review: are economic resources (and their respective returns) best described in the early part of the 21st as land (rent), labor (wage), capital (interest), information (royalty) and assumption of risk (profit)?
Is an example of market information knowing what consumers want? In the food industry, does the grocery store with its check-out scanners have the best information about what food consumers want; that is, what food they are buying? Is another example of market information knowing what businesses are willing to supply, such as a trcuking firm that is willing to transport refrigerated food products to a particular region of a particular state? An easy example of market information is knowing what product a supplier is willing to provide, such as frozen pizzas.
Is an example of production technology the producer who knows what combination of inputs produces the desired outcome at the lowest cost? For example, farmers who know their land well enough that they understand which herbicides to use and how much fertilizer to apply, or they know what feed ration provides the best rate of gain for their livestock? Is GMO another example of production technology?
The availability of information probably fits into three categories: public, private but available, and private and not available.
- Government information is an easy example of public information; it is available to everyone and thus pressures the market towards perfect competition.
- Private information that is available is a product that a business produces but is willing to sell to any willing buyer, such as GMO seed of GPS technology. The producer of that technology will earn the return when selling the technology to willing buyers and will be able to continue to earn that return as long as the buyers cannot replicate the technology and reuse it or resell it.
The buyer will not gain much from using this technology (remember the seller will charge a price that reflects the MVP of the technology). However, the buyers (if the buyers use the technology in their own production, such as farmers using GMO) may find that they need to use the technology to remain competitive with other buyers who have purchased and are using the technology in their own production processes. Thus private information that is available does not increse the profit of the user; that information is primarily profitable to the firm the created, controls and is selling the production technology.
- It is the third category of information that allows a business to break out of perfect competition; that is, private information that is not available to all. For example, the business person who knows a market opportunity, tells no one, and pursues that market opportunity. Or the business with unique production practice (perhaps one they created themselves), does not tell anyone, but uses the practice to enhance output.
The question becomes how does one control private information so it is not available to others and how does one access such private information? That is what the discussion needs to focus on.
Related topics (not yet fully developed)
- Recognize the legal protection that is provided for private information, copyright and patents.
- Collaboration as a way to access and control private information. Recognize the role of contracts and license agreements; also recognize the role of negotiating skills.
- Recognize the risk associated with pursuing a niche opportunity. What happens when consumers change their taste and preferences before a firm can recover its investment that was made in response to an earlier taste or niche market opportunity that is now no longer preferred by consumers?
- Recognize that when negotiating an agreement for an ongoing relationship, such as a long-term, multiple-delivery supply contract, the critical terms will include sharing information about consumer purchases etc, and sharing risk, as well as fundamental contractual terms of price, quality, quantity, delivery date, delivery location, etc.
The Breadth of Information
Information encompasses the thoughts used to produce a good or service; it could be a song, a book, an invention, research results, software, market information, or production technology. Today, information is often referred to as intellectual property.
The economic return for information is royalty.
Is this the "information age?" Has communication technology made this the information age? Is the ability to make better decisions a benefit of the information age? Do the challenges of the information age include
- Understanding what information is needed;
- Knowing how to access information;
- Assessing the quality of the information;
- Managing extensive quantities of information;
- Using the information to make a decision; and
- Understanding the impact of many people having access to the same information, i.e., forces businesses into perfect competition?
Types of Business Information
- Market information: "Who might be interested in buying my product or service?" "Who might be interested in selling to me?" Examples of market information?
- Production technology: Ideas on how to produce a product more efficiently. Examples of production technology?
- How is information created?
- Market information?
- survey, data collection, ???
- Production technology?
- research, experience, ??
- Will ag producers use GPS technology to develop more information about their business so they can begin to apply economic concepts such as marginal cost (that is, the cost of producing one more unit of output as a result of increasing the quantity of variable input)? Will GPS technology allow ag producers to assemble enough data to develop realistic production functions for a narrow portion of Stage II?
- As consumers recognize they can be increasingly selective about their food, will ag producers and the entire food industry respond by using technology to enhance traceability? Will ag producers use technology to document production practices and to share this information in such a way that consumers will have access to information about production pactices pertaining to the specific food item they are consuming?
- Market information?
- Would a network of business confidants, peers or colleagues be a source of information?
The following links are examples of sources of government information about agriculture.
- Economic Research Service, United States Department of Agriculture (ERS) "is the main source of economic information and research from the U.S. Department of Agriculture." It offers a significant body of research and analysis on a variety of Key Topics. Selected resources include
- National Agricultural Statistical Service, United States Department of Agriculture (NASS) provides "timely, accurate, and useful statistics in service to U. S. agriculture."
- North Dakota Agricultural Statistics Service, USDA (NDASS) provides "everyone with equal access to accurate, unbiased information" including prices and yields for North Dakota and yields for each county.
- How is information used?
- Create and sell information (e.g., patent an idea and sell the patent), create and use information (e.g., patent an idea, produce products based on the patent, and sell the products), or access and use someone else's information (e.g., purchase a new technology and use the technology in producing your product)?
- How is market information used?
- How is production technology used?
- Which economic return (e.g., rent, wage, interest, royalty, or profit) might a business be entitled to if it buys and uses someone else's technology or information? Why?
- Use information to make decisions -- which is the task of a manager
- Incomplete information -- Managers will not always have all the information they want when making a decision, so managers need to identify the information they need, that is, the information that is most critical to making the decision. Managers need to know how to gather, organize and use available information, even though it is not all the information.
- Strategic planning -- Consider how a manager uses and manages information as a component of a strategic vision for the business. That is, information is used in making immediate or daily decisions (whether to sell or buy at this time), but also in developing a strategic vision for the business, such as, does the business have the information it needs to enter into a three-year contract, or to create and market a unique product?
- Also consider Daft's thoughts on Information Technology; key points include
- Data v. information -- data needs to be analyzed and applied to become information
- Information needs to be timely, accurate, and easy to use to be valuable; does your information system provide this?
- Information overload -- each of us has access to more information than we can understand and use; we need to identify what information we can or need to use; what information do you need? what information do you use?
- Computer technology is a tool for handling data.
- Converting data into information -- organizing and analyzing the data; storing the data so it can be retrieved
- What questions will likely need to be answered with the information; do these anticipated questions provide guidance as to how the data needs to be converted to information; will the information merely report results (e.g., something changed) or will it also confirm causes (i.e., the reason something changed)?
- Who do you share the information with? Why do you share the information with these persons?
- Why invest in information? What should we expect to receive for this investment?
- Fulfill government requirements (taxes, environmental rules, source of input)
- Useful in making decisions
- enhance our effectiveness (accomplish our goals),
- enhance our efficiency (accomplish our goals at lowest possible cost),
- Enhance our understanding
- Collaboration (more people thinking)
- Continued learning (self-growth and understanding)
- Fulfill contractual requirements; obligations we accepted when we agreed to do business with another firm
- What record keeping system and what analytical tools will work for your business?
- In addition, see Farms, the Internet, & E-Commerce: Adoption & Implications. Agricultural Outlook, Economic Research Service, USDA, November 2001.
Managing Information
- Businesses use information they create as well as information created by others. Examples of each?
- Information is transferable -- consider the impact of education and communication technology.
- How is information transferred or accessed?
- Market information?
- observation, purchase from someone else, retrieve from a public publication or source, ???
- Production technology?
- directly purchase the information or technology, indirectly purchase the information (e.g., buying the technology that has been incorporated into equipment), ???
- Market information?
- Information has value. Why?
- What is the relationship between level of competition and information (review characteristics of competition)? What is the relationship between information and potential for profit?
- How does the perceived value of information impact how it is managed?
Public and Private Information
- What distinguishes private information from public information?
- Is public information (such as government data) different than private information that anyone can buy?
- What price will the seller charge for the information? How does the answer to that question relate to the economic concept of marginal value product?
- Is there a difference between private information that anyone can buy (such as technology) and private information that the owner will not sell or will sell only to selected buyers?
- Again, how does this difference relate to the economic concept of "level of competition?"
- Is public information (such as government data) different than private information that anyone can buy?
- Examples of each type of information
- Examples of private market information? Examples of public market information?
- Examples of private production technology? Examples of public production technology?
- Any additional examples?
- The land grant system is a source of public information.
- Adapting Justin Morrill’s Vision to a New Century: The Imperative of Change for Land-Grant Universities
- "...opportunity should be available to everyone and that education was the vehicle for that opportunity."
- "It was not the Morrill Act of 1862 alone that brought sweeping change to the American educational landscape. The transformation also included: The Hatch Act of 1887 creating the agricultural experimentation stations; the Second Morrill Act of 1890, which led to creation of 17 historically black land-grant colleges; and the Smith-Lever Act of 1914, which created cooperative extension. Ultimately in 1994, 29 Native American tribal colleges gained land-grant status."
- Sources of private information?
- Does a business use public and private information differently? Why?
- When might a business use public information? When might a business use private information? Why?
- When might a business use a combination of public and private market information?
- Does a business control or share public and private information differently? Why?
- Accessing public information
- Accessing private information
- How is (private?) information controlled?
- Considerations: who is creating the information, who owns the information, and what are they requiring to use their information (that is, what does the business want in exchange for allowing someone else to use their information)?
- e.g., Plant Variety Protection Act; GMO license agreement
- Control private information by not sharing, through contract (limit use, prohibit transfer), license, other strategies?
- How is private market information controlled?
- How is private production technology controlled?
- Reconsider the impact of communication technology on developing, accessing, using, and controlling information.
- Considerations: who is creating the information, who owns the information, and what are they requiring to use their information (that is, what does the business want in exchange for allowing someone else to use their information)?
- Does the value of public and private information differ? Why? Are their values really different? Why? How does this difference in value impact how the information is created, accessed, used, and controlled?
In summary, the information age means ...
Last Updated December 5, 2010
Email: David.Saxowsky@ndsu.edu
This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions.
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