Economics rarely improves with reference to etymology, but an exception should be made for the economics of networks. Many valid but distinct definitions of “network economics” compete for attention. That causes confusion in academic writing and in public discourse.
There are many symptoms of this confusion. Consider this one. When the late Senator Ted Stevens inarticulately referred to the Internet as a “series of tubes” it earned him derision from younger denizens of the Internet. To many youngsters it was unthinkable that the ranking Senator on the committee for regulating Internet commerce conflated the physical network – local area networks, backbone lines, access lines – with its applications – email, web surfing, electronic commerce.
To be fair to Senator Stevens, however, such a conflation is rather understandable. Stevens used a habit of mind common in monopoly provision of local electricity and telephony. It came into conflict with another and newer habit of mind, one that lives online. Only recently have these twains begun to meet regularly.
How did this happen? In brief, public discourse typically uses three distinct economic meanings for the term “network” and, without making due distinction, applies these to the same situations. Let’s get straight on the meaning of words. This post explains the lexicon of networking economics.