Extensions and limitations of the analysis

6. Extensions and limitations of the analysis

Before discussing the areas of this research that may necessitate further research, a brief comment on the role of economic analysis of law should be made. Although economic analysis of law may provide insights into how decisions are made or the expected results of a policy change, economic analysis alone can not answer whether the law is 'right'

As Hammer (1988) states:

"Economics can be useful when it is viewed as a science which examines the decision making process, the study of optimization subject to constraints. Economics can not be so helpful if it is viewed as a precise tool that can mechanically and independently determine the outcome of complex problems " (Hammer, 1988)
Therefore, the analysis in this paper should be viewed as one contribution to the overall policy debate surrounding content regulation on the Internet.
Turning now to the areas for future research raised by this paper, three main issues present themselves as possibilities for further analysis. Firstly, non-satiation was assumed with respect to the consumer's preferences for both characteristics. The analysis may therefore be extended by considering the situation where an individual's utility for a certain characteristic becomes satiated at some level of consumption of that characteristic. Subsequent analysis might then ask questions such as what would be the impact on the consumer choice if the consumer had a satiation point for gatekeeper control and not for individual control.. or vice versa.
Secondly, it was assumed in the policy analysis that both characteristics produced positive utility. Another extension of this analysis would therefore lie in examining the implications of one characteristic producing disutility , either at any non zero value, or past a satiation point. One might speculate that both individual and gatekeeper control may eventually produce disutility past a certain level. Excesses of individual control may lead to anti-social behavior such as distribution of virii or child pornography. Excesses of gatekeeper control may produce disutility by unduly restricting Internet users ability to fulfill their underlying purposes of usage. For example, censorship of adult web sites may decrease the level of utility some Internet users are able to obtain from the web.
Thirdly, a more thorough consideration of the costs of producing the two characteristics (individual and gatekeeper control) and the subsequent price of the two characteristics, may produce a vastly different efficiency frontier to that used for the policy discussion in this paper. For example, what if the costs of producing individual control are lower. It may be expected in this case then, that goods that contain larger proportions of individual control will be relatively cheaper, shifting the frontier for these goods outwards. A further complication to the analysis may be that different types of consumers (such as experienced and novice Internet users) may face different information costs such that some classes of Internet user will start closer to their true efficiency frontier than others.

7. Concluding Remarks

The implementation of the Australian government's Internet content regulation scheme generated significant controversy when first introduced. Whilst the initial debate over the legislation has spawned research and analysis from a variety of perspectives, an economic analysis of the impact of the legislation on consumer choice has been lacking.

Endnotes

[1] For an explanation of the standard neo-classical theory of utility and consumer choice consider Katz & Rosen (1994) or Pindyck & Rubinfeld (1995)
[2] By consumption technology, this refers to the relationship between a good and the characteristics it produces. It is assumed to depend on the technical properties of the goods. See Lancaster (1991)
[3] The efficiency frontier demonstrates the maximum quantities of the characteristics which can be obtained from a given budget.
[4] Alternatively the policy could be viewed as a requirement that goods produce a certain minimum of one characteristic relative to another. For example if the characteristics of a car were speed and safety, the policy could be viewed as either prohibiting excess speed relative to safety, or as a policy to ensure a minimum safety relative to speed.
[5] This ignorance need not be deliberate. Ignorance in this sense should simply be seen as referring to incomplete or imperfect information.
[6] That is, we are considering that the consumer is capable of making an efficient choice when all relevant information is available.
[7] This bias will occur in any situation where the information costs for the two characteristics are non-identical.
[8] Again a simple example illuminates this point. Let the two characteristics of a car be safety and speed. A consumer who values safety and safe cars, will be expected to benefit more from lower costs of obtaining information about safety than another consumer whose main interest is how fast their cars goes!
[9] In terms of the regulatory spectrum presented in Post (1995), gatekeeper control may be seen as corresponding to all controller groups except "the actor him/herself". See also Wisebrod (1995) for a discussion on individual control versus gatekeeper and government control.
[10] The controls are in the form of legal prohibitions and sanctions for ISP's breaching the code. However in practice the laws may be avoided by some Internet users.
[11] This body was originally to be called NetWatch.

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