Elkin-Koren, N. and Salzberger E. M. (2005), "The Effects of Cyberspace on the Economic Theory of the State", in Marciano, A. and Josslin J. M (eds.) How to Shape A Democratic State, Edward Elgar, pp. 58-100.

Abstract

The book as a whole analyzes the effects of Cyberspace on the Economic Analysis of Law and argues that the networked information environment should exert a crucial influence on economic thinking, on the perception of law, and, by derivation, on the economic analysis of law. Information technologies have dramatically altered many aspects of our everyday life. They change the way we communicate with one another, the way we purchase, entertain, interact, learn, research, deliberate, do business, and indeed, think. During the past two decades the Internet has been revolutionizing economic, communal and political life. This Cyber-revolution is the most significant transformation in the information environment since the invention of printing.

Cyberspace has become an integral part of people's everyday life, and the online information environment constitutes the human condition of our time. People spend a large portion of their time using the Internet for entertainment, business, social relationships and political activities. The increasing human activity in Cyberspace is transforming social and cultural norms, creating a web of new communities, with diverse characteristics - linguistically, culturally and economically. It is beginning to blur some old boundaries across classes and social hierarchies, while at the same time drawing new borders of the digital divide, between the haves and the have nots, between those who are in command of the technology, and the technologically illiterate. The new information environment further introduces new players and novel market and non-market behaviors that cannot be easily explained by standard sociological, political or economic concepts. Cyberspace can even be thought of as affecting the definition of the self.

The concluding chapter of the book (chapter 10) focuses on political theory and offers a normative analysis of the state and its government, examining collective action, rule-making processes and the organization of the public sphere. We explore whether the new technological frontiers opened by Cyberspace bear upon the liberal theory of the state (and on the economic theory of the state). We conclude that Cyberspace shakes the paradigm of Liberal Democracy and calls for re-examination of its basic foundations: representative democracy governed by checked and controlled majority decision-making.

A by-product of this argument is an attempt to incorporate Republican theories of the state into economic analysis. The focus here is on the presupposition regarding individual preferences - whether they are exogenous, given or internal to the collective decision-making process.

Available at SSRN: https://ssrn.com/abstract=622261