Rents In Cyberspace

(Fellows Address April, 1995) It is now more than forty years since Walter Isard sought to create a new discipline, Regional Science. What concerned him was the Anglo-Saxon bias in economics: that economic systems could be analyzed in a spaceless world, literally on the head of a pin. The flatlands that replaced the Anglo-Saxon pinhead were patterned and rational, and they existed in a world of static equilibrium and comparative statics. Flatland statics are now no longer enough. What if individual behavior is not completely rational? What if more of what is produced is not congealed resources that face diminishing returns, like iron or chemicals, but congealed knowledge that display increasing returns, like biotechnology, telecommunications, and software? What if an economy is an evolutionary system that displays increasing complexity? If this is so, mechanistic views of flatland equilibria must give way to a dynamic view of transience, process, and transformation both at the level of individual behavior and at the level of interactions and transactions among the individual actors.