Already out since February is a book edited by Ndubuisi Ekekwe and Nazrul Islam, “Disruptive Technologies, Innovation and Global Redesign” with two chapters in which I’ve been involved. The first is a review of the literature on economic impacts of mobile telephony in developing economics; the second a study done in cooperation with Bruce Mutsvairo and Louis Klamroth on the implications of media usage patterns for traditional media theories. #

In another paper just out this last weekend in the Central European Journal of Communication, Bruce and me studied citizen journalism in Africa. I did what I consider a rather comprehensive review of the (sparse) literature on this topic. Some of the key findings are a complex relationship with traditional media (“against, parallel to, and interlinked with…”) and democracy (here I’m drawing heavily on an excellent working paper by Joshua Goldstein and Juliana Rotich for the Berkman Center on Kenya). In many parts, the review highlights the lack of sources however: most of the papers cited are case studies of conflict situations. #

Finally, a week ago I was in Austin to attend the International Symposium on Online Journalism where Bruce presented a paper written by us and my friend Iris Leijendekker. In this study, we explore the ethical beliefs of African citizen journalists. In particular, we asked our (unfortunately rather small sample, n=20) questions about their motivations, aims, and allegiances. We find that citizen journalists are strongly driven by the wish to inform others and have a tendency to reject self-censorship and governmental control. In a traditional journalism ethics framework, this is consistent with the theory of social responsibility. Especially with regard to our analytical framework based on Yochai Benkler’s notion of the ‘networked public sphere’, this is a hopeful finding; yet the question remains whether beliefs and practices actually measure up. #

One issue I have with academic publishing are the restrictions it puts on sharing. The book is available from IGI Global for some ridiculous price (each chapter individually costs $30, of which I get absolutely nothing); the online edition of the Central European Journal of Communication will be out “in Spring 2013″ according to the publisher. The very positive exception is the International Symposium on Online Journalism, who put up all presented papers following a request from attendees. Ours is here. As for the others, I guess you know how to write me an email… #

References: #

Mutsvairo, B., Columbus, S., & Leijendekker, I. (2012, April 20). African Citizen Journalists’ Ethics and the Emerging Networked Public Sphere. Presented at the International Symposium on Online Journalism, Austin, TX. #

Mutsvairo, B. & Columbus, S. (2012). Emerging Patterns and Trends in Citizen Journalism in Africa: A Case of Zimbabwe. Central European Journal of Communication 5(1), 123-137. #

Columbus, S. (2012). Is the Mobile Phone a Disruptive Technology? A Partial Review of Evidence From Developing Economies. In N. Ekekwe & N. Islam (eds.), Disruptive Technologies, Innovation and Global Redesign: Emerging Implications. Hershey, PA: IGI Global. #

Mutsvairo, B., Columbus, S., & Klamroth, L. (2012). Rethinking mass communication theories in the Internet era. In N. Ekekwe & N. Islam (eds.), Disruptive Technologies, Innovation and Global Redesign: Emerging Implications. Hershey, PA: IGI Global. #

The Internet has been hailed as an enabling technology for greater, larger, better – and indeed new – cooperation. ‘Here comes everybody’, Clay Shirky wrote some years ago, and he meant: here comes everybody, engaging in new forms of cooperation that will change the world. My shift of interest towards the fields of behavioural and neuroeconomics is rooted in a good dose of skepticism towards these claims. Can we really be better cooperators with new technology, given the biological constraints of our neurology? #

The study I have proposed to conduct with the help of my Beta Beurs scholarship would investigate one part of this puzzle. How does trust develop when people communicate via computers or mobile phones, instead of face to face? From behavioural studies we already know that trust initially tends to be lower, but equalizes over time. What is going on in the brain while this happens? #

I am still looking for a lab at which to conduct my research, and my research question might still undergo some changes – it’s not to easy to find research opportunities as an undergraduate, in particular in Europe (sidenote: if you’re working at a neuroeconomics lab, or know somebody who does, I’d be happy about a mail). The fundamental question, however, remains: can we be better cooperators with the help of the Internet? #

In unrelated news, I have two new publications out this month in a volume edited by Ndubuisi Ekekwe and Nazrul Islam, “Disruptive Technologies, Innovation and Global Redesign: Emerging Implications“. In my paper, I ask the question “is the mobile phone a disruptive technology?” In a second article authored with Bruce Mutsvairo and Louis Klamroth, we investigate whether traditional media theories are still applicable in the Internet era. #

As many of you will have noticed, this blog has become rather silent lately. There are multiple reasons for that, but one is certainly that I have taken some time to focus on two academic publications for a book called “Disruptive Technologies, Innovation and Global Redesign: Emerging Implications”, which is edited by Ndubuisi Ekekwe of the African Institute of Technology and Nazrul Islam of Aberystwyth University. #

Together with Bruce Mutsvairo, who’s a PhD candidate at the University of Hull (and a lecturer at my college), and Louis Klamroth, I have written about the applicability of traditional media impact theories in the age of the Internet and, in particular, social media. One thing that is always striking me there is how little use even young people make of the diverse and accessible media landscape they take for granted to have at their hands (a prime example, in my eyes, is the finding of the 2009 JIM – Youth, Internet, Multimedia – report that 70% of German 12 to 19 years olds liked about television that they did not have to actively choose what content to access). #

Another chapter I wrote on my own reviews research on the economic impact of mobile phones in developing countries. This project started out with the research of Jenny Aker and Robert Jensen, who have conducted quantitative economic studies, but I have also included much qualitative research (e.g. by Ragnhild Overa). I find this topic particularly interesting because it steers away a bit from the hype that surrounds both digital activism and ICT4D. And the economists provide quantitative data, which is so badly missing from the latter discourses (Patrick Meier was also at re:publica, giving a great talk about Ushahidi. Still I wish he had rather presented his dissertation research, which might substantiate much of all this talk about Facebook revolutions). #

Both papers are currently under review. If you are interested, I’ll be happy to share a copy of my drafts with you, in particular of the second paper – just drop me a message at -simon [at] thisdomain-. There are also some other great news to share in the near future, but I have to await confirmation until I can spread the word. #

The similarity between blog and printing press is to obvious to go unnoticed, and many have extended on this allegory. But Eisenstein’s account highlights details which most advocates of the rise of those who were formerly called the audience will likely overlook. Who would have guessed that crowdsourcing is a practice half a millenium old? But indeed, early printers of maps and globes and natural compendia already asked their readers to contribute their discoveries to following editions, as Eisenstein shows. “After printing, large-scale data collection did become subjects to new forms of feedback which had not been possible in the age of scribes.” #

This, of course, is not the collaborative process enabled by the Internet which we see today in the Wikipedia, and which Clay Shirky invests so much hope in. But Eisenstein’s work is fascinating because it allows us to look for the general principles that communications revolutions come with. Enhanced feedback processes, it seems, are one of them. #

I have often heard from sceptics that they don’t see any new ideas in blogs. How can a medium be revolutionary if it just spreads the contents of its traditional predecessors, undermixed with urban myths and conspiracy theories, they ask. A historical perspective seems helpful, because the same is true for the printing press: Early printed books did barely contain any new content; in fact, they often served to spread myths and charlatanry, alongside the same old, unscientific theories as before. #

Eisenstein claims that there is a benefit in knowing three wrong theories instead of one. From comparison, their inconsistence can be realized – and new, better-fitting theories can be devised. We might think similarly about the Internet. My generation has already grown up with near infinite sources of information at their hands, open for comparison. Surely, most people don’t use these intellectual pastures of plenty, but what can they effect as tools of those who do? #

“The Printing Revolution in Early Modern Europe” had originally come to my attention via a mention in Graeme Kirkpatrick’s “Technology & Social Power”. There, the author enhances Eisenstein’s arguments in connecting it with Habermas’ writings on the emergence of the “public sphere”. He writes that “only through the agency of print [...] does it become possible for people to think of themselves as members of an ‘imagined community’, the basis of modern nationalism”. #

The fascinating question that arises is, of course, whether this development will find an equivalent in the social media age. Ala’a Abdel Fattah recently wrote, regarding the current revolutions in the Middle East, that “[f]rom the internet and satellite TV a new pan-Arabism is born”, and Zeynep Tufekci (when rebutting Malcolm Gladwell) touched on hopes for an social media-enabled globalism as a possible force against global problems such as climate change: #

New movements that can bring about global social change will still require people who interact with each other regularly, and trust and depend on each other in somewhat dense networks. Or only hope is if those networks span the globe in a tightly-knit, broad web of activity, interaction, personalization. Real change will come only if we can make friends we care about everywhere and we make bridge ties that cover the world in a web of common humanity that is bigger and more powerful than a handful of corporations and the corrupt, self-perpetuating class of politicians. [...] I say, bring on the hive mind, please let it be global in scale as nothing less will do, and let Facebook and Twitter lead the way. #

I think that’s wildly optimistic. I see very little conversation outside of individual regions, with the exception of a few cross-continent ties (Kenya to Ghana, for instance.) It’s rare to see dialog between Anglophone and Francophone speakers, for instance, and the conceptual barrier that separates sub-Saharan and Northern Africa remains firmly in place in a digital age. I’d love to see digital media emerge into regional media, and will wait to see that before I indulge in Nkrumist fantasies. #

The book takes an anthropological and historical perspective on the role of mobile telephony in a wide range of (sub-Saharan) African societies. It includes chapters on the call-box business in Cameroon, a traditional healer’s use of the mobile phone, and the ‘biography’ of a mobile phone in Tanzania, to name just a few. #

One chapter of particular interest to me, and which proved to be highly disappointing, is Thomas Molony’s account of a Tanzanian wholesaler’s non-use of mobile telephony. The author first outlines how traders of perishables in Tanzania use mobile phones to transmit supply and demand information, a field that is well researched in a range of quantitative studies (see Aker, 2008, 2010; Jensen, 2007). He also looks at the efforts farmers had to undertake in 2004, when Molony conducted his research, to access mobile phone networks (a situation that has certainly improved since then). #

Despite finding that mobile phone usage was already wide-spread among wholesalers in 2003 (when it was considerable more expensive then today), Molony then singles out one trader who, at that point, refused to use a mobile phone to argue that “the telephone may be considered unimportant because personal relationships are formed during meetings conducted in person”. On this still successful wholesaler, he writes that #

while not having a mobile phone may make his jo hectic and he may lose some friends alng the way when he is unable to sell farmers’ consignments to his many contacts in Dar es Salaam, his visits to farmers ensure that he is known localy, and crucially, recommended to emerging farmers”. #

This ignorance of related empirical literature has bugged me throughout the whole book. There is a great deal of references to other anthropological studies, but in the end, a lot of anecdotes still doesn’t make up for the need of quantitative evidence. Another issue is that much of the research the chapter are based on was conducted as early as 2003. In the history of mobile telephony, the six years that are between data collection and the book’s publication in 2009 are a lifetime, and many of the observations might well be outdated today. #

“Mobile Phones: The New Talking Drums of Everyday Africa” provides some interesting qualitative research from a great variety of countries and a range of different viewpoints. I also like the fact that it includes at least some chapters by African researchers, who are often greatly underrepresented. However, in the end, I felt that the book lacks a quantitative component to assess the relevance of the phenomena described. #

Mirjam de Bruijn, Francis Nyamnjoh, & Inge Brinkman (editors). Mobile Phones: The New Talking Drums of Africa. 2009. Bamenda: Langaa. Amazon.com. #

As Deborah M. Gordon’s recent book “Ant Encounters” shows, the reality might be even more fascinating than Latreille’s altruistic phantasy. Ant behaviour, she writes, is determined by “interaction networks”: “An ant colony’s behavior is guided by a pulsing, shifting web of interactions, in which the pattern of interactions is more important than the content.” #

“Understanding how ant colonies actually function”, Gordon writes in an article for the wonderful Boston Review, “means that we have to abandon explanations based on central control”. Each ant responds only to its immediate surroundings and to its interactions with other ants nearby, yet from this interaction network, coordinate behaviour emerges. #

One of the most fascinating parts of “Ant Encounters” is devoted to the question how ants communicate. “An ant uses its recent experience to decide what to do. The pattern of interaction itself, rather than any signal transferred, acts as the message”, writes Gordon. It’s not important what ants tell each other when they meet, but simply that they meet. #

The author herself reminds us of the stunning parallel between ant behaviour and the self-organization that forms the human body: “Ant colonies, like genes, work without blueprints or programming”, she writes. Just as in ants, the messages of neurons are not transmitted by one neuron, but a multiple. A single neuron can only send an excitatory or an inhibitory signal, or not fire at all. Yet one excitatory signal is not enough, just as one ant can’t tell another what to do – a whole pattern of interactions is necessary to trigger an effect. #

On the other hand, Gordon points out where the scientific strife to create cognitive systems still falls short of its aspirations. Engineers have started to model robots after insects, and ants in particular. But even as robots communicate amongst each other to coordinate behaviour, they are far from living beings, writes Gordon: “[T]he complexity of complex biological systems is not what makes living systems unique. One way that living systems are unique […] is that they cause their own development and activity.” A robot is still programmed to achieve a certain goal – an ant can change its task by simply encountering enough nest mates. #

Deborah M. Gordon’s “Ant Encounters” gives a fascinating insight into the organization of an ant colony. Most of all, however, it is a great read because it inspires to question common place understandings of communication and organization, far beyond the world of insects. #

Deborah M. Gordon: Ant Encounters. Interaction Networks and Colony Behavior. Princeton University Press. 2010. #

Crossposted from the BeTA Lab website. BeTA Lab is led by Dr. Sennay Ghebreab, who teaches my course Information, Communication, Cognition. The lab operates “at the crossroad of the brain sciences and information technology”. #

1. If this intrigues you, you might be interested in Diane M. Rogder’s “Debugging the Link Between Social Theory and Social Insects”, which explores the link between political fashion and the interpretation of insect behaviour in depth.

For the start, we watched an unusual documentary: Fast, Cheap & Out of Control, a 1997 film by Errol Morris. It’s hard to describe this movie without asking: What do an elderly topiary gardener, a retired lion tamer, a man fascinated by mole rats, and a cutting-edge robotics designer have in common? #

As it turns out, they share more than they might be aware of. All four of them deal with complex systems – and as different as a bear-shaped tree and a lion, a mole rat colony and an insect-like robot might be, interaction with them has shaped similar ideas in the protagonists of the movie. #

Complex systems are not stable. They collaps, like a carefully shaped tree statue burdened by a winterly blizzard’s snow, and they can even turn against their human “master”, like a lion suddenly angered by a hidden irritation. #

Often it seems as if such systems have a “will”, as if they where progressing in a determined direction. Yet in fact their behavior emerges from inherent qualities – their design, so to say – and their interaction with the environment (including others of their species). #

Sensory capacity is thus extremely important. As in the lion which the tamer holds at distance with a chair – because the lion can only focus on one of its four legs and lets go as the chair is put down. #

Fast, Cheap & Out of Control is a great inspiration to think about the behavior of complex systems and our interaction with them. The individual stories of its four protagonists lead to great question – how do complex systems work? What is communication? At first, however, its message might be hard to find – I will definitely watch the movie again, because I’m sure I still missed quite some parts of it. #

Finally, I also have to mention the film’s fine and quite unusual cinematography (by Robert Richardson, whose work has won him two Oscars for JFK and The Aviator). I loved how sometimes a scene would go on while a different interviewee started to speak, blurring the lines between their seemingly so distinct fields and often making me realize the connecting link between them. All in all, an inspiring and enjoyable movie. #

Naturally, corporate foreign news organisations are confined to major urban centers, in the case of Al Jazeera (resp. Al Jazeera English) Cairo, Alexandria and Suez. And following numerous attacks on their reporters, they are even restricted to their own offices. The revolution is being televised – but which revolution does the television show? #

Since the Internet and mobile network shutdown, news from rural areas have all but vanished from international reports. Commentators have repeatedly stressed that the uprise in Egypt is exceptional for happening all over the country, but whatever is happening outside the urban centers right now – it goes unnoticed. I.e., for the international audience it effectively does not take place.¹ #

In a short digression, it’s also noteworthy that there are now news that Al Jazeera Arabic was taken off air a couple of minutes ago. The most important news source for Egyptians first on the revolution in Tunesia and then on the developments in their own country is thus no longer available. Alaa Abdel Fattah, Egyptian superblogger and longtime opposition activist, has pointed out the impact of supranational media in the Guardian: “From the internet and satellite TV a new pan-Arabism is born.” #

It’s a close call to compare this situation to the much talked-about role of social media during the “green revolution” in Iran one and a half years ago. What is noteworthy is that Blogs, Youtube, Facebook and Twitter diversified the range of news sources – I might just point to the videos of the death Neda Agha-Soltan, which were spread over the Internet. While apparently not relevant to the organisation of protest, Twitter and other social media certainly changed the portrayal and perception of the “green revolution” in the West. #

However, in Iran the protests never spread nationwide in the way they are now in Egypt. There were demonstrations in other major cities apart from Tehran, yet they stayed minor events in comparison to the mass rallies in the capital. Most notably, I barely found (English-language) sources on the ongoings in these smaller cities. Should one conclude that the Internet doesn’t make reporting on uprisings (spatially) more diverse? #

The recent developments in Tunesia seem to go counter such an analysis. Sure, the situation there went unnoticed by a broader (Western – it was amplified powerfully by Al Jazeera in the Arab world) audience; but social media such as movie-sharing platforms were used from the beginning to spread news about the uprising from the beginning. #

The Internet enables us to get informed on the ongoings in any place connected to the network, however remote it might otherwise be. Egypt’s Internet shutdown has effectively narrowed down our perspective to the angles of Al Jazeera’s television cameras. Does that change civil resistance? Being skeptical about media’s role in these in general, I am not sure. But it is certainly an issue to watch as events unfold. #

1. Just as I am writing this, Al Jazeera English is interviewing somebody from Bani Suwaif. So it seems they are, after all, able to create connections to more remote places.

Today I pulled out a paper copy of Wired at my college library. The cover promised an interesting article, so I turned to the inside to look for the table of contents; it’s on page 13 (before that, only advertising). However, my article was listed on the second part of the table, page 16 (more advertising in between). Wired doesn’t give page numbers for small pieces, so I had to find it in its section (40 pages, at least half of which are adverts). In the end, I spent more time looking for the article – a small 10-liner – than actually reading it. #

Imagine a website which treats its readers like this: The start page announces an article, but a link first leads you to a page with the table of contents. However, you have to scroll down over several big adverts to find the link to your article, which turns out to link to another long page, where you have to scroll down some more times to finally read a few sentences. #

Who, really, would do that? #

The introduction of mobile telephony in developing countries has opened up an opportunity to empirically study the influence of information and communication technology on market behaviour. Mobile phones increase access to information and reduce search costs, which economic theory predicts will lead to lower equilibrium price dispersion across markets, producing a welfare improvement for market agents. This paper reviews recent microeconomic studies on the effects of mobile phone adoption in several agricultural sectors of developing countries, and relates their findings to relevant economic theory, as well as outlining possible impacts on macroeconomic processes. The introduction of mobile telephony is found to be causally related to decreased equilibrium price dispersion, improved adherence to the law of one price, reduction of waste, higher market integration, and welfare improvements for producers and consumers of agricultural goods. In conclusion, this paper shows that mobile phone technology can make markets more efficient. This means that information technology policy, and especially mobile phone network development, are relevant in a broader economic context. In particular, mobile phone technology could play a significant role in poverty reduction strategies. #

“Mobiles Make the Markets Now”¹: How Mobile Phone Technology Makes Markets in Developing Countries More Efficient #

“A device that was a yuppie toy not so long ago has now become a potent force for economic development in the world’s poorest countries”, The Economist (2008) has reported about mobile phones, and in The New York Times Magazine, Corbett (2008) has raised the question whether “the cellphone [can] help end global poverty”. Indeed, the mobile phone might be a game changer for developing countries. Yet little has been said about the economic mechanisms that underlie the technology’s big potential. Economists have long accepted that information is crucial for the functioning of markets, since Stigler (1961) has laid down the fundamentals of this field. But despite the eminent role of information in economic theory, the body of empirical studies on the influence of ICTs on market behaviour is relatively small. In recent years, the impact of the Internet on markets in developed (Brown & Goolsbee, 2000) and developing countries (Goyal, 2010) has been subject to some research which found reductions in price dispersion. A range of more significant microeconomic studies, however, focuses on mobile phone technology in developing countries, where in some areas a phased roll-out has allowed for a near-experimental observation of its impact on market behaviour. Aker (2008) has claimed that mobile phones primarily impact markets by reducing the cost of search (p. 1). Her studies on grain markets in Niger (2008; 2010) and Jensen’s (2007) research on the South Indian fisheries industry find that the introduction of mobile phones leads to a decrease in price dispersion, elimination of waste, and Marshallian welfare gains. It can thus be expected that mobile phone technology makes markets more efficient, benefiting producers, traders, and consumers of agricultural goods. In the following, this paper will outline the framework of economic theory in which mobile phones’ impact on markets can be analysed. It will then proceed to review the existing body of microeconomic studies from developing countries, and link their findings to possible macroeconomic effects. Finally, it will conclude by giving a broader assessment of mobile phones’ relevance for developing countries. #

Analytical Framework #

Economic theory often relies on the notion that market participants have access to sufficient and symmetric price information to engage in optimal arbitrage: Knowing that elsewhere they can sell at a higher, or buy at a lower, price, they will trade in the market that allows them to achieve the most favourable deal (Jensen, 2007, pp. 879-880). This is captured in the law of one price, which states that the price of a good on two markets will not differ any more than the cost of transportation between them (p. 879). #

In reality, however, the law of one price is often not adhered to; because information is costly or inaccessible, excess price dispersion arises (Stigler, 1961, pp. 213-214). To obtain price information, market participants have to engage in search (p. 213). Where the cost of search exceeds the expected gains, however, it is not undertaken (pp. 219-220). In this case, prices come to an equilibrium in which dispersion is higher than expected according to the law of one price (Jensen, 2007, p. 885). #

Reducing the cost of information, then, lowers the threshold for expected gains at which search is conducted, and should lead to a decrease in price dispersion (Stigler, 1961, p. 217). As agents can engage in better arbitrage, adherence to the law of one price is improved, and the market gains efficiency. In particular, goods can be allocated more efficiently across markets. By dissolving market inefficiencies, improved access to information can be expected to yield welfare gains for both producers and consumers of goods (Jensen, 2007, p. 883). #

Excess price dispersion is particularly common in developing countries (Jensen, 2007, p. 880), partly because of insufficient access to information and communication technology (ICT), which raises the cost of search. Many developing countries have very low rates in fixed-line telephony and Internet subscription (Fredriksson, 2010, pp. 128-131); high costs are often prohibitive (Fredriksson, 2009, p. 9), and in many cases infrastructure, particularly in rural areas, is insufficient or non-existent (Horezky, 2009). The introduction of an ICT that reduces the cost of search, then, should reduce price dispersion in these markets. #

Mobile phones have been suggested to provide a more feasible means of search for much of the world’s population. Over the last decade, the technology has seen rapid growth in developing countries, especially in Africa, where it effectively “leapfrogged” landlines (Aker & Mbiti, 2010, p. 209). In particular, mobile telephony has facilitated access to ICT in rural areas (ibid.), and for lower income classes (pp. 209-211). It can thus be assumed that the cost of search has been reduced in these areas, which economic theory suggests should lead to a decrease in price dispersion. #

Microeconomic Impact of Mobile Phones on Markets #

Muto and Yamano (2009, pp. 1887-1888) suggest that the impact of lowered search costs on price dispersion should be particularly strong for highly perishable goods traded on local markets. Studying the fisheries sector of India’s South Western state of Kerala, Jensen (2007) and Abraham (2007) indeed found that the adoption of mobile phones by agents of the market made it more efficient, by decreasing dispersion to near perfect adherence to the law of one price and eliminating waste, causing welfare gains for both producers and consumers of the commodity (Jensen, 2007, p. 883). #

The fishing industry is located in several ports along the coast of Kerala; before the introduction of mobile phones, fishermen would usually sell their catch in their home port. As yield differs daily across the ports’ fishing zones, this would lead to price dispersion across the towns’ markets (p. 882); however, lacking access to price information on sea, fishermen would not be able to engage in arbitrage (p. 881). Resulting was a misallocation of goods, which left some towns underserved while producing waste in others (p. 882-883). #

Mobile phones, however, make it possible for fishermen to search for market prices while on sea, enabling them to engage in arbitrage (p. 883). As Jensen has shown, this resulted in more efficient allocation of goods, diminishing waste altogether; price dispersion was decreased to a level adhering to the law of one price. This yields welfare gains for both producers of fish, as the amount sold increased, and consumers, as the price of the commodity decreased (Jensen, 2007, p. 883). #

Aker (2008; 2010), studying grain markets in Niger, has shown that the mechanisms observed by Jensen also apply to non-perishable goods traded across long distances. Markets in the Western African nation are often vastly dispersed, making it difficult to obtain price information (Aker, 2008, p. 6). Previous to the introduction of mobile phones, grain traders would rely on visiting weekly grain markets (p. 2), meaning high search costs resulting in considerable price dispersion. #

Mobile phones, however, enable traders to collect price information remotely, thus vastly decreasing the cost of search and enabling them to engage in better arbitrage. This has led to a more efficient grain market: The introduction of mobile phones in Niger, Aker has shown, resulted in a 10 to 16 percent decrease in price dispersion (Aker, 2010, p. 57), yielding welfare gains for traders and consumers of grain (Aker, 2008, pp. 39-40). #

That the effect observed by Aker is less strong than in Jensen’s study can be attributed to the fact that grains are a storable, not as easily perishable good. However, it is still significant. In contrast, Muto and Yamano (2009), studying markets for corn and bananas in Uganda, found that the introduction of mobile phones only influenced the market for perishable goods (p. 1895). This study, however, observed only farmers’ market participation, and not price dispersion directly. In conclusion, it seems thus reasonable to suggest that the adoption of mobile phones by market agents reduces price dispersion for both perishable and storable goods, albeit at a different scale. #

Despite speculations that new technologies might need a start-up phase before proving effective, Jensen (2007) documents a quick adoption of mobile phones after introduction, soon levelling off on a high tableau (p. 891). This fast uptake goes along with a sudden decline in price dispersion, which Aker (2010) found to be strongest in the first three months (p. 51). Both studies found price dispersion to settle down in a new equilibrium (ibid.; Jensen, 2007, p. 899), leading to the conclusion that changes in equilibrium price dispersion effected by the introduction of mobile phones are persistent (Aker, 2010, pp. 51-52; Jensen, 2007, p. 919). #

While reduced price dispersion as a result of decreased search costs has been found in all of the studies evaluated in this paper, some findings suggest that the size of the impact mobile phone technology can develop on market behaviour depends at least partly on network effects, interrelation with other infrastructure, and structural constraints within the economy. Finally, Aker (2010, pp. 55-57) has addressed alternative explanations for the impact of mobile phones on market behaviour other than reduced search costs, such as spillover effects and increased collusion. #

For communication tools such as mobile phones, network effects ² can usually be expected, i.e. that they become more useful as the technology is adopted by more people. Indeed, Aker (2010, pp. 54-55) found that the reduction in price dispersion only became significant at a point when more market pairs got mobile phone network coverage. This suggests that there are significant network effects across markets.³ #

However, communication is only one of several interrelated infrastructural factors influencing market integration, as Abraham (2007, p. 16) has pointed out. The cost of transportation is particularly important (Jensen, 2007, p. 911), and is the primary cause of price dispersion (p. 881). Especially in cases when travelling is needed to obtain price information, as documented by Aker (2008, p. 2), expensive transportation is detrimental to the functioning of markets. In these cases, cheaper communication tools can make transportation obsolete, and thus reduce excess price dispersion. #

Aker (2010) found that mobile phones were more useful in reducing price dispersion when cost of transportation was high (p. 54). In particular, the effect was stronger when markets were more remote (ibid.); and when they were connected by unpaved roads (ibid.). Similarly, Muto and Yamano (2009) report a positive correlation between banana farms’ distance to the district centre and gains in market participation and income subsequent to the introduction of mobile phones (pp. 1893-1894). These findings suggests that the impact of mobile phone adoption on market behaviour is stronger where the cost of transportation is high, particularly in underdeveloped and remote areas. #

Abraham (2007) has argued that structural obstacles prevent market agents from engaging in optimal arbitrage (p. 12). He describes that fishermen are bound to land their catch in certain ports by contracts with middlemen (ibid.). As a result, only few of them frequently sold their catch on the market offering the highest price (ibid.). However, at least in the population in concern, this seems to be insignificant, as Jensen (2007), studying the same industry, found that price dispersion was reduced to a level adhering to the law of one price (p. 879). Indeed, Goyal’s (2010) research suggests that improved access to information might lead to intermediaries losing their monopsony power (p. 26), and thus the introduction of mobile telephony could contribute to decreasing structural constraints. #

Although research suggests that the reduced cost of search is at the core of mobile phones’ impact on price dispersion, alternative explanations such as spillover effects and collusion are possible. Aker (2010) has addressed these concerns, finding that spillover effects were unlikely to have taken place (p. 56-57). Jensen’s (2007) data, as well, points in this direction (p. 895-897). Aker (2010) also presents indirect evidence against increased collusion (p. 57), which is supported by qualitative research undertaken by Jensen (2007, p. 909). #

In conclusion, the introduction of mobile phone technology in developing countries has a significant microeconomic impact. It can decrease price dispersion, reduce waste, and yield a Marshallian welfare surplus. While interrelated factors such as the cost of transportation influence the strength of the effect, it seems to occur in different agricultural sectors, with both perishable and storable goods, and in local and national markets. These changes are primarily the result of a reduction in the cost of search (Aker, 2008, p. 1). #

Macroeconomic Consequences of Mobile Phone Adoption #

It is reasonable to expect that the microeconomic effects of mobile phone introduction translate into macroeconomic gains; however, there has been little research in this direction. While the existing body of studies suggests that ICTs have a positive impact on GDP growth (e.g. Hardy, 1980; Röller & Waverman, 2001), only Waverman, Meschi, and Fuss (2005) have investigated this for the specific case of mobile telephony in developing countries. More recently, Klonner, Nolen and Marzolff (2010) have also found a significant impact on employment. However, none of these studies links the observed effects directly to reduced search costs. #

As mobile telephony, through a decreased cost of search, makes markets more efficient, there should be a positive influence on overall GDP. Indeed, Waverman, Meschi, and Fuss (2005) found that the technology carried a significant growth dividend. For low income countries, 10 more mobile phones for every 100 inhabitants would translate into a per capita GDP growth higher by 0.59 percent (p. 18). However, while the authors suggest that mobile phones’ primary advantage is a reduction in search costs (p. 14), their study does not explicitly link GDP growth to improved market efficiency. #

Increased coordination among firms might be a plausible alternative explanation for the GDP growth dividend Waverman, Meschi, and Fuss (2005) observed (Aker & Mbiti, 2010, pp. 218-219). Qualitative research by Samuel, Shah, and Hadingham (2005) found that for small-scale firms, mobile phone use was linked to significant time savings and improved communication with suppliers, translating into increased profits (pp. 50-51). Nevertheless, Aker (2008, p. 1) has profoundly argued that reduced search costs are the primary way in which mobile telephony impacts markets, and improved coordination among firms might well only be a secondary factor. #

Improvements in the functioning of markets and the Marshallian welfare surplus described by Aker (2008; 2010) and Jensen (2007) might also lead to increased employment (Aker & Mbiti, 2010, p. 219). In a study on rural South African municipalities, Klonner, Nolen, and Marzolff (2010) found that employment increased by 15 percentage points when a locality received complete network coverage (p. 18). They interpret this as a consequence of the improved spatial integration of the wage labour market (pp. 4-5); yet it might also partly be an effect of more efficient crop markets. #

While the findings of Waverman, Meschi, and Fuss (2005) and Klonner, Nolen, and Marzolff (2010) suggest that the adoption of mobile phones has positive macroeconomic impacts, research in this area is scarce. The current studies only speculate about the microeconomic causes of their observations, and do not provide specific evidence. At the moment, then, it seems too early to conclude whether decreases in search costs have a macroeconomic effect, and what is its scale. #

Conclusion #

This paper has shown that mobile phone technology, by reducing search costs, makes markets more efficient; and that this possibly has a positive impact on a country’s macroeconomic development. Yet the question arises how much these gains matter in the context of developing countries’ overall economic and social situation. #

Toyama (2010) recently fervently attacked ICT4D⁴, arguing that investments in expensive technologies, even if they are successful, take away money needed to serve more basic needs, such as education. But the use of mobile phones does not need to be subsidized – in fact, it is a prosperous business for network operators. And while in Africa, the average expenditure for mobile communication reaches 10 to 15 percent of the individual income (Gillwald, Milek, & Stork, 2010, p. 15), welfare gains make them a sustainable investment at least for some (Samuel, Shah, & Hadingham, 2005, pp. 50-51). #

Toyama’s (2010) main point is that “technology [...] is only a magnifier of human intent and capacity” [emphasis original], i.e. that it will not create opportunities out of nothing. This might indeed be the mobile phone’s biggest strength: While there are some indicators that mobile phones enable new business models (Aker & Mbiti, 2010, p. 220), their primary leverage seems to be in enhancing existing markets. #

Nevertheless, mobile telephony can develop disruptive impact. Muto and Yamano (2009, p. 1894), as well as Klonner, Nolen, and Marzolff (2010, p. 4), found that societies’ least advanced members─the extremely poor and women─benefit the most from the introduction of mobile phones. This way, mobile phones might indeed contribute to decreasing economic disparities and to reducing poverty. #

At the moment, there are not enough studies to conclude on the broader economic and social effects mobile phone technology has in developing countries. In particular, there is a research gap concerning the link between micro- and macroeconomic processes; however, future studies might investigate whether improvement in market efficiency translate into positive impacts on countries’ economic and social situation. #

References #

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1. An anonymous Indian fish trader, cited in Abraham (2007).
2. Network effects have been defined as “a change in the benefit, or surplus, that an agent derives from a good when the number of other agents consuming the same kind of good changes.” (Liebowitz & Margolis, 1998)
3. Intra-market network effects might also exist; however, as both Aker (2008; 2010) and Jensen (2007) studied the phased roll-out of mobile telephony across markets, their studies do not provide relevant indicators for this.
4. Information and Communication Technology for Development