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    The Economics of Libraries

    An important contradiction has arisen from the fact that the information technology revolution has been driven by cost reductions, but the costs of research libraries have been increasing during this period. Many observers (and budget administrators) expected a decrease in research library spending over the past decade. In fact, although the costs of the technology have decreased, these constitute only a fraction of the inputs to the research library. The costs are high for creating, adopting, implementing, maintaining and managing new information systems that rely on networked information technology, in part because these activities depend largely on human labor, not silicon or sand. Meanwhile, during the transformation, the older systems must still be staffed and maintained. Overall, the costs of transformation have been added to the ongoing costs of the institution, and the total cost is correspondingly higher.

    The seeming paradox of lower input costs but higher total costs is no paradox at all. It follows directly from the nature of institutional transformation. The change in library constraints reflects a decrease in the costs of some inputs to a stable, functioning system. However, adapting to this change in constraints—undertaking the transformations to reach the new stable system—is itself costly, and during the transformation total costs can be much higher. The transformation of the USSR from socialist to market economy is a colloquial example. The institutions of a market economy are likely to be much less costly and more efficient, but the transformation from one to the other is costly and slow.