So far technology has hardly changed formal education at all. But a lot of people, including me, think this is the next place where the Internet will surprise people in how it can improve things--especially in combination with face-to-face learning. With the escalating costs of education, an advance here would be very timely.
What Nick Schulz and I call "Economics 2.0" leads to a different measure of market effectiveness than the static efficiency criterion used in standard economics. Instead, I would describe market failure as the ability of incumbents to block innovation. Market effectiveness would be the ability of upstarts to disrupt a market, making goods and services better and cheaper.
The World Wide Web has been available for more than sixteen years now. It provides an interesting context in which to evaluate market effectiveness according to our criterion of adaptive efficiency.
Examples of market effectiveness, with cheaper and better goods and services penetrating the market as a result of the Web: encyclopedias, music distribution, and newspapers.
Examples of market failures, with very little change relative to the potential for improvement: real estate sales, academic publishing, and education.
I will speak more on this topic when Nick and I talk about our new book at Cato on February 4th, at noon.