Observations on the technology and economics of digital emissions

- An economic model of digital emissions and rights management is proposed.
- Characteristics of digital and environmental markets are compared and contrasted.
- A cap-and-trade policy from environmental markets is proposed for digital markets.

Unwanted digital information such as spam is often sent to recipients who did not request it. In the absence of policy intervention, the rate of these “digital emissions” will exceed the social optimum, causing a market failure. Some scholars have noted the similarities between this type of digital market failure and market failures observed in other domains-namely, pollution such as sulfur dioxide emissions in the natural environment. The purpose of this paper is to extend the analysis of these market failures to explore the applicability of analogous mechanisms in these seemingly unrelated domains. We argue that several mechanisms developed for environmental regulation can indeed be applied to digital domains such as labor markets and social media. Doing so could increase equity as well as efficiency.