The Necessity of eGovernment

INTRODUCTION For more than 40 years, the proponents of computerization have promised significant benefits from the increased use of information technology (IT). Many could not contain their enthusiasm and faith in the idea that IT would enable improved speed, prospective recording and storage capacity, and the potential for nearly limitless decision making capabilities. The possibilities for convenience, enormous cost savings, and improved living standards, which would be a natural byproduct of IT use, also generated significant excitement. At the beginning of the movement toward computerization, knowledgeable participants assumed that IT's impact would reach the instrumentalities of society's governance and that government (1) would realize the same benefits as the private sector. Disappointingly, while the private sector has realized much of the promise and possibility of IT, the same cannot be said of state, local, and national governments. This paper presents the positive and negative impact IT has had on governance in the United States and argues that effective and efficient eGovernment (2) is a necessity created by the increased and widespread use of IT in the private sector. Implementing eGovernment at the local, state, and federal levels is the only viable option if our society wishes to remain civil and prosperous. Without eGovernment, society risks the near certainty that the "transaction costs" of governance will rise to a level that precludes democratic governance. The number, speed, and complexity of economic and social transactions have, and will continue, to increase at a rate that outstrips the capacity of government to analyze and utilize the information necessary to maintain and facilitate a civil society. Part II of this paper discusses Coase's Theorem of transaction costs, maps Dahlman's theory of social transaction costs to the tasks of government, describes the functions of governance and its attendant transaction costs, and discusses other elements that are causing the government to lose ground. Part III proposes eGovernment as the solution to the problems created by the increased use of IT, provides a brief definition and background of eGovernment, and discusses why eGovernment is necessary to keep social transaction costs affordable while increasing the transparency and effectiveness of government's obligation to facilitate a civil society. Part IV covers some of the hurdles that eGovernment faces, such as privacy concerns and the distrust generated within the public by the government's failure to follow their own guidelines, and predicts the possible consequences of not having eGovernment. II. THE PROBLEM WITH TRANSACTION COSTS A. What are "Transaction Costs"? Ronald H. Coase, a world-renowned economist and professor emeritus at the University of Chicago Law School, (3) is credited with the theory that now bears his namesake. Coase's model describes transaction costs (originally termed " market costs") as "the cost of carrying out a transaction by means of an exchange on the open market. " (4) In his seminal article, The Problem of Social Costs, Coase wrote: In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on. These operations are often extremely costly, sufficiently costly at any rate to prevent many transactions that would be carried out in a world in which the pricing system worked without cost. (5) A large subset of these transaction costs can be categorized as information gathering, analysis, and distribution costs. The greater the friction caused by these costs, the less likely transactions will occur because of the adverse impact such costs have on net income for all parties engaged in the transaction. …