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GS Paper: GS3

  • [pib] Mega Investment Textiles Parks (MITRA) Scheme

    The Finance Minister has proposed setting up of a scheme of Mega Investment Textiles Parks (MITRA) Scheme in her budget speech.

    Do not get confused over Sahakar Mitra Scheme and this one.

    MITRA Scheme

    • MITRA aims to enable the textile industry to become globally competitive, attract large investments, and boost employment generation and exports.
    • It will create world-class infrastructure with plug and play facilities to enable create global champions in exports.
    • It will be launched in addition to the Production Linked Incentive Scheme (PLI).
    • It will give our domestic manufacturers a level-playing field in the international textiles market & pave the way for India to become a global champion of textiles exports across all segments”.

  • [pib] 14 new Minor Forest Produce (MFP) included Minimum Support Price (MSP) scheme

    14 new Minor Forest produce items have been included under the Mechanism for Marketing of Minor Forest Produce through Minimum Support Price scheme.

    Which are the 14 new MFP?

    Tasar Cocoon, Cashew Kernel (Anacardiumoccidentale), Elephant Apple Dry, Bamboo Shoot (Phyllostachys edulis), Malkangani Seed, Mahul Leaves, Nagod (Vitex negundo), Gokhru (Tribulus terrestris), Pipla/ Uchithi, Gamhar/ Gamari (dry bark), Oroxylumindicum, Wild Mushroom dry, Shringraj (Eclipta Alba), Tree Moss (Bryophytes).

    Now try this PYQ from CSP 2018:

    Q. Consider the following:

    1. Areca nut
    2. Barley
    3. Coffee
    4. Finger millet
    5. Groundnut
    6. Sesamum
    7. Turmeric

    The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the above?

    (a) 1, 2, 3 and 7 only

    (b) 2, 4, 5 and 6 only

    (c) 1, 3, 4, 5 and 6 only

    (d) 1, 2, 3, 4, 5 and 7

    About MSP for MFP Scheme

    • Under the scheme, Minimum Support Price for Minor Forest Produce (MFP) has been fixed for select MFP.
    • The scheme is designed as a social safety net for improvement of livelihood of MFP gatherers by providing them fair price for the MFPs they collect.
    • The Scheme has been implemented in eight States having Schedule areas as listed in the Fifth Schedule of the Constitution of India.
    • From November 2016, the scheme is applicable in all States.

    Back2Basics: Forest Produce in India

    • Forest produce is defined under section 2(4) of the Indian Forest Act, 1927.
    • Its legal definition includes timber, charcoal, catechu, wood-oil, resin, natural varnish, bark, lac, mahua flowers, trees and leaves, flowers and fruit, plants (including grass, creepers, reeds and moss), wild animals, skins, tusks, horns, bones, cocoons, silk, honey, wax, etc.
    • Forest produce can be divided into several categories.
    • From the point of view of usage, forest produce can be categorized into three types: Timber, Non-Timber and Minor Minerals.
    • Non-timber forest products [NTFPs] are known also as minor forest produce (MFP) or non-wood forest produces (NWFP).
    • The NTFP can be further categorized into medicinal and aromatic plants (MAP), oilseeds, fibre & floss, resins, edible plants, bamboo, reeds and grasses.

  • The problem of ageing dams in India

    Ageing dams threaten India’s water security, affect farmers’ income and increases the frequency of flooding. 

    What is a dam?

    • A dam is a barrier that stops the flow of water and results in the creation of a reservoir. Dams are mainly built in order to produce electricity by using water. This form of electricity is known as hydroelectricity.
    • Reservoirs created by dams not only suppress floods but also provide water for activities such as irrigation, human consumption, industrial use, aquaculture, and navigability.

    Types of Dams

    There are many dams in India, and hence there is a need to know about them as there are questions based on the dams of India. The Bank Exams like IBPS or SBI contains questions from this section.

    Based on the structure the types of dams are as mentioned below:

    1. Arch Dam: An arch dam is a concrete dam that is curved upstream in the plan. It is designed so that the hydrostatic pressure (force of the water against it) presses against the arch, causing the arch to straighten slightly and strengthening the structure as it pushes into its foundation or abutments. An arch dam is most suitable for narrow canyons or gorges with steep walls of stable rock to support the structure and stresses.
    2. Gravity Dam: Dams constructed from concrete or stone masonry are Gravity dams. They are designed to hold back water by using only the weight of the material and its resistance against the foundation to oppose the horizontal pressure of water pushing against it. These are designed in such a way that each section of the dam is stable and independent of other section.
    3. Arch-Gravity Dam: This dam has the characteristics of both an arch dam and a gravity dam. It is a dam that curves upstream in a narrowing curve that directs most of the water pressure against the canyon rock walls. The inward compression of the dam by the water reduces the lateral (horizontal) force acting on the dam.
    4. Barrages: A barrage is a type of low-head, diversion dam which consists of a number of large gates that can be opened or closed to control the amount of water passing through. This allows the structure to regulate and stabilize river water elevation upstream for use in irrigation and other systems.
    5. Embankment Dams: An embankment dam is a large artificial dam. It is typically created by the placement and compaction of a complex semi-plastic mound of various compositions of soil, sand, clay, or rock. It has a semi-pervious waterproof natural covering for its surface and a dense, impervious core.
    6. Rock-Fills Dams: Rock-fill dams are embankments of compacted free-draining granular earth with an impervious zone. The earth utilized often contains a high percentage of large particles, hence the term “rock-fill”.
    7. Concrete-face rock-fill dams: A concrete-face rock-fill dam (CFRD) is a rock-fill dam with concrete slabs on its upstream face. This design provides the concrete slab as an impervious wall to prevent leakage and also a structure without concern for uplift pressure.
    8. Earth-fill dams: Earth-fill dams, also called earthen dams, rolled-earth dams or simply earth dams, are constructed as a simple embankment of well-compacted earth. A homogeneous rolled-earth dam is entirely constructed of one type of material but may contain a drain layer to collect seep water.

    Major Dams in India

    The major dams in India have helped the inhabitants in a number of ways like:

    1. Providing adequate water for domestic, industry and irrigation purposes.
    2. Hydroelectric power production and river navigation.
    3. These major dams in India and their reservoirs provide recreation areas for fishing and boating.
    4. They have helped in the reduction of floods.

    Some facts about the issue of ageing dams

    • India is ranked third in the world in terms of building large dams.
    • Of the over 5,200 large dams built so far, about 1,100 large dams have already reached 50 years of age and some are older than 120 years.
    • The number of such dams will increase to 4,400 by 2050.
    • This means that 80% of the nation’s large dams face the prospect of becoming obsolete as they will be 50 years to over 150 years old.
    • The situation with hundreds of thousands of medium and minor dams is even more precarious as their shelf life is even lower than that of large dams.

    Impact on the storage capacity

    • As dams age, soil replaces the water in the reservoirs technically known as silt or sediment.
    • Therefore, the storage capacity cannot be claimed to be the same as it was in the 1900s and 1950s.
    • To make matters worse, studies show that the design of many of our reservoirs is flawed.
    • Almost every scholarly study on reservoir sedimentation shows that Indian reservoirs are designed with a poor understanding of sedimentation science.
    • The designs underestimate the rate of siltation and overestimate live storage capacity created.
    • Therefore, the storage space in Indian reservoirs is receding at a rate faster than anticipated.

    Consequences

    • When soil replaces the water in reservoirs, supply gets choked.
    • The net sown water area either shrinks in size or depends on rains or groundwater, which is over-exploited.
    • Crop yield gets affected severely and disrupts the farmer’s income.
    • The farmer’s income may get reduced as water is one of the crucial factors for crop yield along with credit, crop insurance and investment.
    • It is important to note that no plan on climate change adaptation will succeed with sediment-packed dams.
    • The flawed siltation rates demonstrated by a number of scholarly studies reinforce the argument that the designed flood cushion within several reservoirs across many river basins may have already depleted substantially due to which floods have become more frequent downstream of dams. 

    Consider the question “Ageing dams poses several challenges for India. Identify these challenges and suggest the measures to deal with these challenges.” 

    Conclusion

    The nation will eventually be unable to find sufficient water in the 21st century to feed the rising population by 2050, grow abundant crops, create sustainable cities, or ensure growth. Therefore, it is imperative for all stakeholders to come together to address this situation urgently.

  • Type-II Supernova and the role of neutrinos

    This newscard is an excerpt from the original article published in The Hindu.

    Another space-based abstract terminology has appeared in TH.

    What is the news about?

    • Many stars, towards the end of their lifetimes, form supernovas – massive explosions that send their outer layers shooting into the surrounding space.
    • Most of the energy of the supernova is carried away by neutrinos – tiny particles with no charge and which interact weakly with matter.
    • Researching the mechanisms of the so-called Type II supernovas, a team from IIT Guwahati has come up with new insights into the part played by neutrinos in this dramatic death of massive stars.

    What are Neutrinos?

    • Proton, neutron, and electron are tiny particles that makeup atoms.
    • The neutrino is also a tiny elementary particle, but it is not part of the atom.
    • Neutrino has a very tiny mass, no charge and spins half.
    • It interacts very weakly with other matter particles.
    • Neutrinos come from the sun (solar neutrinos) and other stars, cosmic rays that come from beyond the solar system, and from the Big Bang from which our Universe originated.
    • They can also be produced in the lab.

    Their types

    • Neutrinos come in three ‘flavours’, another name for ‘types’, and each flavour is associated with a light elementary particle.
    • For instance, the electron-neutrino is associated with the electron; the muon-neutrino with the muon and the tau-neutrino with the tau particle.

    What is Supernova?

    • All the stars burn nuclear fuel in their cores to produce energy.
    • The heat generates internal pressure which pushes outwards and prevents the star from collapsing inward due to the action of gravity on its own mass.
    • But when the star ages and runs out of fuel to burn, it starts to cool inside.
    • This causes a lowering of its internal pressure and therefore the force of gravity wins; the star starts to collapse inwards.
    • This builds up shock waves because it happens very suddenly, and the shock wave sends the outer material of the star flying. This is what is perceived as a supernova. This happens in very massive stars.

    Try this PYQ:

    Q. Which of the following is/are cited by the scientists as evidence/evidence for the continued expansion of the universe?

    1. Detection of microwaves in space
    2. Observation of redshirt phenomenon in space
    3. Movement of asteroids in space
    4. Occurrence of supernova explosions in space code

    (a) 1 and 2 only

    (b) 2 only

    (c) 1, 3 and 4

    (d) None of the above can be cited as evidence

    The Type-II Supernova

    • In stars that are more than eight times as massive as the Sun, the supernova is accompanied by a collapsing of the inner material of the dying star – this is also known as core-collapse supernova or Type II supernova.

    Role of neutrinos

    • The collapsing core may form a black hole or a neutron star, according to its mass.
    • As they spew out of the raging supernova, the neutrinos can change from one flavour to another in a process known as neutrino oscillations.
    • Due to the high density and energy of the supernova, it generates neutrino oscillations happening simultaneously over different energies (unlike normal neutrino oscillation), termed collective neutrino oscillation.
    • The oscillation result may dramatically change when one allows the evolution with the angular asymmetry, the oscillations can happen at a nanosecond time scale, termed fast oscillation.

  • What caused the tilt to Saturn’s rotation axis?

    The tilt of the rotation axis of the gas giant Saturn may in fact be caused by its moons, space scientists have reported in the journal Nature Astronomy.

    About Saturn

    • Saturn is the sixth planet from the Sun and the second-largest in the Solar System, after Jupiter.
    • It is a gas giant with an average radius of about nine times that of Earth.
    • It only has one-eighth the average density of Earth; however, with its larger volume, Saturn is over 95 times more massive.

    Reasons for Saturn’s tilt

    • Saturn’s axis interacted with the path of the planet Neptune and gradually tilted until it reached the inclination of 27 degrees observed today.
    • This current tilt of Saturn’s rotation axis is caused by the migration of its satellites, and especially by that of its largest moon, Titan.
    • Recent observations have shown that Titan and the other moons are gradually moving away from Saturn much faster than astronomers had previously estimated.
    • By incorporating this increased migration rate into their calculations, the researchers concluded that this process affects the inclination of Saturn’s rotation axis.

    Try this PYQ:

    Q.Which phenomenon has Venusian winds rotating 60 times faster than the planet below on the dark side?

    (a) Super rotation

    (b) Monrotation

    (c) Dual rotation

    (d) Macrrotation

    Continuous tilting

    • As its satellites move further away, the planet tilts more and more.
    • In fact, Saturn’s axis is still tilting, and what we see today is merely a transitional stage in this shift.
    • Over the next few billion years, the inclination of Saturn’s axis could more than double.

    Why it matters?

    • The decisive event that tilted Saturn is thought to have occurred relatively recently.
    • For over three billion years after its formation, Saturn’s rotation axis remained only slightly tilted.
    • It was only roughly a billion years ago that the gradual motion of its satellites triggered a resonance phenomenon that continues today.

  • Credit rating

    The Economic Survey-2020-21 highlights the issue of the adverse rating given to emerging economies by global credit rating agencies. This article suggests using our flawless repayment record as the basis of argument.

    Prejudice against emerging economies

    • The Economic Survey for 2020-21, charged international credit rating agencies with prejudice against emerging economies such as India and China.
    • The Survey has used economic size as an argument.
    • The economy that is the world’s fifth-largest has predominantly been rated AAA, S&P’s top rating.
    • By contrast, India, which displaced the UK in 2019 as the world’s fifth-largest, has been rated BBB-, the lowest investment grade.
    • The Survey points out that since 1994, only twice has the credit rating (as assigned by S&P and Moody’s) of the fifth-largest economy in US dollar terms been poor.
    • This was when China and India rose to that rank, in 2005 and 2019 respectively.

    Issues with Credit Rating

    •  Rating agencies rarely get credit quality right and they have been found to be well behind the curve in almost every default crisis.
    • The behavior of these agencies has been pro-cyclical, which is often seen to aggravate crises and fuel bubbles.
    • They are too lenient when the times are good, and too harsh when economic conditions worsen, making booms and busts that much more dramatic.

    What should be the basis of India’s argument

    • Unless the country has the privilege of printing the world’s reserve currency, as the US has, there is nothing special that ensures a large economy will always repay what it owes.
    • India’s argument should revolve around the country’s flawless repayment record.
    • The last time we were on the verge of a sovereign default, in 1991, we reformed our economy.
    • Today, the country has foreign exchange reserves in excess of $584 billion, while its total external debt, including that of the private sector, is a shade over $556 billion.

    Consider the question “The Economic Survey of 2020-21 point to the adverse rating of India economy by the global rating agencies. What is the significance of such ratings for the economy. What should be the basis of the argument against India’s adverse rating by the agencies?”

    Conclusion

    Despite the above-mentioned factors, we still find that Indian borrowers must pay higher rates of interest overseas than they would have to with a better rating. Global rating agencies need to overhaul their methodology to better reflect reality.

  • An overview of Economic Survey 2020-21

    The pandemic has been leaving its imprint various aspects of our lives and Economic Survey is no different. This year’s Economic Survey focuses on the recovery path of the economy disrupted by the pandemic. The article takes an overview of the survey and also mentions the missing areas.

    Focus on a recovery path

    • The Economic Survey analyses the broad trends at the macro level and the profiling of the initiatives across various economic activities.
    • This year, the Economic Survey focuses on the recovery path after initial derailment and the losses suffered by the Indian economy due to the pandemic.
    • The recovery is expected to follow a V-shaped path.
    • The Survey advocates countercyclical fiscal policies based on the premise that growth leads to debt sustainability.
    • The Survey brings together various relevant factors that have both a short and long-term impact on the economy and the budget.
    • This year’s Survey focuses on enhanced public healthcare spending and demonstrates how effective it has been in slashing out-of-pocket expenditures in the recent past.
    • It also shows the brilliant performance under the Pradhan Mantri Jan Arogya Yojana (PM-JAY) and the improved outcomes in states that have implemented the programme.
    • With focus on basic needs, the Survey has brought back national attention on the fundamental developmental paradigm.
    • The idea of analysing inequalities in times of recovery is a reassuring premise to move on with.

    Comparison with past Economic Surveys

    • If we consider the last two Economic Surveys, the introduction of new concepts and approaches has been quite evident.
    •  In the Survey for 2018-19, the idea of “nudge” helped provide recognition of the importance of social behaviour change for any policy to succeed.
    • This led to the adoption of transformative approach in the Swachh Bharat Mission and Beti Bachao Beti Padhao initiative that integrated behavioural insights.
    • Another powerful idea has been using technology to run and monitor welfare schemes.
    • The Economic Survey 2019-20 talked overwhelmingly about the importance of wealth creation, entrepreneurship, and financial markets in the economic development.

    What the Survey misses

    • The Survey should have focussed on a new narrative for trade.
    • Apart from explaining the missing value chains and integration with South and Southeast Asia, the survey should have analysed the high cost of tariffs when 38 per cent of our exports are import-dependent.

    Consider the question “In the wake of economic disruption caused by the pandemic, India needs a new narrative for trade. However, India faces the challenge of missing value chains and lack of integration with South and Southeast Asia. In light of this, suggest the policies India should adopt as new narrative for trade.“

    Conclusion

    Besides trade, FDI inflows and the accumulation of foreign exchange reserves has been remarkable this year. It is expected that India will emerge as an important link in the global value chain sector which has been visibly disrupted by the pandemic

  • Limited success of the Green India Mission

    The central government’s afforestation scheme, Green India Mission (GIM), was able to only achieve 2.8 per cent of its plantation target, according to the Economic Survey 2021.

    Try this PYQ:

    Q.Consider the following statements:

    1. As per law, the Compensatory Afforestation Fund Management and Planning Authority exists at both National and State levels.
    2. People’s participation is mandatory in the compensatory afforestation programmes carried out under the Compensatory Afforestation Fund Act, 2016.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Green India Mission

    • GIM is one of the eight Missions outlined under India’s action plan for addressing the challenge of climate change -the National Action Plan on Climate Change (NAPCC).
    • Launched in February 2014, it is aimed at protecting; restoring and enhancing India’s diminishing forest cover and responding to climate change by a combination of adaptation and mitigation measures.
    • The mission has the broad objective of both increasing the forest and tree cover by 5 million ha,  as well as increasing the quality of the existing forest and tree cover in 10 years.
    • The Mission proposes a holistic view of greening and focuses not on carbon sequestration targets alone, but also, on multiple ecosystem services, especially, biodiversity, water, biomass etc., along with provisioning services like fuel, fodder, timber and non-timber forest produces.
    • It will also increase options of forest-based livelihood of households living in the fringe of those landscapes where the Mission is implemented.

    Limited success of the scheme

    • As of March 2020, plantation under the scheme was undertaken only over 0.14 m ha land.
    • A 2018 parliamentary committee report on GIM found that the scheme was grossly underfunded.
    • The report found that the scheme had also missed its targets by 34 per cent in both 2015-16 and 2016-17 financial years.
    • The committee also pointed out that the afforestation done under the mission was only aimed at increasing tree count without considering the soil and weather conditions.
    • Trees like eucalyptus were planted which make environmental problems worse rather than solving it.
    • Planting of unsuitable trees may cause drought and prevent biodiversity in the regions.

  • What is the ‘Doomsday Clock’?

    The hands of the ‘Doomsday Clock’, a visual depiction of how vulnerable the world is to a climate or nuclear catastrophe, remained at ‘100 seconds to midnight’ for the second consecutive year — the closest it has been to the symbolic annihilation of humanity.

    Q.The ‘Doomsday Clock’ represents the hypothetical countdown to raise human consciousness against mutually assured destruction. In this light, discuss various existential threats to humanity and action taken so far.

    What is the ‘Doomsday Clock’?

    • The Bulletin of the Atomic Scientists, founded by Albert Einstein and students from the University of Chicago in 1945, created the ‘Doomsday Clock’.
    • It is held as a symbol to represent how close the world is to a possible apocalypse.
    • It is set annually by a panel of scientists, including 13 Nobel laureates, based on the threats — old and new — that the world faced in that year.
    • When it was first created in 1947, the hands of the clock were placed based on the threat posed by nuclear weapons, which the scientists then perceived to be the greatest threat to humanity.
    • Over the years, they have included other existential threats, such as climate change and disruptive technologies like artificial intelligence.

    Significance of such clock

    • The reason the scientists selected a clock is twofold — they wanted to use the imagery of an apocalypse (midnight) as well as the “contemporary idiom of a nuclear explosion” (zero countdowns) to illustrate the threats to humanity.
    • The clock was originally set to seven minutes to midnight and has since moved closer or further away from the dreaded 12 o’clock position.
    • The furthest it has been being 17 minutes after the end of the Cold War in 1991.

    Why was the clock set at ‘100 seconds from midnight’?

    • It was set at the ‘100 seconds from midnight’ position due to the prevailing climate conditions, “cyber-based disinformation”, nuclear risk and the pandemic.
    • It is the closest to Doomsday we have ever been in the history of the Clock.
    • We now face a true emergency – an absolutely unacceptable state of world affairs that has eliminated any margin for error or further delay.

  • Global antitrust and the challenge of Big Tech

    The article deals with the issue of checking the misuse of monopoly power by the Big Tech while encouraging their positive externalities.

    Worldwide Investigations against Big Tech

    • Big Tech firms, especially Facebook and Google have been investigated worldwide, including in the European Union and the United States, on the abuse of monopolistic power.
    •  Comparisons are drawn with investigations in the U.S. on the telecom industry and the break-up of the AT&T.
    • However, there are important differences this time around.
    •  First, the information good that is being provided by the Internet firms of today, is largely non-rival.
    • Second, Internet firms operate globally, therefore, it is often difficult to lay down international rules of obligation and fulfilment.
    • Third, while it is debatable whether the goods and services provided by the Internet firms are excludable.
    • It is this factor that was leveraged by the Internet firms to provide search, navigation, and social connectivity with no charge to the consumers, and, consequently, making these services non-excludable.

    Monetisation model of Big Techs and isseus with it

    • Public goods should be provided by governments, but the information goods as described above are being provided by private firms.
    • This arrangement poses several problems.
    • First, private firms need to have monetisation models to cover the costs of providing their services.
    • So,  the Internet firms have resorted to personalised advertisements and third-party sharing of the personal data of their users for monetisation purposes.
    • Second, the strong network effects present in these Internet platforms warrant increasing the subscriber base and garnering as much market share as possible.
    • This results in near-monopoly of some firms in their defined markets.
    • These firms may resort to anti-competitive behaviour including acquiring rivals to vertically integrate; erecting entry barriers by refusing to interconnect and inter-operate with competing firms, and leveraging their capital base, thereby engaging in predatory pricing, and driving out competitors.

    Positive externalities and consumer surplus

    • Network effects create a huge consumer surplus.
    • Even without our knowledge, these Internet firms have now become an indispensable part of our lives.
    • There are positive externalities as well, for example, Google Maps Application Program Interface (APIs) is being used by almost all logistic transand port companies.
    • Facebook APIs are used for advertisement by almost all firms across the industry.
    • Google, recently announced that its Search is being expanded to provide accurate and timely information on vaccine distribution to enable quick recovery from the COVID-19 pandemic.

    Challenge of regulation

    • The question before policymakers is how to regulate these Internet firms from abusing their monopoly power while encouraging the positive externalities and consumer surplus they create.
    • It is often very difficult to prove that the firms engage in the abuse of their monopoly power.
    • Due to strong network effects, it is not possible to ban or curtail these services.

    Way forward

    • A traditional view is to subsidise the good that creates positive externalities.
    • Governments can provide tax subsidy to these Internet firms in return for their orderly behaviour in the marketplace.
    • Governments could explore mandating sharing of Non-Personal Data (NPD) owned by these firms for societal and economic well-being as pointed out in the expert committee on NPD.
    • The other way to control any abusive behaviour of the Internet firms is to use the power of public voice.
    • The huge public outcry and subsequent government actions have delayed the recent changes to privacy policy relating to the sharing of personal information between WhatsApp and its parent firm, Facebook.

    Consider the question “Services provided by the Internet firms have become indispensable part of our life, this leads to the problem of checking their monopoly power while encouraging their positive externalities and consumer surplus. In light of this, discuss the challenges posed by the Big Techs and suggest the ways to deal with them.”

    Conclusion

    While governments and regulators deal with these dilemmas the Internet firms should adhere to core ethical principles in conducting their businesses as firms that aim at super monopoly profits and are greedy to become powerhouses of the world, often end up in the ditch.

    Back2Basics:What is positive externality

    • A positive externality exists if the production and consumption of a good or service benefits a third party not directly involved in the market transaction.
    •  For example, education directly benefits the individual and also provides benefits to society as a whole through the provision of more informed and productive citizens.

    What is Network Effect

    • The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service.
    • The Internet is an example of the network effect. Initially, there were few users on the Internet since it was of little value to anyone outside of the military and some research scientists.
    • However, as more users gained access to the Internet, they produced more content, information, and services.
    • The development and improvement of websites attracted more users to connect and do business with each other.
    • As the Internet experienced increases in traffic, it offered more value, leading to a network effect.