Value Creation from Expert Systems: an Economic Approach with Applications in Accounting, Auditing and Finance

The purpose of this paper is to explore some of the value creation processes associated with expert systems. The paper employs a number of different applications of economics to explore the issues. Cost-benefit analysis, based in microeconomics and the economics of defense and government, is used to provide a basic measure of value. Contributions of value for expert systems are explored: economics of strategy/industrial organization, economics of production and innovation, industrial economics, economics of information and economic theory of teams. The paper has a number of conclusions including the following. First, if expert systems can be used to reduce the risk of doing business or develop barriers to entry then those reductions and barriers may be the source of additional value. Second, diffusion of innovations can also lead to additional value through the use of the system by others in the organization for additional purposes or the use of the system by others from different organizations. Third, industrial economics learning processes suggest that building one expert system makes building other expert systems easier and more inexpensive, thus adding value. Fourth, information economics indicates that information has "fleeting" value so the use of expert systems for some applications has limited applicability. Fifth, the economics of teams suggests that expert systems be used to coordinate the efforts of multiple actors. Sixth, the summary suggests that this paper provides a basis for the study of the economics of knowledge and expert systems.