Institutional barriers to electronic commerce: An historical perspective

Although electronic commerce is currently a relatively small fraction of overall sales, the dollar amounts are significant and growing rapidly. Future growth, however, is likely to be limited by two factors - technical barriers and issues of trust and risk. Technical barriers such as delivery, bandwidth, and standardization are already beginning to erode. Problems of trust and risk require as yet undeveloped institutional solutions. The paper explores the possible form of these institutions by drawing lessons from institutions that emerged historically to address opportunism in remote commerce. Once such institutions emerge, remote commerce will begin to have real tax implications for states. The paper describes the institutional changes that will have to occur to address the tax shortfall once it becomes fiscally and therefore politically noticeable.