My piece from today’s Fin ReView section
Is about free sharing of information, and is rescued from behind their increasingly adamantine paywall.
HEADLINE: When co-operation trumps competition
Writeoff: John Quiggin explains how the internet is changing our ideas about innovation
The rise of the Internet has shown how a largely co-operative enterprise can have huge impact impacts. Among those trying to understand this phenomenon, Yochai Benkler, in papers like Coaseâ€™s Penguin and Sharing Nicely has been the most consistently innovative and insightful. Now he has presented these ideas in the form of a book, The Wealth of Networks: How Social Production Transforms Markets and Freedom
Perhaps the most interesting question raised by Yochai Benkler’s book is the question of why people contribute to social production. The answer to this question has important political and social implications, for states as well as for markets and freedom.
To the extent that there is a conventional wisdom about these things, it’s Eric Raymond’s idea of a gift economy, derived from his participation in the open source software movement. Raymond focuses exclusively on reputation as a motive for contributing to social production, seeking to assimilate all other motives (such as craft values) to reputation. But it is precisely this kind of totalising logic that is absent from social production.
On the contrary, a wide variety of motives might lead people to contribute to social capital, for example by participating in various aspects of blogging (making posts and comments, linking and blogrolling, improving software, various kinds of metablogging). Possible motives include altruism, self-expression, advocacy of particular political or social views, display of technical expertise or a desire for social interaction. Particularly in relation to a collective, and largely anonymous, product like Wikipedia, Raymond’s central focus on reputation does not fit the facts.
Against these various motives, there are the two standard methods that have been relied upon to deliver most information production and innovation for the past 150 years: markets and bureaucratic hierarchies. One interpretation of Benkler’s work, which may be traced back to the arguments of writers – like Walter Powell and Eric von Hippel – is that we need to consider networks as a third model.
However, this interpretation is both too broad and too narrow. Mathematically speaking, almost any social arrangement can be represented as a network. A hierarchy is, in the technical language of the field, an acyclic directed network, while the (real or hypothetical) auctioneer of market theory may be regarded as
occupying the central node in a network with a star topology. On the other hand, when used as a metaphor, the term ”network” is commonly taken to imply a degree of reciprocity that is appropriate for some kinds of interaction, such as Raymond’s gift exchanges, but not for others such as the self-expression of a personal blog or web page.
To analyse social production properly, it is necessary to consider all kinds of motives that might be relevant, rather than focusing on a few salient examples. Benkler discusses markets, and the associated profit motives, at some length, making the point that narrowly economic motives tend to crowd out alternative forms of motivation. He mentions the classic work of sociologist Richard Titmuss on blood donations and some other examples to show that monetary and altruistic motives are likely to conflict, rather than reinforce each other.
But the same conflict arises between monetary motives and other social- psychological motives such as a desire for artistic expression. By contrast, different social-psychological motives are usually complementary, or at least mutually consistent.
Why is this? At a superficial level, it’s obvious that people act differently, and are expected to act differently, in the context of relationships mediated by money than in other contexts. Behaviour that would be regarded favourably in a non-monetary context is regarded as foolish or even reprehensible in a monetary context.
One of the most important general differences relates to rationality and reciprocity. In a non-market context, careful calculation of costs and benefits and an insistence on exact reciprocity is generally deprecated. By contrast, in market contexts, the first rule is never to give more than you get.
This rule applies in market contexts but not in social contexts, where such careful calculation is, as Benkler notes, generally deprecated, because markets create opportunities for systematic arbitrage that do not apply in other contexts. In an environment where exchanges are not carefully calculated, a trader who consistently gives slightly short weight can amass substantial profits. If trading partners assume honourable behaviour, none will suffer enough to notice, but eventually arbitrageurs will drive out their less calculating trading partners.
Similar points can be made about other motives. There are a whole range of sales tricks designed to exploit altruism, friendship, desire for self- expression and so on. Hence, to prosper, or even survive, in a market context, it is necessary to adopt a view that “business is business”, and to (consciously or otherwise) play a role that is quite distinct from what might be conceived as one’s “real self”. This is a prime example of what Goffman calls an obligatory role.
The crucial feature of economic motives in a money economy is not that they are less noble or desirable than alternatives such as desire for fame, but that a money economy provides a total system of rationality, from which most of the motives linked with social production are excluded.
Markets are not the only total system of rationality that operate in a modern society. Bureaucracy and the state have a logic of their own. For most of the 20th century, the central issue of politics and economics was the question of where the boundary between markets and bureaucracies (public and private) should be drawn.
Benkler largely ignores the state. As he says: “In much of [my discussion], the state plays no role or is perceived as playing a primarily negative role, in a way that is alien to the progressive branches of liberal political thought.” But this position overlooks the fact that both the internet and the world wide web were developed primarily by state agencies or state-funded institutions. Yet this outcome was not the product of rational bureaucratic planning. Rather, like Topsy, the net and the web “just growed”.
Like market rationality, bureaucratic rationality implies a complete specification of behaviour. When dealing with a representative of a bureaucracy, we (mostly) expect consistent application of rules, rather than an adherence to standard social norms such as “look after your family/mates before others”. Similarly, and more crucially, bureaucracies are supposed to allocate their resources to the achievement of specified goals, not to do things because they would be fun, or even socially beneficial. All of this seems to leave little room for social production. So how did the state come to give us the internet? More significantly for our present purposes, what kinds of public policy will facilitate the further growth of social production and the wider distribution of its benefits?
Such questions are easier to ask than to answer. But the rise of social production, and the fact that socially produced innovations are now a driving force in technological progress, has obvious implications. And these implications run directly counter to the trends that have driven public policy in the past few decades.
First, if monetary returns are weakly, or even negatively correlated with the value of social production, there’s no reason to expect capital markets to do a good job in allocating resources to supporting innovation. It follows that the policy orientation of the past 30 years, in which increasing reliance has been placed on capital markets, is going in the wrong direction. The examples considered by Benkler are illustrative. Both blogs and wikis have their roots in the late 1990s, a time when capital markets were splashing hundreds of billions of dollars around on internet-related projects. Most of these projects came to nothing, while blogs and wikis developed with little or no venture capital money to help them along.
A second implication is that the policies of “New Public Management”, which attempt to tighten bureaucratic accountability and focus on competitive disciplines and measurable outcomes may be misguided. Rather than driving people harder in the search for increased productivity, government macro- economic policy should be oriented towards making room for creativity and facilitating its expression. And, while competition has its place, public policy should be at least as concerned with promoting co-operation.
Long-held assumptions about the competitive nature of innovation are, therefore, under-supported in today’s environment. If governments want to encourage the maximum amount of innovation in social production, then they need to de-emphasise competition and emphasise co-operation.
The Wealth of Networks: How Social Production Transforms Markets and Freedom. By Yochai Benkler. Yale University Press. 528pp.
John Quiggin is an ARC federation fellow in economics and political science at the University of Queensland.