Interesting post. The most fascinating idea is that given the known incentivizing nature of property, how do economics change when the internet makes intellectual property much more difficult to define and protect. It clearly changes one of the bedrock issues of the capitalist structure. But how?

If any of us knew that--or could make a convincing case that we knew that--we would rapidly be on the shortlist for the Nobel Prize in Economics.

Sebastian has put his finger on the question…

“we would rapidly be on the shortlist for the Nobel Prize in Economics”.

Sorry Brad, don’t agree. Looking down the Nobel list for Economics over the years (or Literature for that matter) I’m not at all convinced.

However I do think you made a start in the linked article. It is really interesting - in fact I’ve said many times it was what woke me from my ’dogmatic slumbers’ and got me interested in economics again. The point now is to develop on this foundation.

One starting point might be the idea that shared systems may have some evolutionary advantage. Think about R&D and collaborative computing. Or think about encyclopaedias and wikipedia. Or think, of course, about blogging, and the ’amateurisation’ of online content provision. Clearly if people begin to have hobbies that give them non-lucrative rewards and yet put them in a space occupied formerly by ’professionals’ then there are going to be consequences.

So what I would say here Tobias is that the professional journalist may now be in a similar position to the EMI business developer you mention, ie about to be outflanked by a social phenomenon s/he didn’t know how to evaluate.

I - along with Ray Kurzweil - have drawn one conclusion from this tendency: that this is all going to be highly deflationary. Basically lots of important things are going to get very much cheaper.

Eli Noam in a recent FT piece also seemed to reach a similar conclusion:

“All these are symptoms of a chronic price deflation that shows no sign of abating. It is a good deal for consumers, including those of developing countries, but it spells disaster for providers. The price for their information or distribution is dropping towards marginal cost, which is close to zero and typically does not cover full cost.”

Unfortunately he seemed to get his threads twisted by associating this impact with that of the so called ’tragedy of the commons’:

“Volunteerist activities such as open-source software, shared information or public hotspots will not solve the problem, because they, too, are subject to the instability known as the “tragedy of the commons”, in which individuals’ free-loading and over-utilisation destroys the communal effort.”

I don’t see how this applies to wikipedia at all. The more the merrier it seems to me. OK so there may be some bandwidth issues, but with costs plummeting even here this doesn’t seem to be any big deal.

Maybe what we need to do is not ’solve the problem’ but redefine it. The standard move in all this is normally to go for the IP argument (it may be just a coincidence, but I am having lunch today with an old friend who just happens to be a patent attorney here in Barcelona: normally I frighten the life out of him when I start talking about all this!). But if the Metcalfe effect works, and the higher value is to be found in the Net and not the individual this may turn out to be a problematic strategy.

Bottom line await more information before reaching any definitive conclusions (pun intended).

One last point Brad, it wasn’t so long ago your were waxing about the marvels of online Britannica, now we have Wikipedia. Some people suggest that the world doth change but slowly. I would rather go with James Gleick in ’What Just Happened’: the fact that some people still cling to incrementalism tells us more about the way we are relating to change than about change itself.

This may throw some light on that old riddle about the industrial revolution: why it was that Jane Austin hardly mentions its existence.

I’ve a theory about why Jane Austin doesn’t mention the industrial revolution’s existence:

We keep measuring the industrial revolution in terms of use value and exchange value, but keep excluding the entertainment value involved. The industrial revolution certainly provided a basis for the enhancement of the former two, but was it entertaining enough to comment on?

The information revolution, on the other hand, entertains. That is its one hallmark which distinguishes it from former seemingly similar socio-economic upheavals. Add to that the capacity of human beings to celebrate mischief (Linux in subverting notions of proprietary rights, the prevalence of viruses, etc.) and you find a re-constitution of our notions of what it means to be a “consumer” of entertainment.

It is the identity and the behaviour of that consumer that interests me. Past social theories have relegated the consumer to an end-user status, without seeing that the new order has the consumer shaping the product beforehand, thus changing the identity of the producer. What motivates the producer is less a question of profit, or socialist altruism (Linux), but simply a question of entertainment.

I’m personally involved in shaping a business model here in New York for an ongoing distribution network for entertainment. It’s still amazing to me how much free labor is being contributed, considering the payoff is… well, nothing, - except for me, and anyone else who decides to compete. There is so much interest in having the model succeed, simply because it would entertain the contributors to see it succeed. That was more of the basis for the success of Linux, and craigslist.org, rather than the more commonly accepted notions of social altruism.

Entertainment value, in my mind, is grossly misunderstood as an economic force. People still think in terms of music, movies, and television as being consumed by consumers. But what the information revolution has shown is that the divide between the audience and the stage is being blurred, and that is where to concentrate your thinking and analysis. The nature of entertainment, as we know it, is changing.

As well it should be. Thousands of years ago, drama was not entertainment, but a communal, religious ritual. It’s role has seen countless transformations throughout history. There’s no reason to think such transformations have come to an end.

This revolution is not scary (well, except for music industry executives and patent lawyers). This revolution is fun, and entertaining.

Edward,

“Unfortunately he seemed to get his threads twisted by associating this impact with that of the so called ’tragedy of the commons’…I don’t see how this applies to wikipedia at all.”

The “tragedy of the commons” is just a version of the free-rider problem, which in turn is just a matter of internal vs. external costs. That’s why Noam associates shareware and the like with it. He sees that one can extract value without necessarily sharing in the costs and extrapolates to the same sort of instability one sees in, say, an unregulated fishing ground open to all fleets. The support offered to the communal project need bear no relation to the utility extracted from it, so the project stands in danger of being starved for resources.

He may not be wrong. Of course, one needs to take into account the idea RSN expressed that some of the value extracted from the project may be non-monetary and is tied to specific users (i.e. I contribute to the project simply because my ego drives me to want to see it succeed.)

Possibly of some interest, given the topic:
http://papers.nber.org/papers/W10361

I’ve got a copy, if you don’t have access.

Bernard Guerrero