April 17, 2006

The Wealth of Networks: How Social Production Transforms Markets and Freedom

Posted in Politics, Technology at 11:05 am by antonello

Via Matthew Yglesias: this looks very interesting. Must get to it. It seems like it may be my sweet spot of interest. From the introduction:

The Emergence of the Networked Information Economy

First, advanced economies have shifted from an economy based on production of physical goods and services (e.g., automobiles and textiles, mining and construction) to an economy centered on the production of information goods and services (e.g., cinema and software, legal representation and financial planning).

Second, advanced economies have shifted from a communications environment relies on an expensive centralized communicator that broadcasts to a wide audience (e.g., radio, television) to an environment that relies on a multitude of cheap processors with high computing capacity that are interconnected with one another (i.e., the Internet).

These two shifts make it possible to lessen the market’s influence over political values. The second shift allows decentralized, non-market production. The first shift means that this new form of production will play a central, rather than periphery role, in advanced economies.

The first part of this book explores in detail the economic implications of these two parallel shifts. The central thesis is that a new stage of the information economy is emerging. The industrial information economy of the mid nineteenth and twentieth centuries is now being displaced by the “networked information economy.” The networked information economy is characterized by decentralized individual action carried out through willed distributed, nonmarket means that do not depend on market strategies.

Several factors allowed for the networked information economy to emerge. First, the design of computing technologies and the internet allows for user-to-user communication. Second, the price of computation, communication, and storage has steadily declined and continues to do so. In the old industrial information economy, the desire to communicate was often frustrated by price constraints on the mode of communication. Price constraints on printing, mailing, and broadcasting meant that wider the audience one wanted to reach, the larger the price tag. It was difficult for the average individual, unaffiliated with a commercial business, to broadcast over the radio station and almost impossible to do so via a television network. In the networked information economy, many of these price constraints have been radically loosened.

There are three important observations about this new economy. One, non-proprietary strategies have always been more common in the production of information goods than in the production of physical goods. Examples include public education, the arts and sciences, and political debate. Because these activities are cheaper in the new economy means, in principle, they should play a more central role in information production. Two, there has, in fact, been such an increase in importance. A Google search returns information on almost any subject a user queries. The list of hits comprising the information good is the result of the coordinate efforts of uncoordinated actions a wide and diverse group of individuals. Three, there numerous examples of effective, large-scale, cooperative efforts to create information and culture. This is commonly known as peer-production and is typified by the open-source software movement. Other examples include Wikipedia and SETI@Home.

Without an analytic method of understanding these phenomena, which fly in the face of many traditional economic assumptions, we will see them as mere curiosities or fads. The purpose of Part I of the book is to provide a sophisticated framework that will allow us to understand peer-production for what it really is: a new mode of production, one that is powerful, efficient, and sustainable.

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