Sharing as an Economic Model
In the February 5-11 edition of The Economist, the Economics Focus column discusses a recent paper in the Yale Law Journal by Yochnai Benkler titled “Sharing Nicely: On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production” (available in PDF).
The first question, puzzling to practitioners of the dismal science, is why people - specifically open-source programmers - freely give away the products of their effort done outside of their employment hours. Where’s the “Rational Actor”? Where’s “Self-Interest”? Where’s the pay-back?
The “pure economic” theories tend to run along the lines of subtle pay-back: reputation and prestige leading to greater job prospects. The “social economic” theories talk about communities of reciprocity and trust that benefit all members. (The “geek economics” theories say: “What else would I do with my Friday night?” and “Dude, I need to WiFi my toaster.”)
And then there are characteristics of the computing field itself that influence this economic motivation: negligible cost of distribution, the network effect, the fact that use doesn’t diminish value.
Benkler notes that this model of economic production exists goods other than code: SETI@Home (where people give away their spare processor time, leading to a dynamic computing grid) and peer-to-peer music sharing (where, granted, the economic pay-back is more obvious).
Sharing computing power (and programming resources) is possible because there’s spare capacity; we don’t use the processors in our individual computers all the time; we have more storage space than we usually need; geeks have nothing else to do on Friday night.
Sharing is now possible for the radio spectrum: mobile phone companies currently buy chunks of spectrum like a commodity, where in fact it could be purchased as a utility: usage fees rather than rental fees.
Benkler suggests that this trend represents “a third mode of organising economic production, alongside markets and the state”. It’s a mode that largely exists only within computing, though - aside from car-pooling, he can think of no non-technology examples.
But why is that the case? (This is where I stop paraphrasing The Economist and start thinking for myself.) Is it the nature of the inputs and outputs? An open-source programmer’s input cost is her time and brain-space; the cost of her raw materials is negligible. But the same could be said for a florist, if the florist were to use free materials he gathered himself for his arrangements. Why isn’t flower arranging a bastion of this third mode of production?
Because the florist’s product can only be used by one person at one time; it’s a “rival” good with no network effect. Also, the value of the output is subjective; it’s an aesthetic judgement rather than an objective judgement. Also, the florist’s output has no “use”; few would argue that art has no value, but few find it easy to articulate exactly what that value is.
Okay, so what about tree-planting? Cost of input. Locality of output; no distribution. What about picking up litter off the street? There’s a shared benefit; no input cost; but the output is again an aesthetic rather than practical value. And it’s an unpleasant job that nobody wants to do for free.
Maybe those are the defining components of the types of economic production that are amenable to Benkler’s “third” mode. Jen the economic auto-didact proposes that in order for the sharing model to apply:
- it must add no (or negligible) cost to the input
- if the input transormation is performed by an individual, the task must be enjoyable (or at least not unpleasant)
- other people must be able to use the output
Let’s see how that idea cooks down in my cranium over the next few days…