Posts Tagged ‘economics

G.E’s big bet on what it calls the “industrial Internet,” [is] bringing digital intelligence to the physical world of industry as never before… G.E.’s effort, analysts say, shows that Internet-era technology is ready to sweep through the industrial economy much as the consumer Internet has transformed media, communications and advertising over the last decade.

Steve Lohr

This video features Yochai Benkler discussing his incredibly important work on ‘the memetic economy.’ Key points:

The ‘memetic economy’ is an emerging technological-economic condition – a new stage of  ‘the information economy’ whose two defining characteristics are:

  • An increased role for non-market production
  • Radically decentralised production of information

A meme in this sense is a unit of cultural transmission: covering all information, knowledge, culture. The memetic economy indicates the production of cultural units shifting to individuals – replicating more closely the diverse mechanisms in society more generally – reversing the control focus of the industrial information economy.

In the industrial information economy people have been constrained to consuming products from managerially determined, heavily advertised finished goods – but it is highly valuble to democracy, autonomy and social justice for individuals acting outside markets to determine information relevance and drive cultural content and wider production.

The emerging techno-economic situation where substantial components of information production is owned by end-users means productivity can be sustained with non-proprietary and non-market production – leading to radical decentralised information production, and intelligence at the edges of a network whose core is relatively quite stupid.

Efficiency of non-market production does vary from industry to industry, but in addition to non-market production, market-based indirect appropriation of revenue not reliant on information as property is also possible (e.g. the Spotify Freemium model).

It is of great social value for individuals to participate in direct discourse instead of relying on proxies for political conversation, and centralised and commercialised control structures determining what information they see. The ‘memetic economy’ means the opportunity for a radical shift in the extent to which people can participate in forming the cultural meaning of their society through talking to eachother.

There is / will be a battle over the institutional ecology of information (the giants of the industrial age will not go quietly) but it would be disastorous to allow the winners of yesterday’s economy to dictate the terms of tomorrow’s.

Information non-rivalry is the principle reason the web is a game-changer for media.

Here I break down and illustrate the concept – summarising and re-working chapter 2 from Yochai Benkler’s Wealth of Networks (entitled Some Basic Economics of Information Production and Innovation).

What is non-rivalry?

  • A good is non-rivalrous when your consumption of it does not prevent someone else from consuming it
    • In contrast, if you eat an apple, I cannot then eat it. An apple is therefore a rivalrous good
    • When the guy above is wearing the binary scarf I cannot wear it, therefore it is a rivalrous good
  • Non-rivalry means I do not need to compete with you, in order to consume something
  • When a non-rivalrous good is produced, no more social resources need be invested to create more of it to satisfy the next consumer; this means producing one more of a non-rivalrous good has a marginal cost of zero

Why is information non-rivalrous?

  • Once a scientist has established a fact, or once Tolstoy has written War and Peace, neither the scientist nor Tolstoy need spend a single second more producing additional War and Peace manuscripts or studies of what they wrote for the one-hundredth, one-thousandth, or one-millionth user
  • Economists call such goods “public” because a market will not produce them if priced at their marginal cost—zero

What about the paper it is printed on?

  • The physical paper for a book or journal costs something, but the information itself need only be created once  

So how does the established information economy work?

  • People make money over and above the price of paper, because of copyright
  • In order to provide Tolstoy or the scientist with income, we regulate publishing: We pass laws that enable their publishers to prevent competitors from entering the market
  • Because no competitors are permitted into the market for copies of War and Peace, the publishers can price the contents of the book or journal at above their actual marginal cost of zero. They can then turn some of that excess revenue over to Tolstoy

Sounds fair, why don’t we just carry on doing that online?

  • Because copyright, or ‘intellectual property’ is bad for the further development of human knowledge
  • And the web provides us with other options

Why is intellectual property bad for knowledge development?

  • Preventing people from sharing information freely slows down the development of human knowledge: it restricts us from ‘standing on the shoulders’ of the intellectual giants that went before us
  • Even if copyright laws are necessary to create incentives for information production, the market that develops based on them is systematically inefficient
  • As Kenneth Arrow put it in 1962, “precisely to the extent that [property] is effective, there is underutilization of the information”1
  • Using copyright, then, means we are not utilising the full potential of the information that exists

So is there an alternative?

  • Because welfare economics defines a market as producing a good efficiently only when it is pricing the good at its marginal cost, a good like information which can never be sold both at a positive (greater than zero) price and at its marginal cost, is fundamentally a candidate for substantial nonmarket production

And what is nonmarket production?

  • Production that does not result in a straight swap: access to information in exchange for money
  • This doesn’t mean no money can exchange hands in relation to information production
  • What it means is we do not demand money in return for information, data, the fact, the story

If ‘nonmarket’ production is best, how can writers make money?

  • Information production can be funded by a mixture of:
  • Obviously Rupert Murdoch has other ideas on how to make money from information online, but for society to optimise information production and usage, pay walls are clearly not the answer


For more read the whole chapter online or buy the book

Picture of binary scarf guy by jarrodlombardo

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