1. Introduction: A Moment of Opportunity and Challenge

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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 peripheral 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 are 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.

Networked Information Economy and Liberal Democratic States

How we make information, how we get it, how we speak to others, and how others speak to us are core components of the shape of freedom in any society. Part II of this book will examine how the networked information economy effects four core commitments of democratic societies: individual freedom, a participatory political system, a critical culture, and social justice. Often these commitments are contradictory and therefore must be balanced against one another. For example, a commitment to social justice that takes the form of a progressive tax necessarily limits individuals’ freedom to spend their income as they see fit. Different societies have achieved this balance in different ways, but in all case the economics of industrial production have constrained the range of possible arrangements. For example, consider the United States’ commitment to a critical culture that took the form of the Fairness Doctrine, which imposed a general obligation on broadcasters to give equal air time to opposing political views. It was market forces and the scarcity of airtime that led the FCC to adopt this position in the first place, But as the number of information outlets increased the FCC began to loosen its rules implementing the Fairness Doctrine, the Commission arguing that the constraint on broadcasters editorial decisions was no longer justified since diverse views could be presented in other ways that impinged less on individual automony. The networked information economy has lifted market constraints on the ordering of liberal values along four different dimensions:

Enhanced Autonomy

The networked information economy improves individual autonomy in three ways. First, it improves individuals’ capacities to do more for and by themselves. Take baking for example. The internet offers thousands of different recipes for apple pie. A first time baker no longer needs to buy a Betty Crocker cookbook, call his grandmother for a recipe, or enroll in a cooking class to learn how to bake a pie. All he needs to do is perform a Google search for the phrase “apple pie recipe” Likewise, someone skilled in the art of pie-making and with a wish to share his knowledge does not need technical expertise to share it: he could easily start a blog devoted to pie recipes. Second, it improves individuals’ capacity to do more in loose affiliation with others in a non-market setting. Again, the results of the Google “apple pie recipe” search are an example of the success of this loose uncoordinated affiliation. Three, the networked information society improves individuals’ capacity to corporate with others through formal or organized groups that operate outside the market sphere. Wikipedia, the open source software movement, SETI@home are all examples. The fluidity and low level (both in terms of money and time) of commitment required for participation in these wide range of projects is just one of the ways in which the networked information economy has enhanced individuals’ autonomy.

Democracy: The Networked Public Sphere

The networked information economy has also allowed individuals’ greater participation in the public sphere. This has happened in at least three ways. First, it has given individuals alternatives to the news and commentary of mass media. Second, it has created new and more accessible forms for discussion and debate. Now the individual does not need to write a letter to the editor or attempt to get her unsolicited op-ed published, she can comment on Instapundit, or even start her own blog. Third, through both coordinated collective action and loose uncoordinated but coordinate action individuals can affect the content and focus of mass media news and commentary. An example of this is when a blogger “breaks a story” which is picked up by other bloggers until the main stream media take notice and respond.

Justice and Human Development

The non-proprietary models of production made possible by the networked information society also can be harnessed to promote justice and human development. There are at east two ways in which this happens.

First, the broad range of free software utilities makes it easier for poor and middle-income countries to meet their core software requirements, helping to bridge the digital divide. Free software also creates a market in services, and since the access to the underlying materials is cost-free it makes it easier for these poor and middle-income countries to enter this industry. Brazil is one salient example of a country that is pursuing this path. Second, the peer-production model is being used in areas outside of software such as agricultural research, open-source textbooks, and even health-related products.

A Critical Culture and Networked Social Relations

The networked information economy also allows for the emergence of a more critical and self-reflective culture, this process might be called the democratization of culture. The networked information economy does thus by: 1) making culture more transparent and 2) making culture more malleable. In the industrial information economy the technology that was used to create culture was expensive, or if it wasn’t, the technology needed to spread those creations was. An guitar or drum set may not had required much capital investment, but speakers, microphones, mixing boards, studio time, CD presses, and access to distribution were very expensive. Thus, in the old information economy, even if an individual could write and perform her own music, she could not easily market it. But in the networked information economy not only has the physical capital become easier and cheaper to amass, the economic constraints on distribution are far less in the digital world. Not only does this allow individuals to create and distribute cultural products, it also allows them to speak back to the cultural products they consume. The phrase “rip, mix, and burn” describes some of this behavior, those Jack Balkin’s term “glomming on” highlights the creative as opposed to merely critical capacity of this new cultural literacy and media savvyness

Four Methodological Comments

Every thesis or argument relies on assumptions and methodological choices. The four most salient to this book are assumptions about: 1) the role of technology in human affairs; 2) the role of economic analysis and methodological individualism; 3) economic structure in liberal political theory; and 4) the role of the state.

The Role of Technology in Human Affairs

Different technologies allow for different kinds of human actions and relationships. This proposition differs from technological determinism in that it does not state that technology dictates the kinds of actions and relationships that will arise. But it does suggest that all other things being equal if a technology makes it easier to perform an action that action will be more likely to occur and similarly that if society lacks certain technologies that that are pragmatically necessary to an activity that activity is not likely occur. But all other thins are never equal. And different societies will react differently to the possibilities a new technology offers. The Gutenberg printing press technologically could produce Bibles, making it possible for individual families to own and read their own Bibles. But different religious attitudes also made the actualization of this possibility more or less likely. Thus the same technology (the printing press) had different effects on literacy in communities that endorsed individual worship and study of the Bible and in communities that discouraged such behavior. Similarly, the role of the new technology upon which networked information economy is built can and will be exploited different in social structures. If we deny (as we should) technological determinism, we should also realize that there is no guarantee that this new technology will be exploited to improve society, enhance individual autonomy or promote democratic values. The role of this technology will be determined not just by its internal logical but according to our external societal attitudes.

The Role of Economic Analysis and Methodological Individualism

This book has a descriptive methodology that is individualist and economic in orientation. There are other ways to approach the study of technology, the growth of networks, and the displacement of hierarchical social/organizational models. This work, nevertheless, places the technical and economic characteristics of computer networks and information at the core of the shift in social/organizational models.

The lesson we should learn from globalization and that expanding markets can exert enormous pressure on existing social structures. But if non-market production moves to the center of our economic engine the effects of globalization are altered as the expanse of a market economy is necessarily limited.

Economic Structure in Liberal Political Theory

The methodological approach of this book is also practical and human centric. It is humanistic in that it is concerned with the claims of human beings as human beings not with the claims of human beings in relationship to the requirements of democracy, entitlements of citizenship. The work examines how technology affects human freedom, dignity, and well-being. It is practical in that it is concerned with actual human being in actual historical settings, not with representations of human beings abstracted from their environments. Property and markets are just one domain of human action and the enhance human welfare along some dimensions, but their institutional requirements can become onerous when they effect freedom to act in nonmarkets contexts. This means that calibrating the reach of the market is central to shape of justice, welfare and freedom.

Whither the State?

In the discussions of autonomy, democracy, justice, and a critical culture, the emphases are placed on 1) the rise of individual and cooperative private action and 2) the relative decrease in the dominance dominance of market-based and proprietary action. This raises the question: What role does the state play in all of this? As will be explored in chapter 11, the state in both the US and Europe has mostly supported the market-based industrial incumbents of the old industrial information economy. These incumbents have, in many instances, captured the legislature with the result that most state interventions have been, at best, well-intentioned but wrongheaded efforts to optimize outdated modes of production.

This book is essentially adopts a libertarian political theory: Freedom and justice is best achieved through a combination of market action and private, voluntary (thought not necessarily charitable) nonmarket action. The state in this theory is a relatively suspect actor. This is not rooted in any theoretical skepticism. There is no reason a liberal state could not purse liberal projects and commitments and there are instances in this book where such liberal state-sponsored projects are suggested. Nevertheless, because the most salient feature of the networked environment is the efficacy and centrality of individual and collective social action, the role of the State should, for the most part, be muted. Once the networked information economy has stabilized, then the state can begin to adjust its policies to facilitate nonmarket action and improve its own support for core liberal commitments.

The Stakes of It All: The Battle Over The Institutional Ecology of the Digital Environment

We are coming into the new era of the networked information society, but no benevolent historical force nor invisible hand will necessarily guide us to achieve an open, diverse, and liberal equilibrium. Like economic shifts of the past, this shift will lead to substantial redistributions of money and power. The incumbents--Hollywood, the recording industry, broadcasters, and telecommunications providers, stand to be the losers in this reallocation. And, as any self-interested actor would, these players are not only resisting technological and legal changes that threaten they but also taking pro-active measures to ensure that the techno-legal landscape is favorable to their old modes of production.

This book is offered as a challenge to contemporary legal democracies. We are in the midst of a technological, economic and organization transformation that will affect not only information production, but also the core liberal values of freedom and justice. The end result of this transformation, however, is not pre-determined: It depends on the policy choices that we make in the coming decade. We must recognize that what may appear to be a simple choice over technology-architectures is much more than that. These policy choices are fundamentally social and political choices--choices about how to be free, equal, productive humans.


Sources cited in the chapter

Barry Wellman et al., “The Social Affordances of the Internet for Networked Individualism,” JCMC 8, no. 3 (April 2003).

Langdon Winner, ed., “Do Artifacts Have Politics?” in The Whale and The Reactor: A Search for Limits in an Age of High Technology (Chicago: University of Chicago Press, 1986), 19–39.

Harold Innis, The Bias of Communication (Toronto: University of Toronto Press, 1951).

Lawrence Lessig, Code and Other Laws of Cyberspace (New York: Basic Books, 1999).

Manuel Castells, The Rise of the Networked Society (Cambridge, MA, and Oxford: Blackwell Publishers, 1996).

Other relevant readings

Steven Weber's "The Success of Open Source" snippet from an editorial review on Amazon... "...we can listen to Steven Weber and begin to make our peace with the uncomfortable fact that the very foundations of our familiar "knowledge as property" world have irrevocably shifted..."

Webcast of Steven Weber at the 2005 Conference for Law School Computing titled Is Open Source the Opening Shot in an Economic Revolution?

Case Studies

Supporting examples

Global civil society / UN NGO Community

Global civil society
UN NGO community


Key Concepts

Industrial information economy
Networked information economy
Peer production