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[ox] Economist on Sharing



http://www.economist.com/finance/displayStory.cfm?story_id=3623762 

The economics of sharing

Feb 3rd 2005 

From The Economist print edition

Technology increases the ability of people to share, but will they share more 
than just technology?

BY NOW, most people who use computers have heard of the “open source” 
movement, even if they are not sure what it is. It is a way of making 
software (and increasingly, other things as well), which relies on the 
individual contributions of thousands of programmers. The resulting programs 
are owned by no one and are free for all to use. The software is copyrighted 
only to ensure it remains free to use and enhance. In essence, therefore, 
open source involves two things: putting spare capacity (geeks' surplus time 
and skill) into economic production; and sharing.

Economists have not always found it easy to explain why self-interested people 
would freely share scarce, privately owned resources. Their understanding, 
though, is much clearer than it was 20 or 30 years ago: co-operation, 
especially when repeated, can breed reciprocity and trust, to the benefit of 
all. In the context of open source, much has been written about why people 
would share technical talent, giving away something that they also sell by 
holding a job in the information-technology industry. The reason often seems 
to be that writing open-source software increases the authors' prestige among 
their peers or gains them experience that might help them in the job market, 
not to mention that they also find it fun.


The characteristics of information—be it software, text or even biotech 
research—make it an economically obvious thing to share. It is a “non-rival” 
good: ie, your use of it does not interfere with my use. Better still, there 
are network effects: ie, the more people who use it, the more useful it is to 
any individual user. Best of all, the existence of the internet means that 
the costs of sharing are remarkably low. The cost of distribution is 
negligible, and co-ordination is easy because people can easily find others 
with similar goals and can contribute when convenient.

The question is, can sharing be used to supply more than just information? One 
of the most articulate proponents of the open-source approach, Yochai Benkler 
of Yale Law School, argues in a recent paper* that sharing is emerging for 
certain physical, rivalrous goods and will probably increase due to advances 
in technology. Where open source was about sharing information by way of the 
internet, what is happening now, Mr Benkler notes, is the sharing of the 
tangible tools of technology themselves, like computing power and bandwidth. 
This is because they are widely distributed among individuals, and sold in 
such a way that there is inherent (and abundant) unused capacity.

Consider computing power. By some measures, the world's most powerful 
supercomputer is not owned by NEC or IBM, but is a volunteer project called 
SETI home that aggregates the spare processing power of around 4m computers. 
When an individual's PC is idle, a screen-saver application that users have 
downloaded kicks in and harnesses the computer's processor to decode radio 
signals in search of extra-terrestrial life. A basic PC chip is a rivalrous 
good, but it provides far more power than most computer owners ever use. So 
putting this spare capacity to use through sharing makes more sense, if this 
is as easy to do as it is with SETI home, than letting it go to waste. Why do 
people not sell the capacity instead? Probably, this would raise the 
transaction costs to the point where it would not be worthwhile.

Moreover, via “peer-to-peer” systems, people exchange digital copies of music 
over the internet, sharing not only songs but, more important, the physical 
memory of their PCs. Tens of millions of people have used peer-to-peer 
systems, which account for more than half of all internet traffic. One reason 
why sharing is so commonplace is that there is enormous overcapacity in both 
computer memory and internet bandwidth (and because the songs themselves are 
“non-rivalrous”). Both memory and bandwidth are rivalrous, yet people have no 
choice but to buy more than they can usually consume themselves. And as with 
open source, sharing is made easy because the internet has made transaction 
costs so low.

Tune in and share

The phenomenon of sharing physical goods has important implications for a 
number of public policy debates today, most notably for regulation of the use 
of radio spectrum. Around the world, regulators have granted licences, giving 
mobile-phone companies the rights to use a specific band of the airwaves, 
often in exchange for billions of dollars. Spectrum is parcelled out in this 
way under the assumption that more than one signal on the same frequency 
results in interference. This has been true until recently, but today radios 
with cheap microprocessors can pick out competing signals intelligently, just 
as the human ear can make sense of a conversation in a noisy bar.

The result is that new technology has made the sharing of spectrum possible—
radio waves could be a non-rivalrous good—if only this were legally permitted 
and engineered into the software that runs the wireless devices. Regulators 
have changed their approaches slightly by allowing secondary markets in 
spectrum, but this anachronistically still presumes exclusive, not shared, 
use.

Mr Benkler does not limit his analysis to computing and bandwidth, but tries 
to make a broader point in favour of sharing goods far beyond information 
technology. “Social sharing”, he asserts, represents “a third mode of 
organising economic production, alongside markets and the state.” However, 
with the exception of carpooling, he acknowledges he is hard-pressed to find 
instances where sustained sharing of valuable things is prevalent in the 
world outside information technology. For most goods and services, sharing 
will remain the exception not the rule. But Mr Benkler has identified an 
intriguing alternative.

-- --- 
Willy Smith 
Ciudad Panamá 
Panamá 
America Central



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Web-Site: http://www.oekonux.de/
Organisation: projekt oekonux.de



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