Economics of Social Production

The Economics of Social Production Benkler, Chapter 4 Presentation by Mindy McAdams

Productive Behavior Is Changing
Why do people participate in nonmarket production?
“ Why now, why here?”
Is all this sharing efficient ?

What Motivates People to Produce?
Titmuss-Arrow debates (blood banks)
Extrinsic reasons vs. intrinsic
Social reputation or face
Loyalty or friendship

Review: Inputs Needed
… for production of information goods today
Human factors: Time , creativity, wisdom, knowledge, culture
Computers (for production)
Networks (for distribution)

Modularity and Granularity
Tasks ( parts of a project) can be broken down into modules
The size (length of time needed) can be more or less “fine grained”
Granularity is a measure of module size

Amazon’s “Mechanical Turk”

Modularity and Granularity (2)
The Web makes modular tasks easy to distribute
Also easy to share the outcomes (products) of a difficult task with millions of other people
E.g., “The Memory Hole” -- information retrieved from the U.S. government via FOIA requests

“The Memory Hole” site

Transaction Costs and Efficiency
Scarce resource No. 1: Human creativity, time, and attention (rival)
Scarce resource No. 2: Computer and communication resources (rival)
Public good: Information, knowledge, culture (nonrival)

Transaction Frameworks
Markets (buy it on the open market)
Firms (get it from within a cartel or group or corporation, to which I belong)
Social networks (get it for free from my neighbor) – remember the intrinsic motivations!

Nonmarket Real Estate?

Structures of Transactions
Characteristics:
Market transaction must be “crisply” delineated
Social exchanges are not “crisp” at all
Social systems are not cost-free
Pricing of human time and talent varies widely across professions and locations

Efficiency of Social Sharing
Identify the best person for the job
May be substantially less expensive
Tap into people’s social/psychological motivations
Provide a sustainable alternative to ( not a replacement for) market transaction systems
Utilize (not waste) human creative capacity

When Is It Not Effective?
When the means of production required are expensive, or hard to get access to (e.g., large machinery)
When the raw materials are expensive, or hard to get access to (e.g., steel)
When technology or systems do not permit sharing
When people have no time to spare

Social Production & Market-based Businesses
Social production makes use of time and energy that would usually be wasted in a purely market system
The effect on market activities is not neutral, however

Social Production & Market-based Businesses (2)
Social production poses real threats toward (some) market-based activities and enterprises
Understand these threats -- and we will understand why certain policies and laws are pushed forward (and who would benefit?)
Contracts vs. “cloud” (role of predictions)

Social production changes the system. The more it changes the system, the more important it becomes to the system .

User Innovation Networks
Can function entirely independently of manufacturers when:
At least some users have sufficient incentive to innovate
At least some users have an incentive to voluntarily reveal their innovations, and
Diffusion of innovations by users is low cost and can compete with commercial production and distribution
-- Eric von Hippel (2002)

User Innovation Networks
If the first two conditions hold but the third (low-cost distribution) does not:
A pattern of user innovation and trial and improvement will occur within user networks, followed by --
Commercial manufacture and distribution of innovations that prove to be of general interest
-- Eric von Hippel (2002)

The End Benkler, Chapter 4 Presentation by Mindy McAdams

Economics of Social Production

by Mindy McAdams on Dec 14, 2006

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