The Wealth of Networks: How Social Production Transforms Markets and Freedom.

• Author: Strahilevitz, Lior Jacob
• Position: Book review

The Wealth of Networks: How Social Production Transforms Markets and Freedom. BY YOCHAI BENKLER NEW HAVEN: YALE UNIVERSITY PRESS, 2006. PP. 528. $40.00

INTRODUCTION I. ASSESSING THE WEALTH OF NETWORKS A. On the Shoulders of Aristotle: Explaining Excess Capacity B. On the Shoulders of Titmuss: A Theory of Social Production C. On the Shoulders of Coase: A Framework for Understanding the Choice of Production Regimes D. On the Shoulders of Rawls: Distributional and Political Consequences of Social Production II. THE HEALTH OF NETWORKS: DANGERS FACED BY SOCIAL PRODUCTION A. March of the Trolls B. Excess Capacity as Profit Opportunity C. If You Can't Beat Them, Appropriate Their Methods III. THE PROGRESSIVITY OF NETWORKS A. Reputation and Meritocracy B. Bill Gates Has Shoulders Too: Optimal Redistribution and Social Production CONCLUSION INTRODUCTION

In June 2006, Texas Governor Rick Perry announced a $5 million plan to install night-vision-equipped webcams along the state's border with Mexico and to launch a website that would allow virtual minutemen to monitor portions of the border from their homes and workplaces. People around the country could call a toll-free hotline to notify law enforcement personnel if they spotted suspected illegal immigrants on their computer screens. (1)

Around the same time, something subtly related happened. Internet blog posters began bemoaning a frightening new phenomenon on Skype, the increasingly successful Voice over Internet Protocol (VoIP) service that allows its users to make free long-distance calls to other Skype members across the globe. The phenomenon was telemarketing, and blog commenters began discussing the obvious solution to the problem: setting one's Skype preferences so that the user would receive calls only from a preapproved list of callers known to the Skype user. (2)

Both these stories emerged roughly contemporaneously with the appearance of Yochai Benkler's important and influential book, The Wealth of Networks: How Social Production Transforms Markets and Freedom. (3) That seems appropriate because the two stories offer the beginnings of a rebuttal to Benkler's eloquent opening argument about the ways in which nonmarket production is transforming our economic and political systems. Benkler tells us that "social production" will make us freer, richer, and happier unless our pesky lawmakers get in its way. But some of the events that accompanied the publication of his book, along with events that preceded it, suggest that law may be the least of social production's worries.

In this Review, I scrutinize Benkler's claims that social production is transforming our world. Along the way, I highlight the dangers that social production inevitably faces. Some of these dangers stem from legal rules and interventions, as Benkler anticipates. But basic economic forces and social trends pose far greater threats to the flourishing of communications-technology-driven social production. Finally, I challenge Benkler's most striking and ambitious claim: his conclusion that social production will lessen the gap between rich and poor.

Part I restates the core of Benkler's argument and examines its contributions to the fields of intellectual property and economic theory. In so doing, it critiques several of Benkler's central premises and perhaps a few peripheral ones.

Part II examines the primary threats facing social production in the coming years. The discussion focuses on three bases for skepticism about the transformational power of social production. First, social production efforts that seem quite promising when they attract sophisticated, self-selected users can seem less so when their user bases begin better reflecting the broader demographics of society. Second, when proprietary firms are competing with social producers, they can adopt competitive strategies that successfully target the excess capacity that enables social production. Third, proprietary firms have already shown the ability to appropriate the strategies of social producers, with firms like eBay, Linden Labs, and MySpace earning substantial profits off of the social production of their user bases.

Part III devotes sustained attention to the most audacious portion of Benkler's book: his claim that the growth of nonmarket production will diminish the gap between the haves and the have-nots. This Part suggests that social production writ large could plausibly increase the rich-poor gap, through the proliferation of socially produced reputation systems. Counter-intuitively, however, this development may be desirable because of its beneficial incentive effects and its potential to render society more meritocratic. Even if Benkler's assessment about social production's inherent progressivity is correct, one wonders whether he has identified the appropriate set of tools for tackling global inequality.

1. ASSESSING THE WEALTH OF NETWORKS

   The Wealth of Networks is an unusually ambitious book, an epic that lends structure to the economic and technological transformations the world has already experienced and that provides an imaginative but well-reasoned account of how these transformations will accelerate in the coming years. Benkler's methodology is particularly apt for someone who valorizes remix culture (4) and cumulative innovation. He stands on the shoulders of giants like Ronald Coase and Richard Titmuss, creatively adapting their insights to profoundly new circumstances. (5) In so doing, Benkler shows the reader a vast intellectual terrain that would not otherwise have been apparent. In this Part, I provide a brief description of that terrain, peppering that overview with praise or skepticism when pertinent.

   1. On the Shoulders of Aristotle: Explaining Excess Capacity

      Benkler has written a book about social production. It is therefore a little frustrating that he does not provide a clear definition of the term. The closest Benkler comes to a definition is his statement that social production encompasses all efforts to create content that are "not based on exclusive proprietary claims, not aimed toward sales in a market for either motivation or information, and not organized around property and contract claims to form firms or market exchanges." (6)

      Benkler argues, convincingly, that a large portion of the wealth that exists in society arises from these nonproprietary motivations. A lost tourist might pay me a dime or a dollar for clear directions to Soldier Field, but I provide the information free of charge. A wealthy benefactor anonymously donates millions to ovarian cancer research after having lost a loved one to that terrible disease. A drifter forgoes Greyhound, hitching a ride with a big rig headed for Kalamazoo. (7) Add up the economic value of these various services, performed daily around the world, and old-economy social production becomes quite significant in economic terms. As Benkler observes, excess capacity often drives social production. (8) I give clearer directions when I am not rushing to the airport; the wealthy philanthropist has more money than she can spend on herself; and the truck driver has extra space in his cab.

      While Benkler is right to zero in on the role of excess capacity in facilitating social production, (9) that relationship is one that Aristotle grasped. (10) After all, democracy itself is in many respects a socially produced resource relying on the leisure time of its citizens as an essential input. (11) Indeed, socially produced democratic texts, such as the U.S. Constitution, relied heavily on the contributions of the landed aristocracy, who had the luxury of ruminating about the ideal form of government because they could survive on the work and income of slaves, tenants, and spouses. (12)

      Of course, Benkler's focus is on the present day, not on the Greek or Founding eras, and today we see Aristotle's intuition about excess capacity playing out in many sectors. Users of peer-to-peer networks are more likely to upload files to anonymous strangers when they have bandwidth to spare. (13) Computer enthusiasts are happy to participate in SETI@home, which harnesses their excess computing power to aid in the search for extraterrestrial intelligence, because their computers spend hours a day idling and electricity is rather cheap. (14) And there exist, scattered around the world, Wikipedia contributors with extra time on their hands and an interest in contributing to a valuable public good. (15) There are, to be sure, important differences between the excess physical capital that drives peer-to-peer sharing and the excess human capital that drives Wikipedia--differences explored more fully below. (16)

   2. On the Shoulders of Titmuss: A Theory of Social Production

      If we understand social production to encompass all forms of production that do not rely on rights-based exclusion, then Benkler's framework identifies six types of social production. Three of these are driven by proprietary motives. These include the "Scholarly Lawyer" strategy, employed by people like Howard Bashman of the How Appealing blog, (17) who uses his terrific and free blog to generate clients and name recognition; the "Know-How" strategy, whereby firms develop and hoard in-house innovations that they use to create more competitive markets; and the "Learning Network," such as the A.P. wire service, which is a cooperative venture funded by a number of newspapers. (18) Although Benkler spends a lot of time discussing Scholarly Lawyers, his book largely ignores the Know-How and Learning Network models. This is appropriate. After all, the Know-How model usually relies on trade secret law, a rights-based exclusion system, to guard against misappropriation of innovations by ex-employees or third parties. And learning networks have long been subjected to scrutiny by legal scholars, particularly those who work in the antitrust area. (19)

      Benkler's other three categories are the most interesting. These are...