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

• Author: Baca, Megan Ristau

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

BY YOCHAI BENKLER

NEW HAVEN, CT: YALE UNIVERSITY PRESS, 2006

PP. 515. $40.00 (HARDCOVER). ISBN: 0-300-11056-1

TABLE OF CONTENTS I. INTRODUCTION II. THE EMERGING NETWORKED INFORMATION ECONOMY A. What Is the Networked Information Economy? 1. Diversity of Production Incentives 2. Technological Shifts B. Commons-Based Production and Peer Production C. Responses III. THE EFFECT ON THE POLITICAL ECONOMY A. Individual Freedom B. Political Freedom 1. Criticisms of the Mass Media 2. The Internet as a Counterforce to Mass Media 3. Can the Internet Really Democratize? C. Cultural Freedom D. Justice and Development IV. CONCLUSION I. INTRODUCTION

In Professor Yochai Benkler's book, The Wealth of Networks, (1) he argues that we are in the midst of a paradigm shift of tremendous significance as we enter a new economic era in which production takes place through distributed networks. Because of computers and the Internet, this networked mode of production can provide informational goods and services with increased efficiency, but without the financial constraints of traditional industrial production.

The Wealth of Networks is divided into three parts. Part One describes the characteristics and ramifications of the emerging networked information economy and argues that our current trajectory leads to its increased impact on society. Part Two focuses on the social, political, cultural, and global benefits to be reaped from the nonmarket and nonproprietary alternatives to industrial production. Together, Parts One and Two describe the networked information economy and suggest that its implications will be largely positive. Part Three discusses the continuing legal and political battles over the evolution of the networked information economy, largely in concert with other legal academic thinking. (2) This Note will focus on the first two parts, which contain Benkler's most novel and compelling argument.

2. THE EMERGING NETWORKED INFORMATION ECONOMY

   In Part One of The Wealth of Networks, Benkler argues that the industrial information economy of the last half of the nineteenth century and all of the twentieth century is giving way to a new mode of production of goods and services: the networked information economy. Information, knowledge, and culture--which Benkler argues are "central to human freedom and human development" (3)--were once produced by centralized, industrial firms. The emerging networked information economy, in contrast, features decentralized production of information, knowledge, and culture, which occurs through what Benkler terms "commons-based" production and "peer production," and through other nonmarket, nonproprietary mechanisms.

   1. What Is the Networked Information Economy?

      Today's information economy is gradually replacing the industrial economy which revolved around physical goods and services. In the information economy, information, knowledge, and culture are themselves products and services that are produced, distributed, and consumed.

      The information economy of the past 150 years produced information, knowledge, and culture through traditional industrial channels, and was "tightly linked throughout the twentieth century with controlling the processes of the industrial economy." (4) For example, radio, television, newsprint, and entertainment--all examples of information and culture - were mass-produced by large corporations and distributed through centralized channels. Benkler calls this "the industrial stage of the information economy," or simply, "the industrial information economy." (5)

      Benkler uses the newspaper industry to illustrate the characteristics of industrial information production. First, there is a stark divide between producers and consumers. Those who write and produce the news control what is published and read. Second, information flows from central, commercial producers to passive, receptive audiences. Very little information content, if any, flows from the audience back to the producers. Third, the initial startup costs for production are high, but the subsequent marginal cost of production and distribution is minimal. Newspaper companies, for instance, are costly to build from scratch, but the cost of printing each additional newspaper is low. These three characteristics--the consumer-producer divide, one-way information flow, and high start-up costs--are common among virtually all models of industrial information production. The mass-media model, in particular, was increasingly successful and "easily adopted and amplified by radio, television, and later cable and satellite communications." (6)

      Despite the pervasive success of the industrial mode of information production, economic and technological developments are destabilizing the industrial information economy and ushering in a new era of information production. This networked information economy inverts the characteristics of industrial information production: consumers are producers, information flows multi-directionally, and production start-up costs are minimal. Benkler highlights two developments most responsible for the destabilization. First, he argues that because the basic outputs of the economy have become information, people have more diverse motivations to produce these outputs than in an industrial world. Second, technology has yielded the growth of "a communications environment built on cheap processors with high computation capabilities" (7)--that is, the Internet. Benkler argues that this growth in technology has caused the basic physical capital inputs to production to become concentrated in the personal computer. (8)

      1. Diversity of Production Incentives

         The first force destabilizing the industrial information economy is the diversity of incentives for information production. Diverging from the most traditional theories of production incentives, Benkler argues that innovation and information production are driven only in small part by traditional intellectual property motivations. Intellectual property rights are rooted in the belief that the market will not produce sufficient informational goods without a guarantee of exclusivity. The non-rival nature of information and cultural goods erodes the incentive to produce such goods. (9) Writers, musicians, scientists, and other producers of information and culture presumably will not continue to create if they cannot reap rewards from their efforts. To compensate, the Constitution authorizes Congress to provide an incentive to foster creation. (10) In exchange for creation, Congress grants temporary rights of exclusivity over the informational goods. (11) In contrast, Benkler sees innovation and information production arising from a wide array of motivations, many of which do not rely on the exclusivity granted by the traditional intellectual property regime. Under Benkler's theory, many informational goods would still be produced even without a grant of exclusive rights.

         To illustrate the wide array of possible motivations, Benkler constructs a three-by-three grid showing nine permutations of production strategies with different inputs and outputs. (12) The grid structure is shown in simplified form in Table 1. Along the vertical axis are three options for information exclusivity. Benkler calls this gradation range "benefit acquisition," representing the various ways creators may reap rewards from their work. "Rights-based exclusion" entails leveraging traditional intellectual property protections such as patent or copyright to make money. "Market-based non-exclusion" entails selling informational goods under traditional conceptions of property, but not by exercising exclusive intellectual property rights. "Nonexclusion-nonmarket" involves releasing information freely, without a market transaction. (13) Along the horizontal axis are three possible sources of information inputs: "materials from the public domain," "materials the producer itself owns," or materials acquired "by sharing/bartering for information inputs owned by others in exchange for one's own information inputs." (14)

         Essentially, Benkler's chart shows that information producers are diversely motivated. Only three of the nine strategies, Boxes 1 through 3 on the chart, rely on traditional intellectual property rights for production...