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

• Author: Klein, Peter G.
• Position: Book review

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

By Yochai Benkler

New Haven, Conn.: Yale University Press, 2006.

Pp. xii, 515. $45.00 cloth.

Yochai Benkler's The Wealth of Networks is a comprehensive, informative, and challenging meditation on the rise of the "networked information economy" and its implications for society, politics, and culture. Benkler, the Lillian R. Berkman Professor of Entrepreneurial Studies at the Harvard Law School, is a leading authority on the law, economics, and politics of networks, innovation, intellectual property, and the Internet, and he puts his wide knowledge and deep understanding to good use. He argues that the digital revolution is more revolutionary than has been recognized, even by its most passionate defenders. The new information and communications technologies do not simply make the old ways of doing things more efficient, but also support fundamentally new ways of doing things. In particular, the past few years have seen the rise of social production, a radically decentralized, distributed mode of interaction that Benkler calls "commons-based peer production."

Peer production involves the creation and dissemination of "user-generated content," including the online Wikipedia encyclopedia and open-source software, such as Linux, that allow users to generate their own entries and modify those created by others. Commons-based peer production is characterized by weak property rights, an emphasis on intrinsic rather than extrinsic (monetary) rewards, and the exploitation of dispersed, tacit knowledge. (Some readers will immediately think of F. A. Hayek's concept of the market as generator and transmitter of knowledge, though Hayek does not figure prominently in the book.)

The Wealth of Networks is divided into three main parts. The first deals with the economics of the networked information economy. This is well-trod ground, having been explored in detail in Carl Shapiro and Hal R. Varian's Information Rules: A Strategic Guide to the Network Economy (Boston: Harvard Business School Press, 1998), Start J. Liebowitz and Stephen E. Margolis's Winners, Losers, and Microsoft: Competition and Antitrust in High Technology (Oakland, Calif.: Independent Institute, 1999), and other works, but Benkler's treatment is nevertheless insightful, intelligent, and engaging. The characteristics of information as an economic good--high fixed costs and low marginal costs; the ability to be consumed without exhaustion; the difficulty of excluding "free-riders'--support the widespread use of...