Issues of scale in industrial vs. peer production

* Centralized hierarchies should not be too rudely rejected, but should be seen as effective methods of production during specific periods when connectivity is low. Only as technology makes cooperation among large numbers of people possible does decentralization become a feasible alternative.

* Because closed groups have to support their developers and open groups do not, open groups can diffuse to very large numbers. As a result, the closed groups cannot leverage the value of large-scale cooperation in the way that open groups can.

Interesting contribution by Paul Hartzog:


“Mancur Olson gave us our traditional understanding of the problem of collective action:

that only small groups can take advantage of the social mechanisms necessary for successful collective production.

Yet the open-source software community has performed de facto what should not be possible de jure. This success suggests that some new factor has recently emerged to enable large-scale decentralized cooperation, overcoming obstacles to collective action and cooperation. That factor is arguably connective technology — but how, specifically, does it hand an advantage to open groups?

One answer to this question is that it changes the size of the labor pool — and the ability to dominate the market is directly related to the proportion of the labor pool a group or institution can capture. As the size of the labor pool goes up, the share of the labor pool within any closed institution goes down. And when the share inside the walls of the closed institution reaches a critical threshold, it can no longer compete with open processes. But how does connective technology change the size of the labor pool?


In an information economy, where the competitive value of products derives from information and ideas, the logic of producers versus consumers is replaced by the logic of users, who function as both. As Yochai Benkler explains, technology “now makes possible the attainment of decentralization and democratization by enabling small groups of constituents and individuals to become users—participants in the production of their information environment.” Thus, as the market for information-based products grows, so does the labor pool.

At the same time, connective technologies support the aggregation of self-interested groups of users who can take advantage of their small scale to meet their local needs more effectively than the larger institutions that are bound to focus on a few needs of the broadest markets. Thus the open process enjoys the advantages of both large and small scale.


If open processes represent the institutional future of humanity, what will be the key levers for fine-tuning these new organizational forms?

Certainly, many tools and practices of cooperation will be key. But perhaps these future forms will be defined, as much as anything, by a refined strategy of indirect reciprocity — the willingness to give to someone who may then give to someone else. Martin Nowak and Karl Sigmund suggest that the evolution of cooperation by indirect reciprocity leads to reputation building, morality judgment, and complex social interactions with ever-increasing cognitive demands. These may well be the critical domains of future organizational theory.”

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