The commons and the market: the debate

Four interesting contributions on their inter-relationships:

* Alain Lipietz:

“We have just seen that the rules of access, and the share of benefits and burdens that come with managing a common resource, may represent a “stack” of various community interests. The conflicts that may arise in allocating the respective benefits and burdens, will likely become more and more important in the 21st century. One way to describe this division of responsibilities is as revenue sharing, a way of articulating the management of the commons as a set of monetary relationships, and thus, implicitly, with trade relationships. But things are more complex.

First, monetary relationships are not necessarily the same as merchant exchange. A fine imposed for improper parking in a common urban space is not a business relationship! Nor is the “dot” on a son or daughter’s forehead, as a matrimonial promise, a sale of a child or the buying of a husband or wife. (Yes, Jacob had to work a long time for Laban before he could marry his daughter Rachel, but this work reflects patriarchal relationships in that society, not merchant relationships.)

Reciprocity has a word for a monetary grant which rewards a duty ( munus ), which is expressed in the word re- mun -eration. Such payment is not a wage or a price, even if it looks like it.

Take, for example, the most directly political and bureaucratic management of the commons — the allocation of emissions quotas for greenhouse gas emissions, as part of our attempt to manage the atmosphere and its ability to recycle the greenhouse gases. In the EU, governments allocate these quotas to various industries. It can be done for free or quotas can be bought at auction, or at a flat rate that amounts to “eco-taxes.” Then quotas can be traded, and those who made a particular effort to reduce their pollution, may sell any excess emissions quotas to those who have not made that effort. Would we say that giving quotas based on actual, historic pollution levels — often known as the “grandfathering” of quotas — is more “community oriented” than the auctioning of quotas, which seems to commodify the atmosphere? On the contrary, the Green Members of the European Parliament consider the “grandfathering” of the pollution quotas as a true enclosure of commons. They fight against the right-wing ideologues and production-obsessed governments for an increasing proportion of quotas to be auctioned. In this case, the purchase of quotas should be regarded as a fine for pollution, and the resale of quotas by those who have reduced their emissions, must be regarded as remuneration.”

* Brett Frischmann: When to choose the Commons option, as compared to markets?

Brett Frischmann, a professor at Loyola University Chicago School of Law has published an essay, “An Economic Theory of Infrastructure and Commons Management,” (89 Minnesota Law Review 4, April 2005). “a rigorous, clear-headed explanation of the economic and social benefits of commons-based infrastructures:

“The basic problem with relying on markets to allocate access to common assets, Frischmann explains, is that the market mechanism exhibits a bias for outputs that generate observable and appropriable returns at the expense of outputs that generate positive externalities [public benefits that cannot be captured by market players]. This is not surprising because the whole point of relying on property rights and the market is to enable private appropriation and discourage externalities. The problem with relying on the market is that potential positive externalities may remain unrealized if they cannot be easily valued and appropriated by those that produce them, even though society as a whole may be better off if those potential externalities were actually produced. “Positive externalities” are precisely those “goods” that benefit all of us, as commoners – clean air, access to information, an open Internet, functioning ecosystems. Yet neoclassical economics and the laws based on it generally discount or ignore these types of value; they assume that monetized forms of individual property are the only important types of value worth maximizing. By looking at “infrastructure” through the lens of the commons, however, we can begin to appreciate the positive, non-market externalities that a resource actually generates – and begin to design public policies to protect these benefits on their own merits.”

* Yochai Benkler: Optimal usage of sharing principles vs. market economies

“The paper offers a framework to explain large scale effective practices of sharing private, excludable goods. It starts with case studies of distributed computing and carpooling as motivating problems. It then suggests a definition for “shareable goods” as goods that are lumpy and mid-grained in size, and explains why goods with these characteristics will have systematic overcapacity relative to the requirements of their owners. The paper then uses comparative transaction costs analysis, focused on information characteristics in particular, combined with an analysis of diversity of motivations, to suggest when social sharing will be better than secondary markets to reallocate this overcapacity to non-owners who require the functionality. The paper concludes with broader observations about the role of sharing as a modality of economic production as compared to markets and hierarchies (whether states or firms), with a particular emphasis on sharing practices among individuals who are strangers or weakly related, its relationship to technological change, and some implications for contemporary policy choices regarding wireless regulation, intellectual property, and communications network design.”

* Marc Fawzi: Is a digital commons sustainable without corporate support?

“In any “sharing” system, if the amount of demand exceeds supply, i.e. if there are more leechers than seeders or if certain leechers hog resources, the system will eventually run aground.

That is why BitTorrent sharing sites enforce what is called a “sharing ratio” so that people seed content as much as they leech content off others. A ratio of 1 is good but a ratio of 1.5 (more giving than taking) is even better. However, these systems come with punishment threats, so if a user doesn’t uphold the share ratio they get “kicked out” of the community. Not a good way to run an economy. The share ratio here is besides the share ratio forced by BitTorrent itself. It relates to sustaining the content rather than the bandwidth, which is dealt with directly by forced sharing in BitTorrent itself. When it comes to sharing content, however, BitTorrent cannot force it so the community admins end up having to force it algorithmically (if they run their own tracker, which most do) by monitoring the size in Gb of content being seeded and leeched by each user and setting a “kick out” threshold of 1.00, below which the user’s account automatically gets disabled or the user gets a warning etc. This is governance by threat of punishment, which is not a good way to run anything.

When it comes to so-called free software, projects that have mass appeal also have mass funding not only from the individual users but from corporations who often employ the project leaders and let them dedicate a large portion of their time to the project AND/OR provide direct financial support to the project. This includes Firefox (backed heavily by Google in several ways), GNU (backed by many big pocket donors… many highly paid people at FSF) , Linux kernel and all massively adopted software. This is necessary because the demand on projects like Firefox, GNU and Linux kernel exceeds the abilities of any user base to support with because when you have millions or hundreds of millions of users and only a tiny fraction of them contribute financially and you need a good deal of organization and a good deal of funding to stay afloat as a project there is no way but to accept donations and support from large corporations. So when Google funds Firefox and major corporations fund GNU and Linux kernel with millions of dollars as well as other incentives (like hiring the project leaders and letting them work on those free projects) then how is that a generalized exchange? Google got direct benefit from supporting Firefox by being the default search engine and by having an alternative browser to compete against IE and by giving them time to get their browser strategy together and learn in the process. IBM reaps huge amount of benefit from basing so much of their solutions on Linux (very few companies would opt to use IBM AIX *nix OS on a commodity Intel platform) so the corporations are basically supporting these projects for direct reciprocal benefit to themselves. If those donors were to stop funding those free large-scale projects the projects would collapse under the demands of a huge user base in the hundreds of millions. Same thing with Wikipedia, huge amount of Wikipedia funding comes from IBM and other big corporations, and the $6M they raise from the users is a drop in the bucket compared to the infrastructure they get for free from big corporate donors like IBM.

So the key question I have is can the commons model be sustainable when you have major corporations funding the projects, without which the projects would collapse? As far as what’s been reported, only a tiny percentage of Wikipedia users, or users of free software in general, donate and the bulk of assistance comes from the major corporations. What if IBM goes bankrupt? What if Google disappears? Who will replace their donations? The users certainly won’t suddenly start contributing 10X more than they do now. So how can the commons in this case be sustainable?

The answer I’m leaning toward is that the commons have proven sustainable in the context of the long tail model where there are a huge number of very small/niche projects that have relatively small user bases. In this case, the number of users per each such small project is sustainable by part-time developers.

But once a project goes from 100 users to 10 million users there is no way based on evidence from all such projects that mushroomed into popularity that the user base will fund them sufficiently. There is always a need to charge users, raise VC funds, or get major corporate donors.

So as far as placing the commons in the context of sustainability I see the need to consider the size of the user base. For small user base, the commons works. For very large user base, the commons becomes dependent on a few major donors (corporations) and that is not exactly sustainable …”

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