[Insight-developers] Open Source Economy : Yochai Benkler's paper : Coase's Penguin"

[Luis Ibanez]

The Author: Yochai Benkler

http://en.wikipedia.org/wiki/Yochai_Benkler

"Yochai Benkler is Jack N. and Lillian R. Berkman Professor for
Entrepreneurial Legal Studies at Harvard Law School and the author
of The Wealth of Networks[1] and the paper Coase's Penguin.[2]"


http://www.benkler.org/CoasesPenguin.html


"Coase's Penguin" (Paper)
http://www.yale.edu/yalelj/112/BenklerWEB.pdf


Abstract

For decades our understanding of economic production has been that
individuals order their productive activities in one of two ways: either
as employees in firms, following the directions of managers, or as
individuals in markets, following price signals. This dichotomy was
first identified in the early work of Nobel laureate Ronald Coase, and
was developed most explicitly in the work of neo-institutional economist
Oliver Williamson. In the past three or four years, public attention has
focused on a fifteen-year-old social-economic phenomenon in the software
development world. This phenomenon, called free software or open source
software, involves thousands or even tens of thousands of programmers
contributing to large and small scale project, where the central
organizing principle is that the software remains free of most
constraints on copying and use common to proprietary materials. No one
"owns" the software in the traditional sense of being able to command
how it is used or developed, or to control its disposition. The result
is the emergence of a vibrant, innovative and productive collaboration,
whose participants are not organized in firms and do not choose their
projects in response to price signals.

In this paper I explain that while free software is highly visible, it
is in fact only one example of a much broader social-economic
phenomenon. I suggest that we are seeing is the broad and deep emergence
of a new, third mode of production in the digitally networked
environment. I call this mode "commons-based peer-production," to
distinguish it from the property- and contract-based models of firms and
markets. Its central characteristic is that groups of individuals
successfully collaborate on large-scale projects following a diverse
cluster of motivational drives and social signals, rather than either
market prices or managerial commands.

The paper also explains why this mode has systematic advantages over
markets and managerial hierarchies when the object of production is
information or culture, and where the capital investment necessary for
production-computers and communications capabilities-is widely
distributed instead of concentrated. In particular, this mode of
production is better than firms and markets for two reasons. First, it
is better at identifying and assigning human capital to information and
cultural production processes. In this regard, peer-production has an
advantage in what I call "information opportunity cost." That is, it
loses less information about who the best person for a given job might
be than do either of the other two organizational modes. Second, there
are substantial increasing returns to allow very larger clusters of
potential contributors to interact with very large clusters of
information resources in search of new projects and collaboration
enterprises. Removing property and contract as the organizing principles
of collaboration substantially reduces transaction costs involved in
allowing these large clusters of potential contributors to review and
select which resources to work on, for which projects, and with which
collaborators. This results in allocation gains, that increase more than
proportionately with the increase in the number of individuals and
resources that are part of the system. The article concludes with an
overview of how these models use a variety of technological and social
strategies to overcome the collective action problems usually solved in
managerial and market-based systems by property and contract.


Full Paper at:
http://www.yale.edu/yalelj/112/BenklerWEB.pdf