The Economics of Sharing

Technology increases the ability of people to share, but will they share more than just technology?

By now, most people who use computers have heard of the “open source” movement, even if they are not sure what it is. It is a way of making software (and increasingly, other things as well), which relies on the individual contributions of thousands of programmers. The resulting programs are owned by no one and are free for all to use. The software is copyrighted only to ensure it remains free to use and enhance. In essence, therefore, open source involves two things: putting spare capacity (geeks’ surplus time and skill) into economic production; and sharing.

Economists have not always found it easy to explain why self-interested people would freely share scarce, privately owned resources. Their understanding, though, is much clearer than it was 20 or 30 years ago: cooperation, especially when repeated, can breed reciprocity and trust, to the benefit of all. In the context of open source, much has been written about why people would share technical talent, giving away something that they also sell by holding a job in the information-technology industry. The reason often seems to be that writing open-source software increases the authors’ prestige among their peers or gains them experience that might help them in the job market, not to mention that they also find it fun.

The characteristics of information — be it software, text or even biotech research — make it an economically obvious thing to share. It is a “non-rival” good: i.e., your use of it does not interfere with my use. Better still, there are network effects: i.e., the more people who use it, the more useful it is to any individual user. Best of all, the existence of the Internet means that the costs of sharing are remarkably low. The cost of distribution is negligible, and coordination is easy because people can easily find others with similar goals and can contribute when convenient.

The question is, can sharing be used to supply more than just information? One of the most articulate proponents of the open-source approach, Yochai Benkler of Yale Law School, argues in a recent paper that sharing is emerging for certain physical, rivalrous goods and will probably increase due to advances in technology. (“Sharing Nicely: On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production.” Yale Law Journal, November 2004.) Where open source was about sharing information by way of the internet, what is happening now, Benkler notes, is the sharing of the tangible tools of technology themselves, like computing power and bandwidth. This is because they are widely distributed among individuals, and sold in such a way that there is inherent (and abundant) unused capacity.

Consider computing power. By some measures, the world’s most powerful supercomputer is not owned by NEC or IBM, but is a volunteer project called SETI@home that aggregates the spare processing power of around 4 million computers. When an individual’s PC is idle, a screen-saver application that users have downloaded kicks in and harnesses the computer’s processor to decode radio signals in search of extra-terrestrial life. A basic PC chip is a rivalrous good, but it provides far more power than most computer owners ever use. So putting this spare capacity to use through sharing makes more sense, if this is as easy to do as it is with SETI@home, than letting it go to waste. Why do people not sell the capacity instead? Probably, this would raise the transaction costs to the point where it would not be worthwhile.

Discuss

Your email address will not be published. Required fields are marked *