DoctorMo's Blog

Bruno Girin today wrote a very comprehensive comment about my previous blog post about Free Culture.

I thought it was good enough to post as a full post and also add my own reply at the bottom:

It’s all down to the concept of scarcity, which is the corner stone of market economy. Market economy works something like this: when a resource is scarce somewhere, you will look for a provider than has a surplus of that resource and is ready to exchange it against something you have that he wants. For example, Argh went hunting and has a lot of meat but no fruit. Urgh went collecting fruit and has a lot of fruit but no meat. Argh and Urgh agree to exchange meat against fruit to address their respective scarcity problems.

Money is the same, it’s just a resource that’s easier to carry and exchange than a wheelbarrow of strawberries. But it only works because of its scarcity. If everybody became a millionaire overnight, money would lose its value. And here lies the rub in buying over the net. You can’t buy with virtual money because it can potentially be duplicated so you have to come up with payment mechanisms that can link a virtual buyer and a virtual seller to a real buyer and seller that have real money and goods. The infrastructure to do this is far from simple and doesn’t cross borders easily. It is also hampered by the fact that on the net you are anonymous. Interestingly enough, payment is lot easier on a mobile phone because your phone is linked to a SIM card, that has a number, that is administered by a network operator that allocates it to a real person that is billed every month or has pre-paid for usage of the mobile. So payments engines have a way to link the purchase to a real person and therefore real money: bill the network operator and the operator will forward the bill to the buyer. You can’t do that on the net because you don’t have this chain so you have to devise ways to re-construct the chain for every single payment.

The other aspect about the net and computing that scuppers all economic models is the fact that it has completely changed the concept of scarcity. In the real world, duplicating an object takes time and effort, whether it’d be a pencil or an aircraft carrier. This gives you automatic scarcity and you can attach a price to it. In the virtual world, constructing an initial prototype (whether it be a computer program, a song, a book, a 3D aircraft carrier) is time consuming but duplicating it is easy and virtually free. So there is no scarcity on the objects anymore, there is scarcity on the skills required to build the original prototype. So if you follow standard economic principles, once a digital object is built, its price falls to 0 because it costs nothing to duplicate and there is no natural scarcity; the only possible scarcity is artificial and enforced through things like licenses, DRM, etc.

So free culture isn’t killing our culture or economy, it’s just applying the scarcity principle in market economy to digital goods. The problem is that all standard economic models are based around physical goods where there is a cost associated with duplicating them and don’t work anymore in a situation where duplication is free. In particular, the real world depends a lot on middle-men who can source a particular scarce resource, whether it be grocery retailers or music shops. They add real value to the supply chain in the real world but that value drops significantly with digital goods. So they basically find that they are out of a job in the digital world and aren’t too happy about it, which is probably where this accusation that free culture destroys our culture and economy stems from.

I can tell you what is scarce: people’s time. If someone can work out an economic model where people are paid for the work they perform and not for the copying of that work. We’d probably have a better argument for all kinds of Free Culture including Free Software.