Economics

Why Spectrum Is Not Property: The Case for an Entirely New Regime of Wireless Communications Policy

One Sentence Summary:
"What we now know about the physics and architecture of RF communications contradicts the 'property' model of spectrum and this paper serves as a call to action to re-architect spectrum using a commons-based model."
Disciplines:
Business
Law
Technology
Economics
Findings:
  • While it is possible to create wireless communication networks in which available capacity grows with the number of users, currently regimes equate spectrum to property and use a property rights based regime to allocate and coordinate usage among multiple technology areas. The result is fixed capacity for each technology area.
  • Introducing cooperation in capacity regimes for wireless networks results in models in which capacity increases as users are added.
  • Models have been proposed in which capacity grows as the square root of the number of users.
  • The author suggests that there are good technical reasons to believe that cooperative networks can be created in which capacity scales proportionally with the number of users.
  • The available options within a particular cooperative wireless network would grow according to Metcalfe's (N^2 for pairwise transactions) and Reed's (2^N for options in forming groups) Laws.
  • The current Internet regime for wired communication was formed from 25 years of innovation in an open and experimental environment and differs significantly from the previous wired communications regime that grew under the control of the telecommunications provider.
  • The author calls for the development of an RF network regime using an open and experimental regime as a starting point to encourage cooperation and innovation in much the same way that the early Internet provided a starting point from which the current Internet was evolved.
  • The article does not discuss whether and how cooperative networks provide for the guaranteed coordinated access to capacity.
Keywords:
communication
technology
Author(s) / Editor(s):
Published in:
Internet
Date:
February 7, 2001
One Paragraph Summary:

The current regime for allocating and coordinating the use of spectrum across multiple technology areas uses a property based scheme to subdivide and fix the capacity available to each technology area. Cooperative regimes have been proposed which have the advantage of increasing available capacity as the number of users in a wireless communications network increases. In addition, the available possible pairing and grouping options of a cooperative network would grow according to Metcalfe's and Reed's Law respectively. The author concludes that spectrum does not behave like ordinary property and requires a regime that is commons based. Since no obvious regime exists, the author calls for the development of such a regime by starting with �a regime that allows wireless networks to interoperate and communicate in the use of “spectrum” in an open and experimental way, just as the Internet did —for wired digital communications.

One Page Summary:

Currently, spectrum in wireless networks is allocated using a property based scheme. This solves the problem of interference by providing coordinated access to capacity for users of multiple technologies at the cost of fixing the available capacity for each technology area. Recently, architectures have been proposed that use a cooperative strategy for capacity allocation. These have the advantage of increasing available capacity with the number of users. The author believes that cooperative wireless networks could be created that provide capacity that scales proportional to the number of users. In addition, a cooperative wireless network would have increased options with respect to Metcalfe's Law, the number of pairwise transactions that could occur would grow as N**2, and Reed's Law, the number of groups that could be formed would grow as 2**N.

The author argues that the scaling of capacity available in wireless networks indicates that spectrum does not behave like ordinary property and requires a different commons based allocation and coordination regime one that encourages cooperation among users in order to increase available capacity. No obvious regime exists today. However, the current Internet regime for wired communication was formed from 25 years of innovation in an open and experimental environment. The resulting regime differs significantly from the previous regime that grew under the control of the telecommunications provider. The author calls for the development of a cooperative wireless network regime by starting with an open and experimental regime that encourages cooperation much the same as the starting point for the current Internet regime for wired digital communications.

Why Is Reciprocity So Rare in Social Animals? A Protestant Appeal

One Sentence Summary:
Game theoretic explanations of the evolution of cooperation in humans and other animals relies on assumptions -- rational players should never cooperate, cooperative behavior is explained by direct or diffuse reciprocity, animals can do the mental bookkeeping necessary to reciprocate with multiple partners over time -- that are not always or often borne out by data, necessitating new conceptual tools.
Disciplines:
Biology
Cultural Evolution
Economics
Findings:
  • Partner markets, emotions, learning, reputation all strongly influence cooperation in social animals including humans, but are ignored by conventional game theory models of reciprocal altruism, indicating a need for new conceptual tools in evolutionary game theory.
  • Evolution does not design new mental tools for each problem, but modifies existing mechanisms.
Keywords:
tit-for-tat
reputation
reciprocity
prisoners dilemma
evolution
cultural evolution
cooperation
altruism
Author(s) / Editor(s):
Published in:
Genetic and Cultural Evolution of Cooperation, Peter Hammerstein, Ed., MIT Press in Cooperation with Dahlem University Press
Date:
2003
One Paragraph Summary:

Game theoretic explanations of cooperation involving tit-for-tat strategies and reciprocal altruism are not supported by a large body of evidence. Only a small number of animal examples have been found. Simple models of repeated games do not match the circumstances of evolutionary change. Partner switching and mobility counter the assumptions necessary for reciprocal altruism as a stable evolutionary mechanism. Reciprocity requires significant mental machinery – how do organisms determine whether the actions of others are intentionally or unintentionally cooperative or uncooperative? Alternative conceptual schemas such as partner markets – making it unprofitable for partners to switch – offer alternative conceptual schemas. Emotions may play a role in mediating complex interactions in which intentionality and reputation play a part.

When Push comes To Pull: The New Economy and Culture of Networking Technology

One Sentence Summary:
Information and communication technology innovation have begun to transform commercial business and social institutions from a "push" technology approach (hierarchical "center out"), to a "pull" technology approach (networked -based and decentralized). This poses new challenges to social, political, and educational systems that are largely designed to support "push" economies.
Disciplines:
Business
Law
History
Cultural Evolution
Technology
Economics
Political Science
Sociology
Findings:
  • We are living in an epochal period of transition bridging two very different types of economies and cultures. We are transitioning from a "push" economy: that tries to anticipate consumer demand, and then creates a standardized product, and "pushes the product into the market and culture, using standardized distribution channels and marketing. We are transitioning to a "pull" economy: open and flexible production platforms that use network technologies to coordinate many different entities from disparate regions.. "Pull" economies produce customized products and services that serve localized needs (demand-driven), usually in a rapid manner.
  • "Pull" networks tend to build the capabilities of their networked partners, by providing performance feedback and sharing best practices among the network participants. "Pull" platforms therefore tend to better employ the enthusiasm of all of the participants.
  • The "pull" phenomenon is not confined to business/online commerce. The spread of common use of internet technologies is finding "pull" techniques being applied in entertainment, social life, politics, education, and government.
  • "Pull" models are going to change the way that governments create policy as more companies gravitate toward them.
Keywords:
capitalism
communication
complexity
cooperation
cultural evolution
group forming networks
hierarchy
intellectual property
interdependence
networks
norms
open source
property rights
reciprocity
reputation
social capital
trust
Author(s) / Editor(s):
Published in:
The Aspen Institute
Date:
2006
One Paragraph Summary:

Over the past 25+ years, change that has usually originated with technological innovation has led to new products, services, and human behavior patterns. These changes are reflected in business and industry, and the way that people entertain, govern, educate, and socialize among themselves. The change is from a centralized, command and control, bureaucratic, broadcast way of organizing, that tries to anticipate and create demand, to a decentralized and highly networked system that shares information about overall network performance and best practices among it's network, and meets local and specialized needs.

One Page Summary:

This paper is a summary of an Aspen Institute sponsored in-depth roundtable session, written from the perspective of one informed conference observer (Bollier). The participants are leading thinkers in the many complex areas this paper covers (economics, systems theory, human behavior, human futures, information technology evolution, etc) and are listed on page 57. A selection of their key insights shared in the paper are listed below:

A "push" economy is geared towards mass production, anticipating consumer demand, and routing resources to the right place at the right time, to create standardized and mass produced products. By contrast, a "pull" economy is based on open, flexible production platforms that are used to orchestrate a broad range of resources. Instead of producing standardized products, "pull" model companies are demand-driven, and assemble products in customized ways that serve specialized or local needs, usually using "rapid" or "on the fly" processes.

Several global corporations are moving towards "pull" methods, and away from "push" models; ie., Toyota, Dell, Cisco, Li & Fung. These companies employ different variations of Value Network models, that share information about overall network performance and best practices for serving specialized needs, among hundreds or even thousands of partner companies that make up the network. This creates an intra-network knowledge commons. Some companies also work closely with Open Source Software projects, thereby expanding their "pull" network, and expanding their knowledge commons into a broader Open Commons via Open Source Software project contributions. Thus, "pull" business models also tend to be Network Value-Increasing, and Commons-based business models as well.

"Pull" models can also be platforms for creating "increasing returns dynamics." This is due to "pull" models being based around loose and flexible networks that are already configured to scale as growth occurs. So, growth does not incur the huge overhead costs in administration that "push" models must contend with. Pull platform key characteristics include modular and loosely-coupled networks, open channels that better harness the passion and commitment of innovation communities. "Pull" platforms also will tend to influence public policy with regards to education and innovation, as more companies tend to gravitate towards the "pull" models.

The areas where "push" models tend to succeed in business are in areas where people do not know what they want, and prefer to shop from pre-made selections (Ikea, Home Depot). However, there are even "pull" models to found here, in the form of user-driven innovation, such as mountain biking, extreme skiing, hot rodding, etc. In these pro-amateur niches, customers don't necessarily know what they want, but do want to be a participant in the "pull" network that creates the product.

How do you tax a product that is made in 23 different countries? "Pull" models are going to change the way that governments create policy as more companies gravitate toward them. This will influence laws about intellectual property, education, taxation and more.

"Pull" economies are not just centered around finding creative ways to "outsource/offshore jobs" away from one place and to the places where "labor" is "cheaper". Successful "pull" models have encouraged and aided "insourcing", where more jobs are created, for instance in the United States by "foreign sources (a total of 7 million cited by this paper), than are out sourced (a total of 600,000+ cited by this paper). This is because pull models seek out, not just the "cheapest" labor, but the best ways to add value to the production networks. So, they can scale to many participants around the world, regardless of local labor costs, to find the best participants needed for specific specialized productions.

The social dynamics of "pull" models are highly centered around creating relationships of trust, sharing knowledge, and close cooperation among network participants. In "pull" models, non-market value creation (tacit knowledge, intangible value) is generally steered towards a commons-based model. A commons is used as a "collective governance regime for managing shared resources sustainably and equitably." Many of these commons are made possible by networked information technologies (the internet).

Bollier suggests that "if online commons are going to be useful to business, companies will need to do more work to develop protocols for identity and reputation management". This is because the use of the commons is based around trust. It also due to the need for ways to measure qualitative value in intangible assets beyond money, like knowledge, individual performance and value multiplication, and network wide performance/value multiplication.

Roundtable participants also noted that "pull" models will pose challenges to current education regimes that are centered around training people to participate in "push" economies. One of the participants mentions that " Computers, software tools, and Internet resources make possible some radically new styles of learning. By using pull-based systems, students can function much like businesses in the pull environment: They can access resources they don't control and put themselves into flows of activity, rather than just building inventories of static, objectified "knowledge."

The Tragedy of the Anticommons: Property in the Transition from Marx to Markets

One Sentence Summary:
Care in allocation of property rights in transitional economies (e.g., from state to private control or under rapid technological change) is essential to prevent <em>the tragedy of the anticommons</em>, the underuse of valuable resources.
Disciplines:
Law
Economics
Findings:
  • An anticommons property is a scarce resource in which multiple owners have the right to individually exclude others from its use, and no one has an effective privilege of use. Stalemate results in the tragedy of the anticommons, the underuse of a property.
  • Anticommons property appears when new property rights are being defined and allocated without mechanisms for resolving ownership disputes, notably in economies making a transition from state to private control.
  • A tragedy of the anticommons results when property theorists and implementers of property redistribution in transitional societies focus unduly on the clarity of rights (who is entitled to a share) while giving short shrift to the content of useful property bundles.
  • Once an anticommons property appears, it is difficult to convert it into useful private property either through market means or subsequent regulation due to transaction costs, holdouts, and individual attempts to extract the greatest return. Informal mechanisms of dubious legality sometimes fill the gaps.
  • The notion of the anticommons has implications for the distribution of environmental and intellectual property rights.
Keywords:
public goods
property rights
intellectual property
Author(s) / Editor(s):
Published in:
Davidson Institute Research Workshop on the Economics of Transition and Harvard Law Review, Volume 111 (3) (pp. 621-688)
Date:
June 1997 and January 1998
One Paragraph Summary:

Anticommons property is defined to be a class of property in analogy to the commons in classical economic literature to explain some of the failures and difficulties in the transition from communist to market economies. Multiple owners have privileges in a resource in a commons. The overuse of that resource has been described, notably by Hardin, as the tragedy of the commons. Heller defines an anticommons property as a scarce resource in which multiple owners have the right to individually exclude others from its use, and no one has an effective privilege of use. Stalemate results in the tragedy of the anticommons, the underuse of a property. Appropriate attention to the ways rights are created and allocated in property in societies making a transition from state to private control is essential to avoid the paralysis that occurred in the former Soviet Union. Similar situations can occur in the distribution of environmental and intellectual property rights in societies in which the transitions are taking place because of technological developments.

One Page Summary:

Anticommons property is defined to be a class of property in analogy to the commons in classical economic literature to explain some of the failures and difficulties in the transition from communist to market economies. Multiple owners have privileges in a resource in a commons. The overuse of that resource has been described, notably by Hardin, as the tragedy of the commons. Heller defines an anticommons property as a scarce resource in which multiple owners have the right to individually exclude others from its use, and no one has an effective privilege of use. Stalemate results in the , the underuse of a property.

Heller examines a paradox in Moscow after the dissolution of the Soviet Union. Storefronts remained empty even though the economy was growing and there was demand for consumer goods. In contrast, street kiosks in front of them filled with goods and customers.

He maintains that the phenomenon is due to a tragedy of the anticommons, an underuse of scarce resources due to the allocation of multiple new owners with the rights to exclude others from its use.

He compares the distribution of rights in commercial property (previously owned by the state with overlapping bureaucratic stakes) with other types of properties (e.g., individual apartments, communal apartments, and street kiosks.) In the latter cases, sometimes legal but more often brutally questionable means of resolving rights disputes results in more widespread use of resources in the absence of appropriate legal recourse.

While Heller devotes most of his attention to the underuse of commercial property in Moscow and other cities in the former Soviet Union, the notion of the anticommons has implications in the distribution of environmental and intellectual property rights.

Anticommons property may emerge in developed markets wherever new property rights are being defined. This can occur when new technologies make possible uses of, for example, intellectual property and environmental rights, unanticipated by the previously existing legal mechanism.

Once anticommons property appears, it is difficult to remedy the situation either through markets or subsequent regulation. Rather, Heller argues that care must be taken to avoid the accidental creation of anticommons property when new property rights are being defined by conveying core bundles of rights rather than multiple rights of exclusion.

The Success of Open Source

One Sentence Summary:
Open source software, a form of social organization that configures intellectual property around the right to distribute, not the right to include, is a political economy and production system process, enabled by the Internet, that makes possible voluntary, distributed innovation and collective creation of complex public goods with neither the bureaucratic structure of the firm as we know it or the financial incentives of the market as we know them.
Disciplines:
Business
Law
Computer Science
Economics
Sociology
Information
Findings:
  • The GPL (General Public License) uses copyright law to configure property around the right to distribute rather than the right to exclude. The GPL, by preventing any users from adding restrictions that could deny these rights to others, extends the freedom to run programs, to study how they work, to modify them, to redistribute copies gratis or for fee, to change and improve them and to redistribute modifications. This "shifts the fundamental optic of intellectual property rights away from protecting the prerogatives of an author toward protecting the prerogatives of generations of users."
  • Together with the Internet as a coordinating medium and a shared set of norms that constitute a community, the GPL creates a system of value creation and a set of governance mechanisms that enable the distributed production, maintenance, and development of highly complex software code.
  • The motivations of highly talented programmers to voluntarily contribute include the opportunity to learn the programming craft, the pleasure of working on high quality code, reputation capital, and contribution to a battle against Microsoft and proprietary software in general.
  • As important as the code is the process by which it is built. The open source community's organizing principles include "criteria for entering and leaving, leadership roles, power relations, distributional issues, education and socialization paths, and all the other characteristics that describe a nascent culture and community structure."
  • "The open source process has generalizable characteristics, it is a generic production process, and it can and will spread to other kinds of production. The question becomes, are there knowledge domains that are structured similarly to the software problem?" "The key concepts of the argument – user-driven innovation that takes place in a parallel distributed setting, distinct forms and mechanisms of cooperative behavior regulated by norms and governance structures, and the economic logic of "antirival" goods that recasts the "problem" of free riding – are generic enough to suggest that software is not the only place where the open source process could flourish.
  • "The key element of the open source process, as an ideal type, is voluntary participation and voluntary selection of tasks." Coordination costs are dramatically lowered by self-election: each contributor chooses what to work on, when to start, and when to quit.
  • "Eight general principles that capture the essence of what people do in the open source process: Make it interesting and make sure it happens; scratch an itch (link private contributions to a public good); minimize how many times you have to reinvent the wheel; solve problems through parallel work processes whenever possible; leverage the law of large numbers; document what you do; release early and release often; talk a lot.
  • Open source production is social because it is a product of voluntary collective collaboration, political because structures and organizations allocate resources and manage conflicts, technical because the final product is software code that must work, and economic in a fundamental sense of understanding the way individual choices about what to do with limited time and energy aggregate to a macrolevel.
  • Motivations for contributing include the fun of programming, the opportunity to learn the craft of programming, an urge to contribute to the open source community, ego-boosting (but not bragging – the norm is that the work brags for you), and reputation. A simple but fundamental shared belief is "the notion that personal efficacy not only benefits from, but positively requires, a set of cooperative relationships with others."
  • Rishab Aiyer Ghosh reframed the collective action problem of contributing to open source software by using the image of a vast tribal cooking pot into which one person puts a chicken, another puts in onions, and they each take out a bowl of stew; ordinarily, stews are vulnerable to free-riders who take out but don't contribute, but the Internet makes digital products like software "magically" non-rival: "If a sufficient number of people put in free goods, the cooking pot clones them for everyone so that everyone gets far more value than was put in.
  • The system at a whole benefits from riders, who help invoke network effects by growing the user base; further, if even a small number of free-riders who use but don't create code report the existence of a bug or ask for a needed feature, the effectiveness of the production system increases.
  • Coordination is mediated by social norms: ownership customs enshrined in the GPL; decision-making and support ownership customs; and the technical rationality of "let the code decide."
  • "End-to-end innovation goes a step beyond simply reduced transaction costs. It enables parallel processing of a complex task in a way that is not only geographically dispersed but also functionally dispersed. End-to-end architecture takes away the central decision-maker in the sense that no one is telling anyone what to do or what not to do. This is the essence of distributed innovation, not just a division of labor. There are no weak links in this chain because there is, in a real sense, no chain. Innovation is incentivized and emerges at the edges,; it enters the network independently,; and it gets incorporated into more complex systems when and if it improves the performance of the whole."
  • Four organizational principles needed for distributed innovation: "Empower people to experiment." "Enable bits of information to find each other." "Structure information so it can recombine with other pieces of information." "Create a governance system that sustains this process."
  • "The notion of open-sourcing as a strategic organizational decision can be seen as an efficiency choice around distributed innovation, just as outsourcing was an efficiency choice around transaction costs."
  • Hierarchies and networks exist in a dynamic relationship over time; one form may come dominate, or each can coexist in appropriate niches. "Most interesting will be the new forms of organization that emerge to manage the interface between them, and the process by which those boundary spanners influence the internal structure and function of the networks and the hierarchies that they link together." Future turmoil at this interface will be political as well as economic.
  • Open source process most likely to work effectively when potential contributors can judge the viability of the evolving product, have the information they need to make informed bets that contributions will add up to something useful for all, are driven motives beyond simple economic gain and have a relatively long "shadow of the future," learn by doing and gain personally valuable knowledge, share a positive norm about the value of contributing to the process.
Keywords:
sharing economy
open source
peer production
Author(s) / Editor(s):
Published in:
Harvard University Press
Date:
2004
One Paragraph Summary:

The Internet and a decentralized means of social organization around a production goal make possible "distributed innovation" that radically reduces both transaction and coordination costs, making possible the collective creation of public goods. Although open source software production is the most successful example of this process, it is not the only one. Self-interest combines with a norm of sharing a public good that benefits all; learning, reputation capital, and solving a problem one already needs to solve ("scratching an itch") are individual motivating factors. Self-election eliminates the cost of hierarchical management – individuals decide what to work on. Free-riders contribute to positive network effects by increasing the size of the user base, and aggregate infinitesmal contributions into significant efficiency gains by occasionally reporting a rare bug or complaining about a missing feature.

The Relationship Revolution

One Sentence Summary:
While the Internet phenomenon is often referred to as an “Information Revolution,” Michael Schrage says this is a misnomer and claims it is more accurate to state that the world is in the midst of a Relationship Revolution.
Disciplines:
Technology
Economics
Findings:
  • 58% of people see themselves as passengers rather than drivers on the new Information Superhighway.
  • 51% of adults think the Internet phenomenon is more an example of ‘media hype’ than a fundamental change in this society’s technology.
  • 40% of the general public expect their computers to be more important than their cars ten years from now.
  • 76 % of people view the Internet and new computer technology as technologies that will allow them to do their job better and more efficiently, rather than as a threat that someday may replace them in their job.
  • 76% of people believe that computers, computer networks and e-mail have strengthened, their relationships with the people they work with.
  • 73% think that the private sector rather than government should subsidize research that further develops the Information Superhighway.
  • 64% believe the Internet should be kept tax free.
  • 74% don’t think the government should be able to read private email even if it would reduce crime.
  • 53% of Generation X and 59% of the Baby Boomers think computers and the net have had a significantly greater impact on their lives than cable TV and VCRs.
Keywords:
communication
intellectual property
networks
security
technology
Author(s) / Editor(s):
Published in:
from the Merrill Lynch Forum
Date:
1997
One Paragraph Summary:

The rapid growth and expansion of digital technologies have created the impression that we are in the midst of an Information Revolution, living in an Information Age, or that we have, at least, created an Information Economy. According to Shrage such a view is myopic. Thinking that the Internet is about information is like thinking that the internal combustion engine is about processing gasoline. It’s true that the impact of digital technologies on popular culture, financial markets, health care, etc. is causing a significant revolution, but the biggest impact the technology is having is on the relationship between people and organizations.

One Page Summary:

“Along every conceivable dimension — from the intimate to the institutional — digital media force both individuals and organizations to redefine what kind of relationships create value.” The result of this paradigm shift isn’t about data and information, it’s about the value and priority that people place on the quantity and quality of their relationships.

Significant advances in technology have always altered how we perceive ourselves and our relationships. The automobile had an impact beyond simply moving from point to point B, and TV had an impact beyond delivering images and sound. Both of those wrought real and profound cultural change. Whenever a new medium emerges we have to look beyond the simple mechanics of the medium to the impact the medium has on the community. What’s important to recognize is that these new digital technologies aren’t simply evolutions of preceding technologies, but that these new technologies are now networked with each other. These new networks between networks have resulted in new relationships between networks that, in turn, have created new kinds of relationships between people.

This new phase of networked technologies allows individuals and institutions alike to create new ways of interaction. Intimacy, anonymity, trust, openness, access, passion, negotiation, hierarchy, coordination and collaboration can all be mediated, monitored and managed via networks ostensibly designed to carry bits. The value challenge has shifted from gathering and disseminating information to packaging and bundling it in unexpected ways.

What people crave is the chance to communicate and relate to each other in new ways – not simply to have access to a vast feast of information. The new technologies are directly related to the essence of being human. They challenge and stretch the traditional meaning of concepts like relationship, community and interpersonal expression. People expect more from these new technologies than simple job improvement, they want it to improve their working relationships with their boss, their colleagues, their subordinates and their clients.

Ultimately what is critical to people is value, and it is people, not information, that create value. According to “Netizens” their increased sense of belonging, of being part of a larger community, greatly outweighs the benefits of having a mass of information available. Failing to understand the transformational affects of the digital technology on culture itself will result in missed opportunities.

The Quest for Meaning in Public Choice

One Sentence Summary:
Frameworks, composed of theories that are in turn composed of varying models need to be developed to study and make predictions about the complex behaviors that take place in social situations.
Disciplines:
Economics
Sociology
Psychology
Findings:
  • With incomplete information and information-processing capabilities, individuals competing for common-pool resources may make mistakes in choosing strategies designed to realize a set of goals.
  • Communication and sanctioning mechanisms among potentially competing members of a community competing for common-pool resources increases the efficiency and stability of resource exploitation.
  • A shared culture—generally accepted norms of behavior, common understanding, homogeneity of preferences and resources—improves the probability that a community will develop adequate rules and norms to govern the use of resources.
  • The transmission of culture, rules, and norms through information, knowledge, and skills across generations is a challenge for the stability of open, democratic, self-governing societies over time.
Keywords:
civil society
communication
competition
cooperation
game theory
group forming networks
property rights
public goods
sharing economy
Author(s) / Editor(s):
Published in:
American Journal of Economics and Sociology, vol. 63, issue 1, pages 105-147
Date:
January 2004
One Paragraph Summary:

A useful Institutional Analysis and Development (IAD) framework has evolved under the leadership of the Ostroms and their colleagues at Indiana University for over two decades. It has been applied with success in laboratory experiments on social behavior and in field studies and has enabled the creation of useful models with predictive value in diverse situations. Some results from the application of the IAD framework have lead to suggestions for effective use of common resources and norms for community decision making. The importance of effective communication and sanctioning mechanisms in effective community governance has become clear from the use of the framework.

One Page Summary:

The Institutional Analysis and Development (IAD) framework developed by the Ostroms and their colleagues at Indiana University provides a foundation for studying a multitude of theories, models, and predictions of public choice behaviors in different systems of governance and organization.

Frameworks define the action arena to which it would be applied; the resulting patterns of interactions and outcomes, and the means of evaluating those outcomes.

A framework is a general language about how varying rules, physical and material conditions, and attributes of a community affect the structure of action arenas, the incentives for actors, and resulting outcomes.

Action arenas include an action situation and the actors in that situation.

An action situation includes:

  • Participants
  • Positions
  • Outcomes
  • Action-outcome linkages
  • Control that participants exercise
  • Information
  • Cost and benefits of outcomes

Actors (individual or corporate) involve:

  • Resources brought to the situation
  • Values assigned to states of the world
  • Methods for dealing with knowledge and information
  • Selection processes for courses of action

Analysts can make strong predictions in tightly constrained situations of complete information: overuse of resources in an open commons where the actors do not share access to collective choice arenas.

Results are not as clear in situations where actors are embedded in communities with norms of fairness and conservation as well as the ability to communicate with each other.

Evaluation criteria can include a range of values for categories such as the following:

  • Economic efficiency
  • Fiscal equity among actors
  • Redistributional equity (e.g., policies to care for poorer individuals
  • Accountability
  • Conformance to a general morality
  • Adaptability to change

The IAD framework has been applied to various domains to make predictions of resulting behaviors in field settings. Examples of successful application include:

  • Police services
  • Urban public services in general
  • Common-pool resources: these were studied in laboratory as well as field settings. The IAD framework was used to create a theory of behavior. Communication of participants affects behavior: if no communication was permitted, the results approximated that of non-cooperative game theory. Communication led to different, more positive, results.
  • The IAD framework was used to develop extensive databases coding common-pool resources and diverse property regimes.

The Logic of Collective Action: Public Goods and the Theory of Groups

One Sentence Summary:
Rational, self-interested individuals in large groups need a positive incentive or negative sanction delivered through institutional arrangements in order to provide themselves a collective good; in small groups the collective good itself can be incentive enough for individuals to cooperate.
Disciplines:
Economics
Political Science
Sociology
Findings:
  • Findings from studies of small groups cannot be scaled to predict behavior of large groups; the behavior of large groups is qualitatively different.
  • Business interests are successful in organizing toward a political common good because industries often contain a relatively small number of large firms. These firms benefit from the advantages of small groups more than large numbers of workers or consumers.
  • Many non-economic incentives play an important role in motivating cooperation, including prestige, respect, friendship or other social pressures. This is especially the case in small groups characterized by face-to-face contact.
Keywords:
cooperation
group forming networks
norms
public goods
Author(s) / Editor(s):
Published in:
Harvard University Press
Date:
1965
One Paragraph Summary:

Common or public goods are those which if consumed by one member of a group, cannot be feasibly withheld from other members. Large groups require some kind of selective sanction or incentive apart from the benefit of the public good itself for individuals to contribute their own time and resources to maintaining a formal organization. The selective aspect of sanctions or incentives indicates that institutions recognize and treat differently those who do not contribute to the public good. Organizations frequently fail to provide public goods on the most optimal scale, because all self-interested individuals try to sacrifice as little of themselves as possible to still gain access to the good. Because groups cannot benefit from fractional quantities of regulating organizations, there is also a necessary minimal cost of maintenance associated with the formation of formal organizations.

The Evolution of Strategies in the Iterated Prisoner's Dilemma

One Sentence Summary:
The genetic algorithm uses computer simulations to evolve different strategies for playing Prisoner's Dilemma games, and by observing the interactions of populations of agents over many runs, it is possible to make useful observations that could generalize to human behavior – such as the tendency of reciprocation to establish itself and spread if cooperating agents are able to encounter one another.
Disciplines:
Biology
Computer Science
Economics
Political Science
Information
Findings:
  • Genetic algorithms, developed for complexity and artificial life research, can be used to evolve strategies for playing Prisoner's Dilemma games that are well-adapted to different environments, and thus can be a probe of possible dynamics of human cooperation.
  • From a random start, populations of Prisoner's Dilemma strategies evolve away from cooperation to less cooperative rules, but after a number of runs, those players that reciprocate when encountering cooperation lock into mutually beneficial reciprocal cooperation: reciprocity, once established, can spread through a population that is originally dominated by non-cooperative strategies.
  • Genetic algorithms are highly effective method of searching for successful strategies in very large possibility spaces.
Keywords:
agent-based model
complexity
evolution
game theory
prisoners dilemma
reciprocity
tit-for-tat
Author(s) / Editor(s):
Date:
1987
One Paragraph Summary:

John Holland at University of Michigan developed a means of testing computer problem-solving methods by applying a method based on Darwinian evolution: agents (program) have a phenotype (the strategy the program uses for problem solving) and a genotype (the way strategies are represented in their programming code). Means of reproduction and mutation are specified. Agents interact with each other in a rigorously specified simulation, and the effectiveness of each agent is evaluated in a particular environment in relation to its interactions with other agents; successful strategies are reproduced at a higher rate than less successful strategies; pairs of successful offspring strategies are mated by combining genetic material; mutation is introduced. Simulations can be halted after specified numbers of runs and analyzed, then restarted. In about a quarter of simulation runs with sexual reproduction, better strategies than Tit-for-Tat evolved, and after a random start, populations tend to first evolve away from cooperation as less cooperative rules succeed more often, but can evolve back toward stable cooperation states if cooperative strategies encounter one another and reciprocate.

The Cornucopia of the Commons

One Sentence Summary:
Dan Bricklin examines ways to induce a pool of users to contribute to a commons without extra effort, using the architecture of the commons (as in Napster's default to sharing in the way download directories are available) and leveraging user's self-interest.
Disciplines:
Business
Economics
Sociology
Findings:
  • Users must want to use the shared repository, i.e. it should contain things that are of value to them.
  • Adding to the commons must be a "a natural by-product of the user's work" i.e. users should be "adding to the value of the database without doing any extra work."
  • Sharing should be the default.
Keywords:
sharing economy
peer production
open source
hierarchy
communication
Author(s) / Editor(s):
Published in:
O'Reilly and Associates, Inc.
Date:
March 2001
One Paragraph Summary:

Dan Bricklin examines ways to induce a pool of users to contribute to a commons without extra effort, using the architecture of the commons (as in Napster's default to sharing in the way download directories are available) and leveraging user's self-interest. The key to understanding the success of Napster and other file-sharing technologies resides not in their 'peer-to-peer' nature but in the fact that they provide users with access to a database of desirable things and enable people to create a public good in the process of seeking their own interests.

One Page Summary:

Dan Bricklin examines ways to induce a pool of users to contribute to a commons without extra effort, using the architecture of the commons (as in Napster's default to sharing in the way download directories are available) and leveraging user's self-interest. The key to understanding the success of Napster and other file-sharing technologies resides not in their 'peer-to-peer' nature but in the fact that they provide users with access to a database of desirable things and enable people to create a public good in the process of seeking their own interests.

Bricklin identifies three ways to fill a database: organized manual, organized mechanical, and volunteer manual.

CDDB succeeded at motivating volunteer manual data entry because it leveraged the desire for users to have their data in the database so that CDDB-aware programs could access it, for example when a user would insert a CD into their computer.

Bricklin calls this "harnessing the power of individual selfishness."

Napster cleverly avoided manual data entry by automatically indexing anything in the user's 'Shared Music' directory. Thus "storing the copy in the shared music directory [was] a natural by-product of the user's work with the songs."

Sharing is the default. This results in users "adding to the value of the database without doing any extra work."

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