Theories on Incentives, Scaling & An Evolved Economy Pt 2

In the previous post of this series, I described ways in which human monetary systems have typically tended to scale and how it compares to the history of the Internet. Both systems are functioning with models which have incentives to centralise at scale which introduce vulnerabilities as dependence on the central points grow. Next, I want to extend this exploration to the exchange and ownership of property on the Internet and scaling intellectual property systems. Reviewing contrasts and similarities in physical property and intellectual property can help to shed light on the challenges we face in managing those systems as they grow — online and off. (Disclaimer: Some references in this post assume having read the content from the first part.)

Properties of Property: Personal, Private and Public

Having explored historical implementations of economies and their breakdown points at scale, we will find similarities to systems dealing with ownership of property. While cultures around the world have different perspectives on property, there are three basic categories in which to categorise ownership: personal, private and public.

Personal property are belongings actively used by an individual such as a toothbrush, a homemade apple pie or a wrist watch. Public or common property are objects or land openly used or consumed by any member within a community such as a common walking path or a common garden maintained by some or all of it’s members. Finally, private property is ownership usually in the form of real estate but can be seen more broadly as relatively unused property owned by a person or group as well as any property requiring significant external security (usually provided by state-based registration/titles). Examples of private property are banks, rental apartments and summer sailing boats. The lines between these categories can blur at times but I will not address those cases for the purpose of simplicity.

Abundance within Meatspace Economies

The distinction between private and public ownership models and their respective abilities to scale are important aspects in economies to explore. For example, a community where food and the labor to sustain the growth of food is abundant (perhaps out of love for gardening), the food itself is not very useful as an exchange of value as it is produced without distinct demand market forces. If one of these gardeners offers four apples to a blacksmith in exchange for a specific gardening tool, by normal market standards the trade doesn’t make sense since the produce is in abundance already and further will rot if not consumed. However, it would make sense for the blacksmith to view the gardener’s labor as an important value to the community and to support them by simply giving them the tool and continuing to eat the produce at their leisure. The two versions of this exchange may sound equivalent but the incentives and transactions have quite different characteristics as the system grows.

Scaling Public Gardens

The preferred type of trade in the above scenario of abundance, also referred to as a gift economy, can be related to the concept of tracking Rai stone ownership (which we explored in the previous post) in that it can sustain itself as the scale stays small but beyond that, a garden maintainer might realise the relationships with those consuming the produce have become less beneficial and thus are no longer able to depend on the precedent of established community connections to depend on gifts from others. At a larger scale, it makes sense for these producers to prefer working privately because the abundance is reduced when growing for more individuals while putting a price on the produce helps to guarantee their labor has a similar or greater rate of return and isn’t likely to be taken advantage of. This price can come in the form of credits (by tracking the number of fruits and vegetables individuals receive) or as a relative price to a more fluid value of exchange such as currencies. However, even when a privately exhibits improvements in ability to scale compared to commonly managed garden, it is not void of the further vulnerabilities brought on by economies of scale. Reducing the cost of input for a growing output is a natural tendency for business which at a certain threshold leads into a rather self destructive cycle of incentives towards more centralised control.

Properties of Intangible Property

Now that we’ve established a perspective on basic concepts in meatspace property, we can map them fairly accurately to intellectual property for a better understanding of the technology industry’s challenge to scale labor that goes behind open source development and public content. Intellectual property (IP) can also be categorised between personal, private and public. Personal IP are any ideas or data that we would keep to ourselves so only ourselves (and perhaps a very few others) could have access such as health records and personal thoughts. Public IP in contrast are ideas and information that are shared free and openly for anyone to access and use like weather reports, certain online academic journals and content within the public domain. Finally, intellectual property considered private would be data controlled for restricted use such as restricted software code or online publishing which require payment to view contents. To further sub categorise private intellectual property one can consider both those protected by avoiding physical reproduction such as DRM (Digital Rights Management) and those protected by legal security such as copyright and even free software licenses. While licenses like GPL and MIT promote open standards, the fact that there’s a restriction of use introduces aspects of private, owner controlled controlled IP. Not to say this is a wrong method, (I heavily stand by MaidSafe’s decision to release code as GPLv3) but in the context of these definitions and for the next part in this series, I think it’s important to keep this in mind.

Scaling Public Idea Gardens

So, with these distinctions there’s obviously a vast amount of private IP out there of all shapes and sizes as our society reacts to the globalisation of ideas. Patents and copyright systems have been put to use for several hundreds of years mostly aiming to resolve the labor that goes into creations with inherent lack of scarcity like blueprints to inventions and writings and generally give an economic advantage to the creator. Unfortunately, this sort of solution essentially puts a price on access to a piece of intellectual property and privatises ownership similar to the “once localised and looking to scale” community gardens but even more drastic. The physical limit for the abundance of intellectual property to be overcome is comparatively miniscule and shrinking further thanks to improving storage capabilities of computers. So like the some members of a community may be inclined to tend a community garden, others might selfishly enjoy creating intellectual property such as inventors and designers but as soon as their labor is easily taken for granted, the economical balance is disrupted. We should be able to support production of intellectual property at a small scale but the globalisation of communications and knowledge over the past several centuries has made that not practical.

Code and Content as Assets

Many activists involved in resisting DRM, copyright and patents often evangelise that private IP conflicts with long-term progress and inhibits essential freedoms. Finding economical answers to better serve production of intellectual property so more people are incentivised to choose sharing ideas publicly rather than keep them privately protected is certainly a difficult task and most likely will not be resolved via a single solution. Most mainstream research journals see the IP they publish as assets to protect in order to sustain their business and thus make the access artificially scarce by marking it with a price. Many VCs who fund software development similarly see the code produced by developers as a significant asset which protects against competition implementations. In some cases, there can be agreements between corporate competitors to build public solutions for standardising purposes but this is not a reliable solution and has potential to lead to bad implementations of those standards that many others must begin to rely upon. To integrate intellectual property into our economy properly, we must work to evolve the economic system itself rather than force ideas to take on characteristics which make them artificially scarce.

In the final post of this series, I will overview solutions which have pushed the boundaries of how we deal with money and intellectual property and more specifically, what SAFE brings into the mix. Scaling is the main factor in the breakdown that we see in many systems from currency and property to the Internet itself so focusing our sights on this problem is essential. While MaidSafe is working on a single solution to address these issues via an evolved Internet, the previous experimentation and future supplementary projects from other parties will be necessary to grow a real foundation for a global economy and digital society.