Diana McCarty on Mon, 7 Oct 96 05:40 MET |
[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]
nettime:Markets, Anti-Markets 1/2 |
http://hgk.stzh.ch/hello_world/events/symposium/txt_delanda.html "Markets, Antimarkets and Network Economics" by Manuel DeLanda One hundred years ago, Western societies underwent a second Industrial Revolution, based on the the interaction of several technologies: electricity, the internal combustion engine, oil, steel and plastics. Although knowledge and information as inputs to production processes had already played a role in the first Industrial Revolution, it was the coming of electricity, and the creation of the first industrial research laboratories (such as the General Electric laboratory) that propelled knowledge to its position as the most important input to production. Information, of course, also plays key roles in other economic areas such as marketing and investment, and indeed, to the extent that a particular economy is truly driven by supply and demand, the information transmitted by prices has always played a central role. But regardless of the fact that knowledge has always been a key factor in the working of economies, electricity and the other innovations of the early twenty century greatly intensified its importance. And, of course, the explosive growth of computer networks in the last three decades is bound to intensify the flow of knowledge even more and this intensification will undoubtedly transform the nature of the economy in the next century. It follows that a very important task for today s intellectuals is to create realistic scenarios of the world of twenty-first century economics. The problem is that, when we try to picture what the effects of the intensification of knowledge will be like, several obstacles stand in the way. The most important of these roadblocks is that intellectuals on the right, center and left sides of the political spectrum are all trying to predict what a twenty first century economy will be like on the basis of theories devised to explain the working of nineteenth century England. In other words, whether one is using the conceptual machinery of Adam Smith or of Karl Marx (or of any combination of the two), whether one sees in the recent commercialization of the Internet a new invisible hand that will magically benefit society, or whether one sees in this commercialization the commodification of the Net which will magically ruin society, one is still trying to understand what is a radically new phenomenon in terms of obsolete categories belonging to bankrupt systems of thought. It is time to go beyond both the invisible handers and the commodifiers and to attempt to construct a new economic theory that not only give us a clearer picture of the future, but almost as important, of the past, since it is impossible to know where we are going unless we know how we got where we are. Therefore, before exploring some of the characteristics of Internet economics I will need to give at least a brief sketch of what these new economic theories would be like. First of all, it is not as if we would need to manufacture a new theory out of thin air. Alternatives to the invisible handers and the commodifiers have existed in the past (such as the institutionalist school of the followers of Thorstein Veblen) and new theories are flourishing today, such as the neo-institutionalist school and the growing field of nonlinear economics. {1} Also, economic historians like Fernand Braudel and his followers have given us a fantastically detailed account of the development of Western economies in the last eight hundred years, and this research has generated a wealth of empirical data which simply was not available to either Adam Smith or Karl Marx when they created their theories. Furthermore, as I will soon try to show, the new data contradicts many of the foundations of those two systems of thought. Finally, not just economists and economic historians will be involved in developing the new ideas we need, philosophers will also participate: in the last twenty years the discipline of the philosophy of economics (that is the philosophy of science applied to economics) has grown at a tremendous pace and is today and very active field of research.{2} Here I only have space to discuss a few of the ideas that have been developed by economists, historians and philosophers, so I will select only those concepts that have a direct relevance to our discussion of the Internet. Perhaps the most dramatic new insight emerges from Fernand Braudel s history of capitalism. Unlike theorists from the left and the right who believe capitalism developed through several stages, first being competitive and subservient to market forces and only later, in the twentieth century, becoming monopolistic, Braudel has shown with a wealth of historical evidence that as far back as the thirteenth century, and in all the centuries in between, capitalism has always engaged in anti-competitive practices, manipulating demand and supply in a variety of ways. Whenever large fortunes were made in foreign trade, wholesale, finance or large scale industry and agriculture, market forces were not acting on their own, and in some cases not acting at all. In short what Braudel shows is that we must sharply differentiate between the dynamics generated by many interacting small producers and traders (where automatic coordination via prices does occur), from the dynamics of a few big bussinesses (or oligopolies, to use the technical term), in which prices are increasingly replaced by commands as coordinating mechanisms, and spontaneous allocation by the market replaced with rigid planning by a managerial hierarchy. What these new historical findings suggest is that all that has existed in the West since the fourteenth century, and even after the Industrial Revolution, is a heterogeneous collection of institutions, some governed by market dynamics and some others manipulating those dynamics, and not a homogeneous, society-wide capitalist system . In the words of Fernand Braudel: "We should not be too quick to assume that capitalism embraces the whole of western society, that it accounts for every stitch in the social fabric...that our societies are organized from top to bottom in a 'capitalist system'. On the contrary, ...there is a dialectic still very much alive between capitalism on one hand, and its antithesis, the 'non-capitalism' of the lower level on the other." {3} And he adds that, indeed, capitalism was carried upward and onward on the shoulders of small shops and "the enormous creative powers of the market, of the lower storey of exchange...[This] lowest level, not being paralyzed by the size of its plant or organization, is the one readiest to adapt; it is the seed bed of inspiration, improvisation and even innovation, although its most brilliant discoveries sooner or later fall into the hands of the holders of capital. It was not the capitalists who brought about the first cotton revolution; all the new ideas came from enterprising small businesses." {4} Several things follow from Braudel s distinction between market and capitalist institutions (or as he calls them antimarkets ). If markets and antimarkets have never been the same thing then both the invisible handers as well as the commodifiers are wrong, the former because spontaneous coordination by an invisible hand does not apply to big bussiness, and the latter because commodity fetishism does not apply to the products created by small bussiness but only to large hierarchical organizations capable of manipulating demand to create artificial needs. In other words, for people on the right and center of the political spectrum all monetary transactions, even if they involve large oligopolies or even monopolies, are considered market transactions. For the Marxist left, on the other hand, the very presence of money, regardless of whether it involves economic power or not, means that a social transaction has now been commodified and hence made part of capitalism. It is my belief that Braudel s empirical data forces on us to make a distinction which is not made by the left or the right: that between market and antimarket institutions. In fact, we can already see the kind of dogmatic responses that the lack of this distinction promotes on discussions in the Internet. As it became clear that digital cash and secure crypto-technology for credit card transactions were going to transform the Net into a place to do bussiness, some intellectuals became euphoric about the utopic potential of digital free enterprise , while others began to denounce the Internet as the latest expression of international capitalism or claim that the Net was becoming commodified and hence reabsorbed into the system. It is clear, however, that if we reject these two dogmatic positions, our evaluation of the economic impact of the Net (its potential for both decentralization and empowerment of the individual producer and for centralization of content production by a few large firms) will have to become more nuanced and based on more complex models of economic reality. Beside the distinction between markets and antimarkets our models of network economics must take advantage of recent discoveries in nonlinear science and theories of self-organization. Basically, these theories may be used to explain the emergence of wholes that are more than the sum of their parts. Real markets are, in a sense, such synergistic wholes since they emerge as a result of the unintended consequences of many independent decision makers. In this sense, markets are quite similar to ecosystems in many respects. The Internet itself is also one such self-organized entity, despite its origins in the hands of military planners. One thing markets, ecosystems and decentralized networks have in common is that their synergistic properties emerge spontaneously out of the interactions among a variety of elements, plants and animals, sellers and buyers, or computer servers and clients. To understand the processes that lead to such emergent, synergistic wholes, we need to create new ways of modeling reality. In particular, instead of beginning at the top, at the level of the whole, and moving down by dissecting it into its constituent parts, we need to create models that proceed from the bottom up. For example, instead of creating a computer model of a market, ecosystem or computer network, by using a small set of mathematical functions (that capture the behavior of an idealized whole), we need to create virtual environments in which we can unleash a population of virtual animals and plants, buyers and sellers, or clients and servers, and then to let these creatures interact and allow the self-organized whole to emerge spontaneously. In this way the botom-up modeling strategy compensates for a weakness of the top-down strategy. Emergent properties are properties of the complex interactions between heterogeneous elements, but top-down analysis dissects and separates elements, that is, eliminates their original interactions, and then adds them back together. But this operation necessarily misses any property that is more than the sum of the parts. Hence analysis needs to be complemented with synthesis, as is done today, for example, in the discipline of Artificial Life and in the branches of Artificial Intelligence known as connectionism and animats. {5} This switch in modelling strategy would have a significant impact on the shape of the new paradigm of economics that I mentioned before, the one that goes beyond the invisible hand and commodification. Instead of postulating a whole, a capitalist system, for instance, and then attempting to capture in some mathematical formulas its basic dynamics, we would unleash within a virtual enviroment a population of institutions, including virtual markets, antimarkets and bureocratic agencies. Only if we can generate from the interactions of these virtual institutions, something like a capitalist system, would we feel justified in postulating an entity like that. My guess is, like Braudel s in the quote above, that there is no such overall, homogeneous system, and that society is a much more heterogeneous collection of processes. Recognizing this heterogeneity may be crucial not only when thinking about network economics but, more generally, when analysing the oppressive aspects of today s economic system, that is, those aspects that we would want to change to make economic institutions more fair and less exploitatitive. We need to think of economic institutions as part of a larger institutional ecology, an ecology that must include, for example, military institutions. Only this way will we be able to locate the specific sources of certain forms of economic power, sources which would remain invisible if we simply thought of every aspect of our current situation as coming from free enterprise or from exploitative capitalism. In particular, many of the most oppressive aspects of industrial discipline and of the use of machines to control human workers in assembly line factories, were not originated by capitalists but by military engineers in eighteenth century French and nineteenth century American arsenals and armories. Without exageration, these and other military institutions created many of the techniques used to withdraw control of the production process from workers and then exported these techniques to civilian enterprises, typically antimarket organizations. {6} Hence, not to include in our economic models processes occuring within this wider institutional ecology can make invisible the source of the very structures we must change to create a better society, and hence diminish our chances of ever dismantling those oppresive structures. After these introductory remarks let s now consider a few specific questions regarding the new knowledge-based economies that are taking form today. To begin with let s explore the question of the technological infrastructure of the Internet, first the computers that serve as its servers and clients and then the telephone, cable and radio technologies used to interconnect those servers and clients together. The question of the manufactury of computer hardware and software has many different interesting angles, not to mention a very close association with military institutions which have been involved in the development of computers from their inception. I have written about this military involvement in the past but today I would like to discuss a different issue, one related to our botton-up modelling of heterogeneous institutional ecologies. In particular, I would like to discuss two such ecologies with different mixtures of market and antimarket components: Silicon Valley and Route 128 in Boston. Both are -- * distributed via nettime-l : no commercial use without permission * <nettime> is a closed moderated mailinglist for net criticism, * collaborative text filtering and cultural politics of the nets * more info: majordomo@is.in-berlin.de and "info nettime" in the msg body * URL: http://www.desk.nl/~nettime/ contact: nettime-owner@is.in-berlin.de