nettime:*Markets and Anti-Markets,1/4 DeLanda

[diana@dial.isys.hu (Diana McCarty)]

Short Note: This version of DeLanda's text is quite different than the
one already posted to nettime in the fall. 

Markets and Anti-Markets
Manuel DeLanda

Delivered at MetaForum III/UNDER CONSTRUCTION/Budapest Content Conference
Oct. 1996, 
www.isys.hu/metaforum


INTRODUCTORY REMARKS
Before I begin my reading this essay, I would like to introduce some
background to you so you can see where I am coming from. Though I began my
career as an artist and still make my living as a computer artist, I
consider myself a philosopher. I have been publishing for fifteen or
sixteen years, specializing in the Philosophy of Science. This is important
because what I will read is a criticism of economic ideas. Since I am not
an economist, you might wonder, "How does he dare to do this criticism?"
The answer is that there exists a large branch of the Philosophy of
Science, called the Philosophy of Economics, concerned with issues of
methodology and conceptual structure of economic theories. It is a branch
that has grown in the last two or three decades. And it is from the point
of view of the Philosophy of Economics that I would like to speak today.

The Philosophy of Science up to the early 1960s was dominated by
Positivism, beginning with the Vienna Circle which espoused a very
idealistic vision of what science is. Scientists were pictured as these
rational human beings who pursued truth at the expense of anything else:
constantly engaging with one another in perfectly logical dialogues and
basically elaborating on those theories that could be reduced to logic and
logistic rationality. Then came the 1960s, and the 1960s overturned
everything. The Philosophy of Science was not spared. You might have heard
of Thomas Kuhn, or at least his famous phrase that has become familiar,
"the paradigm shift," a shift in the world view that completely alters the
way we perceive reality. Aside from Kuhn there were many others in the
1960s, and later in the 70's and 80's. It's has been an intense reaction
against the Philosophy of Science, specifically by British sociologists in
Edinburgh and Bath and now sustained by American and French sociologists
and ethnomethodoligists like Bruno Latour.

This reaction mat be labeled the Anti Science Movement, and it possesses
some important aspects. These sociologists and anthropologists were the
first ones to actually go into a laboratory to study just what exactly
happens there. Instead of giving us a totally abstract picture of rational
beings confronting nature, they reported about the seamy, sleazy side of
science in which there are, for example, negotiations between scientists
over competitions for Nobel prizes and other prestige awards, to mention
only the most obvious power struggles. And so its turns out that science is
a completely social, human activity with all the friction and noise and
messiness that every human activity has. There is something to be said for
what the sociologists of science have done. They woke up philosophers to
the idea that they cannot remain oblivious to real history, oblivious to
the real details of how science has developed, and that science cannot be
considered to be based on the Scientific Method that every single branch of
science uses. Biologists, zoologists, economists, physicists, and chemists
all use slightly different methods, and there is much to be learned from
the details and distinctions. On the other hand, the rampant relativism
with which the Anti-Science movement has replaced Positivism must also be
rejected. To be coherent, we must critize both the right and the left.

A similar point can be made of economic theories. After the collapse of the
Soviet Union, the Wired Magazine type of people in the United States
believe that free enterprise has won. Free enterprise in their sense
involves a complete illusion about how the American economy (and the
European economy, for that matter,) has worked over the last several
hundred years. But their counterparts on the left (who speak in equally
misleading ways about commodification and California Ideologies) must also
be sharply critizised. More generally, what is important now is to take the
economic knowledge that was developed (by the right and the left) and cut
it down to size so to speak, to figure out exactly in what specific
conditions these ideas apply. To make a comparison with physics: while for
a long time we thought that Newton, Galileo, and our most preeminent
scientists had discovered the laws of the universe, philosophers of science
and sociologists of science now agree that Newton, Galileo and company only
discovered some extremely simple regularities that apply only to extremely
simplified systems within a laboratory. In particular, most classical
science is based on the exclusion of friction, noise, and all other kinds
of complicating factors. Friction is very complicated because it interacts
with other variables like velocity in a non- linear way, in a kind of
feedback loop. An airplane, for example, will suffer more friction the
faster it goes. When two such variables interact in a mathematical
equation, the equation becomes essentially unsolvable by hand, and you need
big computers to actually explore the behavior of that equation. Therefore,
there is a practical reason why classical physicists excluded friction and
noise from their theories. And we can justify this perfectly by saying,
"Well, science would have never taken off, it would never have bootstrapped
itself, if they had not done this." However, now we know that when you add
friction and a driving force to counteract the friction to even a simple
system such as a pendulum, the system becomes a non-linear pendulum with a
mutitude of dynamical behaviors that were undreamt of by the classics.
Friction, far from being something we could add at the end once science
figured all the irregularities out, is crucial to an understanding of
reality. We understand that the friction, the noise, the messiness, and the
heterogeneity of the real world actually have a much more complicated role
to play in science than we ever admitted before. We are rediscovering
extremely classical dynamical systems that we thought were completely
exhausted.

A similar point applies to economics: many of the things that the classical
economists, whether right wing or left wing, developed apply, much like
Newtonian physics, to only extremely reduced portions of reality. Adam
Smith's theory of the invisible hand in which demand and supply
automatically cancel each other out preventing wasteful excesses and
deficits only applies in very, very specific circumstances, for instance,
in a small town market, that specific place in town where people come and
gather every Saturday and then go home. As historian Fernand Braudel has
argued, only in the old-fashioned sense of "market" is there enough
transparency for prices to set themselves. The moment we begin using the
word "market" to apply to a dispersed set of consumers, like the market for
personal computers, the fact of the matter is that no one knows the
dynamics behind price formation. Yes, there are some ideas to be taken from
the classics, whether classical physics or classical economics, but we must
find the specific circumstances where they work and not extrapolate
carelessly. And you absolutely do not make the Wired Magazine mistake of
believing that such a complex system as the United States economy--with all
its large corporations that have nothing to do with market behavior--is a
free enterprise or a free market. It's an illusion.

Having cut down to size of the contribution of the classics, let me begin
with how we can apply these ideas to analyze some of the phenomena of the
Internet.

INTRODUCTION
The explosive growth of computer networks in the last ten years, coupled
with the recent development of electronic cash and cryptographic techniques
for the secure transmission of credit card numbers and commercial documents
has begun to open new possibilities for the flow of material and
informational resources and for the conduct of financial and commercial
transactions. Although these developments are, indeed, symptoms that the
Internet is beginning to form a radically new economic space, the
differences with other economic spaces and the degree to which the Internet
represents a radical break with the past should not be exaggerated. Some
economic characteristics of the Net are shared by many different kinds of
networks: railroad and telephone networks, for instance. One such shared
property is what economists call network externalities. An externality in
classical economics is defined as a side effect of production or
consumption in which people other than the direct producers or consumers
are positively or negatively effected. An example of a positive externality
is an owner of a house who paints the house and fixes the garden,
increasing the property value of his or her house but also helping the
other neighbors because the values go up in the neighborhood if it looks
better. A negative externality would be, for instance, pollution by
factories, in particular when it costs nothing for a factory to pollute a
river. It is a negative externality because the side effect of production
has an actual real cost for people down the river where the pollution ends
up accumulating. An example of a network externality is the so- called fax
effect. As the number of people using faxes increases, the use value of
each individual fax machine increases, too. In other words, when there are
only a few users, the fax machine is at most is an expensive gadget, but as
the number of possible people one can reach via a fax increases, the
machine becomes more useful and begins to change the routines and practices
of the users themselves until it becomes a necessity. As an economic space,
the Internet is clearly subject to such network externalities, but so are
non-computer networks. Thus it is important not to overemphasize the novel
aspects of the information revolution, actually, to not even to use the
term information revolution, for this gives us a false sense of its
historical connections with other economic spaces. Many contemporary
observers of the computer world, particularly of the Wired Magazine type,
think we have entered a new age, the Information Age, characterized by the
importance of knowledge instead of matter or energy or labor as factors of
production. The problem with this view is that it forgets that at least a
hundred years ago, the interaction of several technologies--electricity,
the internal combustion engine, oil, steel, and plastics--had already made
knowledge a key input to production processes. And it was the creation of
the first industrial research laboratories early in this century such as
the General Electric Laboratory that propelled knowledge to this key
position. There were German precedents to the General Electric Laboratory,
but at least for most of the nineteenth century, these labs did testing as
opposed to research and development. The first paradigm of concentrated
intellectual resources for research and development is the General Electric
Laboratory. What the dramatic growth of computer networks has done is to
intensify the flow of knowledge even more. And although this
intensification will undoubtedly transform the nature of the economy in the
next century, one should not forget that it is a development more or less
continuous with the past. In other words, I do not believe we have reached
a new age: we simply added a new set of technologies that are interacting
with many historical trends that are at least one hundred, two hundred, or
three hundred-years old depending on which one we are talking about.

Similar remarks can be made regarding the negative aspects of computer
networks. Several software products readily available on the market allow
the transformation of computers connected to a local area network into
surveillance devices through which the management of a firm can monitor and
discipline its workers: peek at an employees screen in real time, scan data
files and e- mail, tabulate keystroke speed and accuracy (one way of
controlling worker productivity, so to speak), override passwords, and
seize control of a work station. Some of these software packages, by the
way, don't even hide the fact that they are basically surveillance
packages. One is called Peek-n-Hide, Peek-n-Spy, or something like that.
Clearly network management software poses distinct dangers to privacy and
individual control of work activity. But it would be wrong to blame
computer technology for it. Computers are merely intensifying a process
that is at least two hundred years old, a process in which workers were
progressively deskilled as their daily activities were transformed into
fixed routines and their skills were transferred to machines. Military


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