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A. Carpools

A. Renewable Resources
B. Rapidly Decaying Resources
C. Lumpiness in General
D. Shareable Goods: Conclusion

A. Transaction Costs
1. Choosing a Transactional Framework
2. The General Shape of Transaction-Costs-Based Choice Among Frameworks
3. Transaction Costs Analysis of Markets and Sharing
a. Crispness
b. Rendering Requirements and Lossiness
B. Motivation
C. Motivation and Information

A. Sharing Is a Common and Underappreciated Modality of Production
B. Sharing Is Sensitive to Technology Because Individual
Efficacy Is Subject to Physical-Capital Constraints
C. Decentralized, Loosely Coupled Social Sharing Is an Economically Attractive Modality of Production

A. Wireless Communications Regulation
B. Information, Knowledge, and Cultural Production Policy
C. Network Design for a Network of Shareable Goods


The world's fastest supercomputer and the second-largest commuter transportation system in the United States function on a resource management model that is not well specified in contemporary economics. Both SETI@home, a distributed computing platform involving the computers of over four million volunteers, and carpooling, which accounts for roughly one-sixth of commuting trips in the United States, rely on social relations and an ethic of sharing, rather than on a price system, to mobilize and allocate resources. Yet they coexist with, and outperform, price-based and government-funded systems that offer substitutable functionality. The sharing practices that have evolved around them are not limited to tightly knit communities of repeat players who know each other well and interact across many contexts. They represent instances where social sharing is either utterly impersonal or occurs among loosely affiliated individuals who engage in social practices that involve contributions of the capacity of their private goods in patterns that combine to form large-scale and effective systems for provisioning goods, services, and resources.

(Note: Computers as communications devices do have demand-side returns to scale, or network externalities. But as processing units, the paramount value of personal computers is the intrinsic value of their computation speed and memory, not the network externalities they enable owners to capture. SETI@home and other distributed computing projects harness these intrinsic-value aspects of personal computers rather than their capacities as communication devices.)

This Essay seeks to do two things. The first three Parts are dedicated to defining a particular class of physical goods as "shareable goods" that systematically have excess capacity and to combining comparative transaction costs and motivation analysis to suggest that this excess capacity may better be harnessed through sharing relations than through secondary markets. These first three Parts extend the analysis I have performed elsewhere regarding sharing of creative labor, like free software and other peer production, to the domain of sharing rival material resources in the production of both rival and nonrival goods and services. The characteristics I use to define shareable goods are sufficient to make social sharing and exchange of material goods feasible as a sustainable social practice. But these characteristics are neither absolutely necessary nor sufficient for sharing to occur. Instead, they define conditions under which, when goods with these characteristics are prevalent in the physical capital base of an economy, it becomes feasible for social sharing and exchange to become more salient in the overall mix of relations of production in that economy. The fourth Part is then dedicated to explaining how my observation about shareable goods in the domain of physical goods meshes with the literature on social norms, social capital, and common property regimes, as well as with my own work on peer production. I suggest that social sharing and exchange is an underappreciated modality of economic production, alongside price-based and firm-based market production and state-based production, whose salience in the economy is sensitive to technological conditions. The last Part explores how the recognition of shareable goods and sharing as a modality of economic production can inform policy.

Shareable goods are goods that are (1) technically "lumpy" and (2) of "mid-grained" granularity. By "lumpy" I mean that they provision functionality in discrete packages rather than in a smooth flow.

(Note: Unlike the nonprofit literature, my focus is not within the boundaries of firms - whether for- or nonprofit - but on sharing among individuals in informal associations more resembling markets in the price-based economy than firms.)

A PC is "lumpy" in that you cannot buy less than some threshold computation capacity, but once you have provisioned it, you have at a minimum a certain amount of computation, whether you need all of it or not. By "granularity" I seek to capture (1) technical characteristics of the functionality-producing goods, (2) the shape of demand for the functionality in a given society, and (3) the amount and distribution of wealth in that society. A particular alignment of these characteristics will make some goods or resources "mid-grained," by which I mean that there will be relatively widespread private ownership of these goods and that these privately owned goods will systematically exhibit slack capacity relative to the demand of their owners. A steam engine is large grained and lumpy. An automobile or PC is mid-grained in the United States, Europe, and Japan, but large grained in Bangladesh. Reallocating the slack capacity of mid-grained goods - say, excess computer cycles or car seats going from A to B - becomes the problem whose solution can be provided by secondary markets, sharing, or management. I offer reasons to think that sharing may have lower transaction costs, improve the information on which agents who own these resources act, and provide better motivation for clearing excess capacity. While economists might prefer to call these goods "indivisible" rather than "lumpy," that terminology is less intuitive to non-economists, and, more importantly, it emphasizes a concern with how best to price capacity that is indivisible and coarsely correlated to demand, glossing over the way in which the granularity affects the pattern of distribution of investment in these goods in society. My own concern is how a particular subclass of indivisible goods - those that are mid-grained as I define them here - creates a feasibility space for social sharing rather than requiring a particular model of second-best pricing. While indivisibilities do create challenges for efficient pricing, in my analysis they create conditions in which social relations may provide a more efficient transactional framework to provision and exchange those goods than would the price system.

In particular, both markets and managerial hierarchies require crisp specification of behaviors and outcomes. Crispness is costly. It is not a characteristic of social relations, which rely on fuzzier definitions of actions required and performed, of inputs and outputs, and of obligations. Furthermore, where uncertainty is resistant to cost-effective reduction, the more textured (though less computable) information typical of social relations can provide better reasons for action than the persistent (though futile) search for crisply computable courses of action represented by pricing or managerial commands. Moreover, social sharing can capture a cluster of social and psychological motivations that are not continuous with, and may even be crowded out by, the presence of money. Pooling large numbers of small-scale contributions to achieve effective functionality - where transaction costs would be high and per contribution payments must be kept low - is likely to be achieved more efficiently through social sharing systems than through market-based systems. It is precisely this form of sharing - on a large scale, among weakly connected participants, in project-specific or even ad hoc contexts - that we are beginning to see more of on the Internet; that is my central focus.

Social sharing and exchange is becoming a common modality of producing valuable desiderata at the very core of the most advanced economies - in information, culture, education, computation, and communications sectors. Free software, distributed computing, ad hoc mesh wireless networks, and other forms of peer production offer clear examples of such large-scale, measurably effective sharing practices. I suggest that the highly distributed capital structure of contemporary communications and computation systems is largely responsible for the increased salience of social sharing as a modality of economic production in those environments. By lowering the capital costs required for effective individual action, these technologies have allowed various provisioning problems to be structured in forms amenable to decentralized production based on social relations, rather than through markets or hierarchies.

My claim is not, of course, that we live in a unique moment of humanistic sharing. It is, rather, that our own moment in history suggests a more general observation: that the technological state of a society, particularly the extent to which individual agents can engage in efficacious production activities with material resources under their individual control, affects the opportunities for, and hence the comparative prevalence and salience of, social, market (both price based and managerial), and state production modalities. The capital cost of effective economic action in the industrial economy shunted sharing to its peripheries - to households in the advanced economies, and to the global economic peripheries that have been the subject of the anthropology of gift or common property regime literatures. The emerging restructuring of capital investment in digital networks - in particular the phenomenon of user-capitalized computation and communications capabilities - is at least partly reversing that effect. Technology does not determine the level of sharing. But it does set threshold constraints on the effective domain of sharing as a modality of economic production. Within the domain of the feasible, the actual level of sharing practices will be culturally driven and cross-culturally diverse.

- "'Sharing Nicely': On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production," Yochai Benkler http://www.benkler.org/, Professor of Law, Yale Law School, First published in "The Yale Law Journal," Volume 114, Pages 273-358, October 22, 2004 http://www.yale.edu/yalelj/112/BenklerWEB.pdf

Copyright © 2004 Yochai Benkler. The following notice appears on the correspondence page of the issue in which the full text was first published:

This work is licensed under the Creative Commons Attribution Noncommercial License until December 1, 2005. After December 1, 2005, this work is licensed under the Creative Commons Attribution License.

To view a copy of these licenses, visit http://creativecommons.org/ or write to Creative Commons, 559 Nathan Abbott Way, Stanford, California 94305, USA.” Any use under either license must carry the notation “First published in The Yale Law Journal, Vol. 114, pp. 273-358.”

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Post Date: February 14, 2005 at 7:55 AM CST; 1355 GMT