The kernel for this post is a comment and a question from Stephen Smoliar on a recent post of mine. [I think this post should come with a health warning on its length and its subject matter. You have been warned :-) ]
Gresham’s Law, simply put, states that Bad Money Drives Out Good.
If there is “Something” commoditised and in circulation, with real and measurable intrinsic value, this “Something” can be replaced by “Something Else” with lower intrinsic value, provided the Something Else has a way of having its artificial value upheld or warranted. Please do look at the linked Wikipedia entry if you are not familiar with the term, rather than rely on any of my mutterings.
Is there a Gresham’s Law for information? Not yet. Could there be a Gresham’s Law for information? There will be, if we let it happen. Should it happen? I think not; I hope not.
- Information, particularly digital information, is an extreme nonrival good
- For digital information to have value, we (the consumers/producers of information) must impute that value to information
- That imputation of value should not come from seeking to make an abundant commodity scarce, but from new ways of imputing value to digital information
- We already have new ways of imputing value to such information
- The velocity of information is increasing, and traditional responses will not scale
We have the power to prevent Gresham’s Law from being applicable to information. It is up to us.
Let me now take each point in turn.
Information, particularly digital information, is an extreme nonrival good.
- The economic basis for intellectual property is nonobvious, to say the least. Unlike most forms of property, intellectual property is almost unique in requiring state support for its very existence. While it is helpful to have state protection for a plot of land, it can also be protected by, for instance, putting a fence around it, and a chair can be protected by sitting on it. Such acts of protection express your possession of your property. Information is not just an extreme nonrival good, in that many people can enjoy its benefits at the same time; information is also unusual in that ownership over it cannot be expressed through a public act of possession. You can possess information if you keep it to yourself — in which case it remains private, and nobody knows what it is that you possess. As soon as you make public the information you claim to own, it is public information that everyone can access since you no longer have any natural control over it. The extreme nonrival nature of information means that any expression of possession you make over it, after publishing it, is impotent, and your “ownership” of published information can only be guaranteed through external support, such as by the state.
- The external protection of such a hard-to-possess form of property also runs against the gradient of economic sense. Information can be reproduced infinitely with no inherent marginal cost of reproduction — any cost is solely related to the medium of production. Since something with a zero marginal cost of reproduction is clearly not scarce, it also has no value that can be naturally protected.
The extreme nonrival nature of information is something to be cherished, to be nurtured, to be protected.
For digital information to have value, we (the consumers/producers of information) must impute that value to information
This time I shall quote from Norbert Weiner. In a book titled Extrapolation, Interpolation, and Smoothing of Stationary Time Series, he has this to say:
Let us now turn from the study of time series to that of communications engineering. This is the study of messages and their transmission, whether these messages be sequences of dots and dashes, as in the Morse Code or the teletypewriter, or sound-wave patterns, as in the telephone or phonograph, or patterns representing visual images, as in telephoto services and television. In all communication engineering —[….]— the message to be transmitted is represented as some sort of array of measurable quantities distributed in time. [……] For the existence of a message, it is indeed essential that variable information be transmitted. The transmission of a single fixed item of information is of no communicative value. We must have a repertory of possible messages, and over this repertory a measure determining the probability of these messages.
From Weiner to Winterson. Jeanette Winterson has this to say about reading:
Good books are detonating devices, able to trigger something in the mind of the reader — a memory perhaps, or a revelation, or an understanding not possible by any other means…..The introverted nature of reading is part of its power. No one knows what you are thinking as you read. No one can see what changes might be taking place under the surface of your silent repose. It is this unaccountability to external authority that makes reading both defiant and an act of free will.
Information itself has no value. We have to impute that value, by interpreting it, giving it meaning, giving it credence. Esther Dyson covered some of this ground in a recent post in her new blog. Stephen Smoliar was on a parallel path in his recent post. The whole Semantic Web concept is built around how we can impute meaning, and therefore value, to the bits. And it is we who do that imputing.
Through meaning and interpretation comes value. Remember that the only fact on a financial statement is the cash position; everything else is conventional representation. And in this context, think Enron. Think Sarbanes-Oxley. Think revenue recognition. Think back-dating of options. It is through meaning and interpretation that information has value.
That imputation of value should not come from seeking to make an abundant commodity scarce, but from new ways of imputing value to digital information
The more I think about it, the more I worry about the “evolutionary” response to freeriders and to vandals, as we increase the number of blocks and filters we place on the World Live Web, on the Writable Web. People like Doc and Esther and Chris and Cory and Ross have successfully hammered the idea of the web being live and writable into my head, and now it won’t go away.
Clay Shirky first brought this to my attention, and it seemed reasonable. Innovations adapt to survive and thrive; for things like Wikipedia, he suggests that increased governance is an evolutionary adaptation necessary for survival. I have tended to agree with him, but now I’m not so sure. I think the retrograde nature of the adaptation is a cause for concern, and that we ought to look at new governance models, not variations of the old.
On the inside front cover of Democracy and The Problem of Free Speech, Cass Sunstein is quoted as follows: “Our government now protects speech that causes harm yet forbids speech that is essential.” I have this growing fear that we will live with far too many unintended and unwished-for consequences if we fall into the Increased Governance trap for community information. It is the community that creates the information, maintains it, corrects it where needed, imputes value to it, consumes it, archives it. And we must keep it that way.
We already have new ways of imputing value to such information
Linus’s Law, Given Enough Eyeballs, All Bugs Are Shallow, has itself been exposed to a good many eyeballs. Blogs and wikis are social-software instances where the same Law holds true. The opensource movement has already proven the worth of the Law; let us not give up now and revert to prior, and potentially destructive, governance models.
And we have new ways, ways that make use of the power of emergence a la Steven Johnson, of the power of democratised innovation a la von Hippel and Benkler. Ways like Reputation. Ways like Community Ratings and Collaborative Filtering. Ways like improving the concepts and implementation of the Semantic Web. Ways like better Pattern Recognition and Contextual Search, as Esther suggested. If you want examples, take a look at what Tom Bell (of the Chapman University School of Law) is doing. I quote from the abstract:Copyrights and patents promote only superficial progress in the sciences and useful arts. Copyright law primarily encourages entertaining works, whereas patent law mainly inspires marginal improvements in mature technologies. Neither form of intellectual property does much to encourage basic research and development. Essential progress suffers.
Prediction markets offer another way to promote the sciences and useful arts. In general, prediction markets support transactions in claims about unresolved questions of fact. A prediction market specifically designed to promote progress in the sciences and useful arts – call it a scientific prediction exchange or SPEx – would support transactions in a variety of prediction certificates, each one of which promises to pay its bearer in the event that an associated claim about science, technology, or public policy comes true. Like other, similar markets in information, a scientific prediction exchange would aggregate, measure, and share the opinions of people paid to find the truth.
Because it would reward accurate answers to factual questions, a SPEx would encourage essential discoveries about the sciences and useful arts. Researchers and developers in those fields could count on the exchange to turn their insights into profit. In contrast to copyrights or patents, therefore, a SPEx would target fundamental progress. Furthermore, and in contrast to copyrights and patents, the exchange would not impose deadweight social costs by legally restricting access to public goods. To the contrary, a scientific prediction exchange would generate a significant positive externality: Claim prices that quantify the current consensus about vital controversies
I’m not saying we have the right answers already. What I am saying is that we need to look for the right answers; what I am also saying is that current retrograde governance suggestions are inappropriate.
The velocity of information is increasing, and traditional responses will not scale
Eggs Igino had been studying Economics for six years, and he’d never seen such a perfect display of the Third Law. He sat down at the small round table in the kitchen and tried to gather his thoughts. The First Law of Information Economics was simple. Knowledge is power. The Second Law was only a little more complicated: Knowledge is not a candy bar. If you eat a candy bar, the candy bar is gone. And if you give it to a friend, then he gets to eat it and you don’t. But with knowledge, you can’t use it up, and you can’t get rid of it by giving it away. This leads to the corollary to the Second Law: Word travels fast. Knowledge spreads much faster and more easily than any physical product, mostly because telling your friends doesn’t make you poorer. If knowledge spreads effortlessly to everyone, and if knowledge is power, then one logical conclusion was that everyone would have power. The other logical conclusion was that the power of knowledge was fleeting and temporary and we would all be powerless. Eggs Igino pulled a paper napkin off the breakfast cart and wrote on it with one of the corporate pens in light blue ink:
1. Knowledge is Power!
2. Knowledge is not a Candy Bar
2(b). Word Travels Fast
He stared at his theories. He underlined each of them twice as he rehearsed their logic. It was just so beautiful to see the salespeople so powerless and their world going to hell. For an intellectual like Igino, it was as beautiful as mitochondria in a petri dish or a mouse in a maze. Then he wrote below the other lines in large, energetic, slashing letters:
3. Power is Temporary!!!
We have learnt about the power of many. We have learnt about the corruptions that take place when reading/writing power is in the hands of a few. History is not just littered with examples, even the history we read has had its fair share of corruption.
Let’s not allow Gresham’s Law to become applicable to Information. Let’s keep traditional governance models where they deserve to be, filed somewhere even Google cannot find, and let’s concentrate on using the power of many, of peer review and rating and pressure and action.
I realise this may offend some of you. No offence intended, I am doing what I normally do, thinking aloud about things that matter to me. Always happy to be proven wrong. Comments welcome.
How do I love thee Wikipedia? Let me count the links.