hydrarchist writes:

"Economic Orthodoxy and the Information Commons:
An
Interview With Michael Perelman"

Frederick Emrich, www.info-commons.org

Economics is a social science concerned with the production,
distribution, and consumption of resources to the fulfillment of human
desires. In some estimations, economics is the most "scientific"
of the social sciences because it has constructed powerful analytical
models and tools for developing our understanding of these processes.
Economics -- or at least the appeal to the idea of economics -- plays
an important role in policymaking. This is true not only of policymaking
with respect to physical goods, but also with respect to information.

Developing a full understanding of the information commons
means understanding: how information can be seen as a distinctive resource
(or set of resources); how informational resources are produced, consumed,
and distributed; how the accessibility of information is an essential
factor in its utility; and how policymaking can help to build or to
destroy a vibrant information economy. In short, understanding the information
commons requires that we understand the information economy, in the
broadest sense of that term.

Michael Perelman is Professor of Economics at California
State University at Chico. He has spent a significant amount of energy
addressing economic issues related to information. Although he is a
professor of economics, although he teaches courses in a university
economics department, and although he holds a doctorate in economics
from a major U.S. university, Perelman has called himself a "lapsed
economist" because he questions the validity of much of what passes
for "economic orthodoxy." His most recent book, Steal This
Idea: Intellectual Property Rights and the Corporate Confiscation of
Creativity (Palgrave 2002), focuses on the destructive influence
of strong intellectual property rights in the areas of science and technology.

As part of a continuing project to build an understanding
of the information economy, info-commons.org editor Frederick Emrich
recently conducted this interview with Perelman.IC: You have described yourself as a
"lapsed economist," someone who, despite holding a Ph.D. in
economics and teaching in an economics department, questions the validity
of the prevailing economic orthodoxy. This orthodoxy seems to hold sway
both over initiates and over those with little or no economic training.
Given the centrality of economics to policymaking, what should the uninitiated
understand about economic orthodoxy?

Michael Perelman: I think understanding the limitations
of economic orthodoxy is the most important thing. You've heard the
joke about the chemist, the physicist, and the economist on a desert
island with only a tin can of food to eat? The chemist wonders how he
can dissolve the can, the physicist considers how he can break the can
open using force, and then the economist pipes in and says, "assume
we have a can opener."

The economic theory that we use, while it's very tight,
depends upon very, very severe assumptions that are never met in the
real world. Once you can see that the emperor has no clothes, then you
can go on and understand that some of what economists say still makes
sense. But you have to realize the limitations of economic theory. You
can't allow it to be used as a club to silence anyone who disagrees
with market orthodoxy.

IC: In Steal This Idea, you argue that the
shift toward ever-stronger property rights in information enriches a
few people in society while undermining basic social, democratic, and
scientific values. These are values that seem to be ignored in much
of economic discourse, or perhaps subsumed into assumptions about market
freedom. Are there ways that these values might be integrated into economic
analysis, or that economic analysis might be "embedded" into
a system of wider social values, rather than the other way around?

MP: I don't think you'll ever get economic analysis
directly embedded into a wider system of social values. You can do so
within some limits once people are already conditioned to accept those
values. For example, I could give you an economic analysis showing that
selling child pornography or selling dope to children is "rational"
because markets are the most efficient method of organizing human activity.
But here, most people's value systems will lead them to say that these
are inappropriate activities. But I don't think you can assert values
that are not widely accepted and say they should take precedence over
economics. Incorporating values requires a great deal of work beforehand
in making people become sympathetic to those values.

In terms of intellectual property, I think that it would
be more fruitful to understand its long-run detrimental effects. Business
applies a dangerously short-run perspective, in which managers just
look toward the next quarter. With the recent corporate scandals, we
can see that this perspective leads to very unproductive, even destructive
behavior.

If you were to consider its long-run effects, you would
see that intellectual property today is a system that is taking advantage
of a field that is already prepared. You can think of it as comparable
to a village where people enter a field of planted crops and take the
food. They may say, "Look at how efficient I can be at producing
all this food at very low cost." But if you take a longer-run perspective
you'll say, "Well, if you just have people rushing in and taking
whatever they want, then who is going to plant the field?"

The interesting part of that perspective is that it is
very, very similar to what the supporters of intellectual property argue
in their short-run defense of intellectual property rights. That is
they will say, if I go out and steal their music by downloading it without
paying for it, how will you get the supply of new music replenished?
What I would say is, music has a short life-cycle. There is a period
of a few weeks or a few months to create the music and get it out into
the market. Science, which is of greater concern to my analysis, has
a life cycle of maybe 20 years, 40 years, 60 years. And by stifling
the kinds of public science that are so important, there the costs won't
be apparent for a short period of time. It will be like rushing into
the field and stealing the crops. But because we are not replenishing
the field - because we are not producing enough basic science right
now - we're going to be in trouble in the long run. So in a sense you
take the same argument that the intellectual property holders use to
defend what they do, and say that there is something much more important
going on in the background -- a longer cycle, a deeper cycle -- and
you people are just taking without putting anything back.

IC: Steal This Idea is primarily concerned
with the effects of intellectual property on science and technology.
You have indicated that the processes that lead to useful scientific
knowledge are characterized by the need to take time in developing ideas
and by the need for collaboration, and you have argued that strong intellectual
property rights are barriers to both. Given the value that we place
on scientific and technological information, there are important reasons
for this focus. On the other hand, despite the shorter economic life-cycle
that characterizes music (among other intellectual endeavors), many
people would argue creativity in this area is also collaborative and
that strong property rights here have a similar detrimental effect on
innovation. Would you agree with this, or does the shorter life-cycle
change things here?

MP: In science, intellectual property rights create
serious problems by generating secrecy and litigation. I'm not sure
that the same problems would occur with music. I have not thought as
much about the effect of intellectual property rights on the creative
arts as I have about science.

IC: Supporters of the idea of an information commons
argue that having an effective commons is crucial not only for protecting
"non-economic" values, but also for ensuring the vitality
of information markets. We maintain that the commons is an important
resource from which material can be drawn both for market and for non-market
uses, and that enclosing the commons has a negative effect on both kinds
of uses. This seems to conflict with much of economic orthodoxy, which
sees strong property rights as essential and a commons as a resource
that may be depleted from overuse or wasted because there is little
incentive for development. Despite the "public goods" and
other exceptions, this orthodoxy still seems to dominate. What ideas
would you suggest that might support the idea of the commons in economically-grounded
argument?

MP: I would go back to the importance of the long-term
replenishment of ideas. What we are doing is stifling ideas by creating
an atmosphere of secrecy, of litigation, and of restriction, all of
which will harm the system's ability to create important ideas in the
long run. The idea that information should be private property is absolutely
new, absolutely untested, and in my mind absolutely destructive. Again,
I would go back to this question of long-term replenishment and say,
"Where do you see the private incentives for long-term replenishment?"
If you think about the way the system works today, the private sector
is very, very good at taking deep, basic, scientific insights and eventually
turning them into marketable commodities. But at the same time what
they are doing is destroying the system of creating deep, basic, scientific
insights by using their financial leverage to force science into devoting
more attention to the moneymaking process.

IC: Destroying that system through setting up property
barriers?

MP: Through property and also by setting up incentives.
If you think about what happens in the university community, there are
very strong incentives to do things that will help this short-term extraction
of information from the commons. There is very little being done in
basic science, because no business has a particular interest in seeing
that basic science be done. Basic science may not do anything for the
business for 10, 20, 30 years. Even worse, the basic science is most
likely to be useful in areas unrelated to that particular business.

IC: The centrality of economic concerns to the
development of information policy leads many people interested in preserving
the commons to seek out experts who might be able to develop economic
arguments that support the commons. For example, Larry Lessig and the
team who worked on Eldred v. Ashcroft obtained friend of the
court briefs from prominent economists saying there was no economic
justification for applying the Sonny Bono Copyright Term Extension Act
to works already in existence.

However, in talking to economists, supporters of the commons
often find that it is difficult to achieve real understanding. In part,
this seems to be a result of differences in vocabulary. Many of the
terms used by economists, such as "rationality" and "efficiency"
seem very familiar to us, but it is apparent that they are employed
by economists in ways that bear little resemblance to their everyday
usage. A related problem, and perhaps even more significant, is that
economists often appear to view the world very differently from librarians
and other supporters of the commons. Their assumptions about how the
world works appear fundamentally different. Are there any suggestions
you can offer for how one might bridge this linguistic and analytical
divide?

MP: Obviously, you don't create an incentive if
you put an extension on the copyright of Mickey Mouse. Walt Disney isn't
going to come back from the dead to improve his Mickey Mouse concept
just because there is a longer copyright. There's absolutely no way,
by any stretch of the imagination, that you will improve an existing
work by extending the copyright. But economists are trained with Pavlovian
efficiency to believe that anything that is creating an incentive for
an immediate profit is desirable. Without any consideration of what
the other effects might be, if you wave a flag in front of them and
say, "Would you extend copyright to get people to produce more
and develop more?" they will automatically say, "Yes, yes,
that's a good thing."

You're absolutely correct to point to an analytical divide.
It is almost impossible for the uninitiated to understand economic thought
without sitting down with an economist one-to-one and taking apart that
person's assumptions. But because they'll be talking to you in jargon,
I think it will be difficult for most people to really understand what's
behind the economists' theory.

And because their theory is so inbred, and because they
will speak so quickly and with such authority, very few people will
be able to enter into a dialogue. It will be a monologue in which the
economist is just trying to teach an "ignorant person" how
things work.

IC: That seems doubly difficult because economists
use terms that appear frequently in everyday language, but the meanings
they give those words are very different from their everyday meanings.

MP: I tell my students in my introductory classes
they are going to learn a new language. It sounds like English, but
it's economish, and they have to learn to translate the terms because
ordinary people don't speak the language even though they use the same
words. I agree with you one-hundred percent.

IC: A number of law professors, information specialists,
library associations and others have asked the World Intellectual Property
Association to hold a conference to explore the value of open and collaborative
methods of developing information. According to news reports, WIPO initially
responded favorably to the idea, but later changed its mind after the
U.S. Patent and Trademark Office voiced its opposition. From your perspective,
what sort of arguments might be mobilized in a situation like this to
support the idea that open methods could enhance, rather than detract
from the information economy?

MP: I think that there is in our society today
an almost instinctual belief that whatever is done in a market transaction
is going to be much more efficient than any other possible system. Most
people don't know how information is really produced in an academic,
scientific environment where it depends upon collaboration; that nobody
ever invents anything really, unless it is a minor, minor modification.
Science is collaborative. So what you really need is to find ways to
promote collaboration.

But of course once you start creating intellectual property
rights, then collaboration can be a threat to your own accumulation
of intellectual property. And unless we can get people to appreciate
just how invention or science is done through collaboration, I don't
think we'll get anywhere in cutting through the nonsense.

George Ackerloff, the nobel prize winning economist said,
"Who invented the fish hook? Who invented the computer? Who invented
the microchip?" It becomes impossible to identify any individual.
But once you have rewards for that individual who develops something,
people who otherwise would make a great contribution to this collaborative
effort would be inclined to keep it to themselves. Even worse, they
will have to take time that they might otherwise be using for science
to devote to questions of litigation and commerce, which would not do
anybody much good.

IC: Do you see this like the process of developing
folk music, in which you may not know the original author of a song?

MP: I'm not talking about anonymity. That is, when
you look at a great scientific process, the scientists involved are
usually quite aware who made important contributions. The thing is,
nobody can isolate the person who "invented" A, B, or C. What
scientists generally got, over and above relatively modest salaries,
was recognition. Everybody understands that some of the work that Einstein
did at the turn of the century was essential for developing modern electronics.
But Einstein never invented the computer. So those are two different
things. I don't think I'm talking about anonymous contributions where
people are like the craftsmen who made medieval cathedrals. I'm talking
about a system where their peers understood clearly that this person
has done some first-rate science. But science is never the result of
the work of one person.

IC: So perhaps we could say, if we understand this
as a process of innovation of ideas or inventions, we may be able to
look at the process and identify the key contributors, but if we look
at the object or idea that is innovated, we cannot subdivide it and
identify exactly who was responsible for what part?

MP: Absolutely. Whereas I assume, though I am not
knowledgeable about folk music, that people could listen to a song and
hear some specific technique and say, "That's something that Pete
Seeger brought in, that's something that somebody else brought in,"
without having to pay a royalty to Pete Seeger every time you use that
particular technique in your music.

IC: And we could see the need to pay a royalty
every time you use an idea developed by someone else as a barrier to
innovation?

MP: Yes. One of the things I emphasized in the
book is the idea that there are two counteracting forces in economics.
One is - and this is the side that is usually emphasized by the intellectual
property holder - that intellectual property rights create incentive
to produce ideas. The other side - and this is also in every economics
textbook - is that when you put a price on information, you create a
disincentive to use it. Yet the more you use information, the better
and more powerful it becomes. So when they make their case about incentives,
they conveniently forget that second side of the theory. There are two
contradictory forces at work here. They emphasize one and ignore the
other.

IC: In your book, The Invention of Capitalism,
you demonstrated how the early political economists such as Adam Smith
and James Steuart, despite claiming that capitalism was a self-correcting
system that did not require government intervention, advocated government
action in separating the peasant classes from their means of life. In
effect, enclosing the commons and forcing the peasant class to sell
their labor in order to survive was a precondition of "free-market"
capitalism. What lessons might this history suggest for those of us
who are concerned with the state of the commons in the early 21st Century?

MP: I guess you could say that the abuse of power
is not new. But I speculate, what would have happened if, instead of
forcing people into factories for mind numbing labor, society had followed
the lead of Robert Owen. Now Robert Owen was not a perfect person, but
what he saw was that if he provided education to his workers at the
same time he was trying to extract profit, everybody benefitted. That
is, if the workers had been seen not just as passive beasts of burden
but as potentially creative people we could have had a very different
world. If these workers had been educated, or at least given the opportunity
for education instead of having them work from sunup to sundown, eventually
killing themselves from overwork, I suspect the economy initially would
have grown a bit slower. You couldn't squeeze as much surplus out. But
in a generation or two, I am sure that the economy would have grown
much, much faster. I tried to play with these ideas in a book called,
Transcending the Economy.

IC: This past summer, a government plan to create
a "market" to predict the likelihood of acts of terror was
cancelled when members of Congress objected that the idea was immoral
and ill-advised. A number of reports held, however, that it really wasn't
such a crazy idea, and pointed to an experiment in creating a market
for predicting election results which claims to show the market outperforms
polling as a predictive instrument. How would a market to predict terror
work, and is it a reasonable idea?

MP: The idea was silly, but it was a very useful
exercise in that it demonstrated, I think, to virtually everybody that
markets are not the appropriate vehicle for taking care of everything.
I would say just as markets aren't the appropriate vehicle for predicting
acts of terror, they are not the appropriate vehicle for dealing with
science and information.

In this particular market, the craziness had to do with
the fact that the people who would be betting on this market would have
no particular information as to what would be generating terrorism.
It would be like me betting on what the next popular musical comedy
would be on Broadway. I have no idea what musical comedies are on Broadway,
or whether there are musical comedies on Broadway. For me to be betting
one way or another would not contribute any information at all.

The idea of markets is that in such a market people should
be able to take all the little bits of information they accumulate and
have all these markets piece together a larger picture. But if nobody
has any information about what's happening, then the market is inappropriate.

By the same token, markets have no idea of the long-term
consequences of scientific process and are inappropriate for trying
to determine the fate of science and technology.

IC: Thank you very much for taking the time to
talk with us.

MP: Thank you. I enjoyed it very much.

Michael Perelman is Professor of Economics at California
State University at Chico. He has written extensively on the relationship
between information and economics, and is author of several books including:
Steal this Idea; Transcending the Economy; and The Invention of Capitalism.

Frederick Emrich is editor of www.info-commons.org and
www.commons-blog.org.