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Everything old is new again: Adam Smith, the Wizard of Web 2.0,

the Rhetorician of Remix

Copyright Future: Copyright Freedom, Canberra, 27th May, 2009

Nicholas Gruen

Member of the Review Panel into Australia’s National Innovation SystemConsultant to Department of Finance and Deregulation and AGIMO on

continuous improvement in regulation and Government 2.0

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Outline– James Boyle’s quest for a new ‘politics of IP’– Smith’s intellectual project

• The invisible hand and public goods• The interactivity of human culture• Human motivation

– Web 2.0• The invisible hand and public goods• The interactivity of human culture• Human motivation

– Concluding comments on copyright

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Boyle’s Quest– A new politics of Intellectual Property

[C]ourts are traditionally much less sensitive to First Amendment, free speech and other "free flow of information arguments" when the context is viewed as private rather than public, or property rather than censorship. Thus, for example, the Supreme Court will refuse to allow the state to ban flag burning, but it is quite happy to create a property right in a general word such as "Olympic," and allow the word to be appropriated by a private party which then selectively refuses public use of the word. Backed by this state-sponsored "homestead law for the English language," the United States Olympic Committee (USOC) has decreed that the handicapped may have their "Special Olympics," but that gay activists may not hold a "Gay Olympics." The Court saw the USOC's decision not as state censorship, but as a mere exercise of its private property rights. (Emboldened, Chief Justice Rehnquist applied the same argument to the American flag.)

– Are we there yet?

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Smith’s intellectual project

Reclaiming self-interest from “those whining and melancholy moralists who are perpetually reproaching us with our happiness, while so many of our brethren are in misery.”

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Smith’s intellectual project• Enlightened self interest => virtue • The Newtonian Method or ‘enchaînement’

“an immense chain of the most important and sublime truths, all closely connected together by one capital fact, of the reality of which we have daily experience”

– Economics - ‘truck barter and exchange’– Social Psychology – the principle of sympathy

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Sympathy• Not just taking the side of the other

– Perhaps mostly not that • Sympathy is social epistemology – how we know what it’s

like for othersAs we have no immediate experience of what other men feel, we can form no idea of the manner in which they are affected, but by conceiving what we ourselves should feel in the like situation. Though our brother is upon the rack, as long as we ourselves are at our ease, our senses will never inform us of what he suffers. They never did, and never can, carry us beyond our own person, and it is by the imagination only that we can form any conception of what are his sensations.

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The search for approbation• We crave approbation and fear disapproval • We internalise the social mores of our society • Conscience is the ‘impartial spectator’ • Smith the rhetorician

– Praising virtue – Blaming vice

• Every savage undergoes a sort of Spartan discipline, and by the necessity of his situation is inured to every sort of hardship. . . Fortune never exerted more cruelly her empire over mankind, than when she subjected those nations of heroes to the refuse of the jails of Europe, to wretches who possess the virtues neither of the countries which they come from, nor of those which they go to, and whose levity, brutality, and baseness, so justly expose them to the contempt of the vanquished.

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The invisible hand and public goods• In being the apostle of self-interest, Smith anatomises the

public goods necessary for self-interest to serve the common good

• Each individual strives to employ his own capital as profitably as possible

– Which ultimately serves the common good• He generally, indeed, neither intends to promote the publick interest,

nor knows how much he is promoting it. . . . . [H]e intends only his own security; and by directing [his] industry [and capital] in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it.

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The invisible hand and public goods• The invisible hand is not a public good. It merely optimises the

distribution of private goods• Public goods are non-rival and non-excludable

– Rendering private provision • Difficult if not impossible and • Inefficient

• But public goods are both precedent and consequent on a market• Precedent - Public mores and support of contracts and fair dealing• Consequent - Prices and liquidity arising from a market

• There are other public goods in Smith including – The habits of trade underpinning a currency – Language itself. Smith wrote his own treatise on the emergence of language

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Emergent public goods• In economics the paradigmatic problem of public goods is

how to fund them– How to pay for a good on which everyone can free ride?

• But just as these ‘Smithian’ public goods are spontaneous and even unintended consequences of social interaction, they are also unpaid.

• There is no problem of funding them!

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Web 2.0: the burgeoning of emergent public goods

• The pubic goods of Web 2.0 require no external funding• Open source software is sometimes driven by altruism

– But mostly by private problem solving – With code donated back to the project to have it incorporated in

subsequent distributions– Ditto

• Flickr• Wikipedia• Blogging

– Though there are other motives also . . .

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Human production: Human motivation

• For Smith human sociality is the foundation of all that is truly human

– Smith’s ‘oratorical’ theory of the bargain• “Markets are conversations” - the cluetrain manifesto• The engine behind Web 2.0 is human sociality

– Economists/business people/ pundits regularly underestimate its power

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Interactivity > passive receipt of broadcasting

• We routinely underestimate the importance of social interactivity and overestimate the value of ‘content’

– The use of telephones for social purposes– The use of e-mail on ARPANET– SMSs – Instant Messaging– Facebook is a fad

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Cable TV

$0.0001

Wired Phone

0.0800

Mobile Phone

3.0000

SMS

3000.0000

HT: Andrew Odlyzko

Price/MB

Interactivity > passive receipt of broadcasting

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Telephone $199.3 $256.18.7%U.S. Postal Service 49.6 58.3 5.5Advertising 151.7 187.5 7.3Motion pictures 53.5 63.0 5.6

movie theaters 6.2 7.6 7.0video tape rentals 7.0 7.2 0.9

Broadcast industriestelevision broadcasting 31.1 36.9 5.9radio broadcasting 10.5 13.5 8.7newspapers 47.2 55.3 5.4magazines 17.4 19.9 4.6

Consumer spending on “content” 113.9 133.5 5.4

HT: Andrew Odlyzko

1994 1997 annualIndustry revenues revenues growth

(billions) (billions) rate

Interactivity > broadcasting

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Smith on human motivation• To what purpose is all the toil and bustle of this world? . . . Is it to

supply the necessities of nature? The wages of the meanest labourer can supply them. . . . To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it. It is the vanity, not the ease, or the pleasure, which interests us.

Adam Smith• Basically, when you get to my age you'll really measure your success

in life by how many of the people you want to have love you actually do love you.

Warren Buffett

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Smith on human motivation• What most of all charms us in our benefactor, is the concord between

his sentiments and our own, with regard to what interests us so nearly as the worth of our own character, and the esteem that is due to us. We are delighted to find a person who values us as we value ourselves, and distinguishes us from the rest of mankind, with an attention not unlike that with which we distinguish ourselves. To maintain in him these agreeable and flattering sentiments, is one of the chief ends proposed by the returns we are disposed to make to him.

• Science seeks to relieve the “chaos of jarring and discordant appearances, to allay this tumult of the imagination, and to restore it, . . . to that tone of tranquility and composure, which is both most agreeable in itself, and most suitable to its nature.”

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Web 2.0: human, all too human . . .

Image per: xkcd.com

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Conclusion• Smith showed us how crucial public goods emerge from life itself

– From the restlessness of human sociality• Without further ‘funding’

• Web 2.0 is showing us all over again• Smith shows us how this is about humans expressing their humanity

together– not just economic efficiency

• Should I have free use of the term ‘Web 2.0’– Economics says “yes”– So does ‘humanity’, and commonsense – So does freedom and all those values about freedom of association and speech

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Conclusion

• Smith showed us how the labour of human culture is built from the bottom up, from the interactions of everyday life

• These things are left alone by legal restraint except in so far as they may sometimes step in to enforce social norms

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ConclusionThe man of system . . .is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess–board. He does not consider that the pieces upon the chess–board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess–board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

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Conclusion• It seems surprising to me that any employer would be reluctant to let

hackers work on open-source projects. At Viaweb, we would have been reluctant to hire anyone who didn't. When we interviewed programmers, the main thing we cared about was what kind of software they wrote in their spare time. You can't do anything really well unless you love it, and if you love to hack you'll inevitably be working on projects of your own.

• Paul Graham