Thursday, November 10, 2011

Stewart Brand and the Economics of Information

In 1984, Stewart Brand said to Steve Wozniak: "On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other."

It seems to me Brand was committing the classical (literally - going back to Aristotle) fallacy of separating and then confusing "use-value" with "exchange-value". There is not a tension here. Information as a good should naturally be cheap and it should have a high consumer surplus. Production of original information may be extremely challenging, which changes the marginal cost of information if what you're interested in is new information. Reproduction of new information for distribution after it has been produced is quite cheap. In that sense, there is a real tension between the producers of new information and the producers of reproduced information. But the fact that information is extremely valuable doesn't really introduce a tension at all.


  1. "It seems to me Brand was committing the classical (literally - going back to Aristotle) fallacy of separating and then confusing "use-value" with "exchange-value"."

    Can you expound on this?

  2. So upon cracking open Politics again, Aristotle is not as bad as some of the later writers, but only because he doesn't really try to delve into exchange value itself. He writes:

    "Of everything which we possess there are two uses: both belong to the thing as such, but not in the same manner, for one is the proper, and the other the improper or secondary use of it. For example, a shoe is used for wear, and is used for exchange; both are uses of the shoe. He who gives a shoe in exchange for money or food to him who wants one, does indeed use the shoe as a shoe, but this is not its proper or primary purpose, for a shoe is not made to be an object of barter. The same may be said of all possessions, for the art of exchange extends to all of them, and it arises at first from what is natural, from the circumstance that some have too little, others too much. Hence we may infer that retail trade is not a natural part of the art of getting wealth; had it been so, men would have ceased to exchange when they had enough. In the first community, indeed, which is the family, this art is obviously of no use, but it begins to be useful when the society increases. For the members of the family originally had all things in common; later, when the family divided into parts, the parts shared in many things, and different parts in different things, which they had to give in exchange for what they wanted, a kind of barter which is still practiced among barbarous nations who exchange with one another the necessaries of life and nothing more; giving and receiving wine, for example, in exchange for coin, and the like. This sort of barter is not part of the wealth-getting art and is not contrary to nature, but is needed for the satisfaction of men's natural wants. The other or more complex form of exchange grew, as might have been inferred, out of the simpler. When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use. For the various necessaries of life are not easily carried about, and hence men agreed to employ in their dealings with each other something which was intrinsically useful and easily applicable to the purposes of life, for example, iron, silver, and the like. Of this the value was at first measured simply by size and weight, but in process of time they put a stamp upon it, to save the trouble of weighing and to mark the value."

    It's the old diamond and water issue. If we want to talk in terms of "use value" and "exchange value" we need to understand that exchange value is generated by marginal use value. Aristotle began this process of separating out the two "values" and then comparing them and - finding a divergence - declared one natural and one un-natural. The whole "use value as natural value" dropped off by the 17th century, but you still had this distinction being made and an underappreciation of the marginal principle that related the two.

    Brand's mistake here, I think, is the old one of saying "because information generates a lot of 'value' it ought to be 'valuable'" - ignoring the huge difference between value-as-welfare and value-as-price.


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