Infrastructure Commons in Economic Perspective

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Article: Infrastructure commons in Economic Perspective. By Brett M. Frischmann.

URL = http://www.firstmonday.org/issues/issue12_6/frischmann/index.html


Abstract and Key Argument

This essay briefly summarizes a theory (developed in substantial detail elsewhere) [1] that better explains why there are strong economic arguments for managing and sustaining infrastructure resources in an openly accessible manner. This theory facilitates a better understanding of how these fundamental resources generate value for society and how decisions regarding the allocation of access to such resources affects social welfare. The key insights from this analysis are that infrastructure resources generate value as inputs into a wide range of productive processes and that the outputs from these processes are often public goods and nonmarket goods that generate positive externalities that benefit society as a whole. Managing such resources in an openly accessible manner may be socially desirable from an economic perspective because doing so facilitates these downstream productive activities. For example, managing the Internet infrastructure in an openly accessible manner facilitates active citizen involvement in the production and sharing of many different public and nonmarket goods. Over the past decade, this has led to increased opportunities for a wide range of citizens to engage in entrepreneurship, political discourse, social network formation and community building, among many other activities.


Infrastructure

The term “infrastructure” generally conjures up the notion of physical resource systems made by humans for public consumption. A list of familiar examples includes: (1) transportation systems, such as highway and road systems, railways, airline systems, and ports; (2) communication systems, such as telephone networks and postal services; (3) governance systems, such as court systems; and, (4) basic public services and facilities, such as schools, sewers, and water systems. I refer to these resources as “traditional infrastructure.”

Two generalizations about traditional infrastructure are worth noting at the outset. First, the government has played and continues to play a significant and widely–accepted role in ensuring the provision of many traditional infrastructures. While private parties and markets play an increasingly important role in providing many types of traditional infrastructure (due to a wave of privatization as well as cooperative ventures between industry and government), the government’s position as provider, coordinator, or regulator of traditional infrastructure remains intact in most communities.

Second, traditional infrastructures are generally managed in an openly accessible manner. That is, they are managed such that the resources are openly accessible to members of a community who wish to use the resources [2]. This does not, however, mean that access is free. We pay tolls to access highways, we buy stamps to send letters, we pay telephone companies to have our calls routed across their lines, and so on. Users must pay for access to some (though not all) of these resources. Nor does it mean that access to the resource is unregulated. Transportation of hazardous substances by highway or mail, for example, is heavily regulated. The key point is that the resource is openly accessible to all within a community regardless of the identity of the end–user or the end–use [3]. As discussed below, managing traditional infrastructure in this fashion makes economic sense.

Infrastructure resources constitute an important class of resources for which society should value nondiscriminatory public access. Yet conventional economic analysis of many infrastructure resources fails to fully account for how the resources are used as inputs to create social benefits. Economists (regulators, politicians, and others) recognize that there is a tremendous demand for public infrastructure and that infrastructure plays a critical role in economic development, but exactly why there is demand, how it manifests, how it should be measured, and how it contributes to human well–being is not fully understood. Critically, many infrastructure resources act as inputs into a wide variety of socially valuable productive activities, including the production of public goods and non–market goods. These activities generate significant social welfare gains generally associated with traditional infrastructure [4].


Commons as Resource Management

This essay uses “open access” and “commons” interchangeably to refer to the situation in which a resource is openly accessible to users regardless of their identity or intended use [5]. I intentionally abstract from the institutional form (property right, regulation, norm, etc.) to focus on a particular institutional function (opening or restricting access), i.e. the management principle itself. Tying form and function together obscures the fact that the management principle can be implemented through a variety of institutional forms, which are often mixed (property and regulation, private and communal property, etc.), and not necessarily through particular forms of property rights [6]. The optimal degree of openness/restrictiveness depends upon a number of functional economic considerations related to the nature of the resource in question, the manner in which the resource is utilized to create value, institutional structures, and the community setting.

The general value of commons as a resource management principle is that it maintains openness, does not discriminate among users or uses of the resource, and eliminates the need to obtain approval or a license to use the resource. As a general matter, managing infrastructure resources in an openly accessible manner eliminates the need to rely on either market actors or the government to “pick winners” downstream. In theory, at least, this facilitates innovation in the creation of and experimentation with new uses. More generally, it facilitates the generation of positive externalities through the downstream production of public goods and non-market goods that might be stifled under a regime where access is allocated on the basis of individuals’ willingness to pay.

More Information

Full Article at http://www.firstmonday.org/issues/issue12_6/frischmann/index.html