Crisis of Value and the Ethical Economy

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* Article: The Crisis of Value and the Ethical Economy. By Adam Arvidsson, Michel Bauwens and Nicolai Peitersen. Journal of Futures Studies, May 2008, 12(4): 9 - 20



"This article argues that the information economy is split in two. On the one hand, there is the traditional capitalist economy that works with monetary incentives. This economy still handles the main part of material production: the production of cars, shoes, computer chips, and the transportation and maintenance of these goods. But immaterial production- the production of the ideas, innovations, experiences and other intangibles that virtually everybody agrees to be the most important source of value and development- is increasingly performed by another economy that does not primarily move according to monetary incentives. We provide a provisional analysis of the value logic of this non-monetary, ethical economy and point at three future scenarios in which the ethical economy challenges the hegemony of global capitalism."


Michel Bauwens:

This is a very important essay, the first one to my knowledge to directly deal with the crisis of value that results from the emergence of generalized social innovation and peer production. Or in other words: more and more use value is created, but only a small part of it can be monetized. This creates an imbalance in society, where companies are profiting from social innovation, but there is no return mechanism to fund it properly.

I wrote a Dornbin Manifesto as a Response to Adam Arvidsson on the Ethical Economy, which is not a critique, but a restatement with some additional remarks, some of which have already been incorporated in this second version of the essay.


The Crisis of Value and the Ethical Economy. By Adam Arvidsson. June 26, 2007. Version 2 without footnotes.

Adam Arvidsson:

‘We have sophisticated metrics which capture Love and Respect’

- Kevin Roberts, CEO of the Saatchi & Saatchi Ideas Company

It is becoming ever more obvious, as even the mainstream business press is acknowledging this, that the information economy is split in two; we have two economies rather than one (or three, if we include the growing criminal or informal economy which we will not treat in this paper). On the one hand, there is the traditional capitalist economy that works with monetary incentives. This economy still handles the main part of material production: the production of cars, shoes, computer chips, and the transportation and maintenance of these goods. But immaterial production- the production of the ideas, innovations, experiences and other intangibles that virtually everybody agrees to be the most important source of value and development- is increasingly performed by another economy that does not primarily move according to monetary incentives. Most people who participate in creating the enormous wealth of content that give MySpace or YouTube their market values are not in it for the money. Instead they want to build networks, make friends, show off, be cool or what have you. The same thing goes for the users who participate in the multitude of smaller, less famous sites that make up the new productive developments known as Web 2.0. Neither are the people who participate in the many business initiated user-led innovation initiatives that now proliferate, like the Nokia Concept Lounge (450.000 visitors, 4.500 Ideas submitted) or user generated advertising campaigns like Heinz tv-challenge, primarily there for the money. Indeed the very business sense behind such initiatives is that they give access to an enormous reservoir of free creativity that needs not be paid for (to be deployed either in the actual design of products or advertisements, or, more importantly perhaps, in brand building, von Hippel, 2006). The importance of such non-monetary production is however not limited to the world of on-line initiatives or web 2.0. Within companies it has long been recognized that the prime source of productivity is not what people get paid for, but what is more difficult to include in a job description: their ability to network, share knowledge and support each other, to co-create a good working environment, a marketable service or a flexible organization. Managers recognize that the best way to foster such forms of cooperation is not through monetary incentives, but rather by fostering a solid corporate culture with strong values, a strong sense of solidarity or commitment, a particular ‘mood’ or ‘vibe’ (cf. Brian & Joyce, 2006). Similarly marketers have discovered that the autonomous cooperation among consumers is an important source of brand value (Holt. 2002, Arvidsson, 2006). Finally, the ‘creative economy’ of the urban music, arts and fashion scenes, which is growing in importance as a productive externality for the creative industries proper, is not primarily motivated by monetary incentives. Most members of the ‘creative class’ do not live off their creative labour, but rather accept poor or precarious economic conditions as a (temporary, they hope) trade off for the ability to realize themselves or pursue their dreams (Florida, 2002, cf. Arvidsson, 2007).

I have chosen to call this emerging non-monetary economy an ‘ethical’ economy. Not because I necessarily believe that it is inherently better or nicer than the mainstream corporate economy. Instead, my choice of the term ‘ethical’ refers to the fact that this economy is largely coordinated by respect, peer-status, networks, friendships and other forms of inter-personal recognition; and it is geared towards the accumulation of such forms of interpersonal recognition, what sociologists would call ‘social capital’. After all ethics in the classic (pre-Kantian) sense of the term, was not primarily concerned with deciding between good and bad, but with regulating the interaction between free human beings (men) in a situation where no explicit hierarchies or obligations (whether moral or monetary) prevailed. Ethos (as opposed to nomos) was thus directly related to the ‘small world’ of interpersonal relations in an environment with no given hierarchies and a generalized contingency. Now this ‘ethical climate’ closely resembles the ‘post-modern condition’ in general (cf. Bauman, 1993), and in particular the kind of cooperative peer production that marks the productive condition of these networks (Bauwens, 2005). So this economy is ‘ethical’ in the sense that it is coordinated by a number of emergent media of interpersonal recognition (respect, peer status, networks, friendship). But it is also ‘ethical’ in the sense that its valuable product is often an ‘ethical thing’: a community, a shared value (like the appreciation of a brand or the lived values of an organization) or an affective intensity. The ethical economy mainly produces what Maurizio Lazzarato (1997) has called an ‘ethical surplus’, a social relation, a value, an affective intensity that was not there before. Indeed, we could argue that what the ethical economy really produces is (however transitory) forms of order in an increasingly fluid and contingent world: the organization of a productive process (as in a project team arising in a flexible organization), a distinction between friends and enemies (as in a MySpace network), a community, or an affective intensity (as in a music concert or a YouTube video), or the (however temporary) ability to say that something is better or more useful than something else (as in the aggregate of social judgements that results form a Google search).

An emerging structural feature of the capitalist information economy is thus that value is less based on direct command over a productive process, and more founded on the ability to organize and appropriate an external production process: to tap into the ethical economy and subsume it. This is true for Web 2.0 successes like MySpace or Google who do not primarily found their business models on the valorization of intellectual property, but on the organization of productive networks. Michel Bauwens (2005) calls this form of capital ‘netarchic’ in that it primarily exploits the formation of networks. The same model applies to less obvious cases, like the pharmaceutical company that constructs an online forum for health practitioners in order to siphon off their knowledge and innovations; the market research company that mines the data consumers freely supply in their online movement for marketable patterns; the advertising agency that lives of its ability to read new trends and forms of cool, or even the struggling ‘creative’ that acquires market value by capitalizing on her personality and network in an effort to ‘self-brand’. In this situation, value becomes increasingly based on the ability to translate the products of one, ethical economy to the standards of another, monetary economy. There is a general agreement within the management literature that, overall, the products of the ethical economy do have important monetary values, that, for example, Share-holder Value Performance and Social Value Performance correlate in the abstract, or that strongly lived corporate values do have monetary values in that they increase the efficiency of cooperation. But there is, so far, no standard measure able to determine the exact, or even approximate value of the particular products of this ethical economy. (Rather there is a proliferation of ad hoc measures that work with very different standards.)

This absence of a measure points towards a power vacuum within the information economy. There is no common measure simply because nobody has been strong enough to impose a common measure, or to put in more Nietzschian terms, to decide what the values should be. Indeed, the issue is not so much ontological as it is sociological. It is not that you cannot measure ‘ethical things’ like love or respect, there are systems that do this as we will show below. It is rather that the ethical economy presents a problem of measure for the capitalist monetary economy because it largely unfolds beyond its direct control. The situation was similar, two centuries ago. The way in which industrial capitalism established itself was by imposing its own measure of value as the societal standard, against the moral economy of peasant tradition Modern management, emerged (with Taylorist scientific management) as an attempt to break down the complex networks of craft production into simple units of worker-machine interaction that cold be measured in terms of labour time. (And modern consumerism was largely shaped by the need to impose a different conception of the value of time: that it was better spent productively to acquire more goods than idly in rest once one had accumulated enough.) Consequently, productivity could be defined as output per unit of labour time. Although this kind of measure originated with the situation of material factory production it has since been extended to various forms of immaterial labour, like the taylorized production of services at McDonalds restaurants, call-centres and increasingly, British universities. So the problem of measure is not about the nature of immaterial production. It is rather about its sociological relation to ‘the (capitalist) machine’ that mediates productive interaction within the factory or organization. Indeed, the further we move from the original situation in which this philosophy of measurement developed, the less the quantum of time spent interacting with a machine that also acts as a disciplining device (whether a material machine or an immaterial, organizational one), and the more emergent factors like networks, tacit knowledge and social organization- what Marx called ‘General Intellect’- matters, the less valid this form of measurement becomes. And we can argue that the main productive contribution of information- and communication technologies is unleashing of such General Intellect on a societal scale, which is difficult to control and measure. (And the reason why the relation between investments in ICTs and productivity growth is tenuous is precisely that productive contribution of this General Intellect largely unfolds outside of the monetary economy.) The result is a ‘crisis of value’: a lot of the actual wealth produced cannot be measured, or can only be measured with great difficulty. And what cannot be measured can hardly be managed.

In many ways the contemporary proliferation of Non Financial Performance Metrics can be read as a response to the crisis of value that confronts contemporary capitalism. Sometimes these metrics originate with NGOs or other actors who want to make their particular value agenda prevail. They are subsequently welcomed by corporations: in part because they offer new and complimentary ways to estimate their social value. Often such metrics are developed by consultancies as a way to legitimized increasingly blatant discrepancies between the market values of companies and their ‘book values’, captured by antiquated accounting systems designed to capture the material realties of industrial production. Most such systems, like brand valuation for example, are not developed to measure the empirical performance of a brand, but to provide an explanation for what is chiefly an accounting problem. The point is that these measurements have no common origin, but emerge out of a multitude of agendas and concerns, most of which are not primarily preoccupied with actual measurement. So when they are successful that is not because they work as valid measurements of some independent reality: what does a system like Buzzmetrics, that provides a quantitative estimate of how often a brand or organization is mentioned in the blogsphere, really say about its potential to make money? How does the ‘wall of codes’, where Chinese garment factories tape up the codes of conduct, imposed on them by (mostly) western subcontractors relate to worker rights or environmental standards? Does the performance review measure anything apart form excellence in filling in performance review forms and other forms of documentation? Rather these systems work if they can become self-fulfilling. If a company like Interbrand claims that a brand is worth $ X million (based on a combination of factors ranging from its spending on advertising, via the number of patents the company possesses to the brand’s standing in trend barometers) then investors will act on this and the brand will attract money. Such metrics primarily work to guide investment decisions on financial markets that have become increasingly distanced form the realities of real wealth production (whether material or immaterial), but as tools for aligning ‘shareholder value-creation and social value-creation’ they are virtually worthless (Chatterji & Levine, 2006).

Interestingly, the ethical economy is developing its own measurement systems, and these are directly aimed at measuring the social, rather than the monetary value of people or products. Of course such systems have always existed on a rudimental level, in the form of guidebooks and peer advice. But new information and communication technologies take this to a new level by enabling the aggregation of complex assemblages of such peer-produced data. Affinity markets, like ALOHAS (Association for Lifestyles of Health and Sustainability, an estimated $ 227 billion market) allow the valuation of products not simply according to their monetary prices, but also according to a multitude of alternative values systems (like, in this case environmental sustainability). Peer based systems for the evaluation of trust or reputation, like Slashdot’s Karma system, E-bay’s system of user rating or advanced alternative econometric indicators like the ‘Gross or Net Orchestrated Convivality’ developed by the Centre for Adventure Economics, connected to the hospitality network Couchsurfing, aggregate the social standing of a product or individual into an easily managed quantitative index. Such alternative, emergent measurement systems significantly empower the ethical economy, by endowing it with its own means of organization. Indeed the next thing on the horizon are the alternative or Open Money systems that are emerging all across the globe. These can accomplish the coordination of scarce resources by means of media that are both disconnected from the global capitalist economy and thus oriented to alternative value flows, and that provide different protocols for action.

The advantages of such peer based measurement systems are that they are emergent. They are not imposed by managers, NGOs or other organizations who might have little knowledge of the actual productive realities of particular practice, and who tend to impose ‘codes of conduct’, which easily degenerate into mere bureaucratic exercises. Instead they are generated by the community itself, and hence tend to give a more realistic estimate of the social impact of a product, organization or person. And we can envision that such peer-based valuation systems will become more efficient with technological development. With a mobile internet and developed RFID tagging it could be possible to sweep one’s mobile phone over a sweater or another piece of garment to instantly acquire a quantitative estimate of what several thousand people, placed all along the production and distribution chain say about its environmental impact, respect for worker’s rights, adherence to particular religious practices, or what have you. It might also be possible to use your cell phone to easily acquire products with alternative currencies, like units of credit earned writing for a blog or hosting someone on your couch.

The perspective for the immediate future is that the monetary capitalist economy will continue to loose its monopoly over the measurement, and hence also the organization of productive processes. This is natural, since that monopoly has essentially been founded on a monopoly over the means of organization. It has only been possible to govern complex productive networks like the modern corporation, by means of efficient information processing machines like the bureaucracy. Likewise, the central bank with its large affiliated research institutions was the only organ capable of determining the price of money with any accuracy. Today such information monopolies are challenged. Central banks have but a minimal influence over the price of money, Most is determined by financial markets, which are in essence mediated real time interaction systems, not very different from Second Life (Zaloom, 2006). In the form of Information and Communication technologies the means of organization have been socialized to the extent that alternative coordination and measurement systems can and do arise beyond the direct control of corporate capital. The outcomes of this are twofold. On the one hand, such new peer based measurement systems can be integrated into the value dynamics of corporate capitalism. This is already happening: the proliferation of non- financial performance metrics is a (generally inefficient) step in that direction. There are also a number of consultancies that provide advice on performing such integration, like Namaste economics, offering to ‘integrate economics with social values’ or the Karmainitative, providing ‘trust metrics in the market place’. On the other hand we can predict that corporate capitalism and the institutions at its control will resist and repress attempts at constructing alternative valuation and measurement media. Again this is already happening. We can understand Intellectual Property legislation and Digital Rights Management systems as attempts not only to enforce property claims, but also to restrict the circulation of such property to circuits in which measurable values are created. Central banks and financial markets are bound to resist the proliferation of alternative currencies once these become sufficiently influential

A Case for the Ethical Economy

In any case, the resolution of this crisis of value is crucial to the future of the information economy. Today we find ourselves in a situation where a large share of the growing immaterial economy is not recognized as valuable by capital. The result is an underpaid, underemployed and generally precarious ‘creative proletariat’ that does not receive any retribution form either capital or the state. (Think of absurd unemployment policies that force young people into unproductive job-training programs.) More generally we maintain a capitalist economy the very monetary protocol of which is geared towards a continuous expansion which is neither environmentally nor socially sustainable. On the positive side, new and alternative valuation systems are emerging and will probably further proliferate in the future. At the same time the spread of Socially Responsible Investment and sustainable accounting systems means that financial investors are recognizing that there is a massive discrepancy between the actually sustainable social value of a company and its value on the books, as recognized by traditional accountancy systems. Market research is also going beyond the study of buying decisions to try to develop ways to valorize and include consumer produced opinion and sentiment before it reaches the market (Bonini et al. 2007). On the other hand, however there is a strong structural incompatibility between the privatizing logic of Intellectual Property Right on which the monetary economy relies and the sharing logic of the ethical economy. The likely outcome is a shift of real productive power over to the ethical economy. First the productivity of this economy accelerates with the ongoing diffusion of ICTs. Companies or states that embraces its logic are bound to perform better than those who do not. (This way the situation is similar to the bourgeois revolution where states who embraced trade and manufacture grew more powerful than those who did not.) Second because the ethical economy is generates new forms of political participation. We already see emerging trends like the social entrepreneurship movement that are mobilizing the disenfranchised political energies of the educated and networked middle classes (Ray & Anderson, 2000), while the political institutions of twentieth century capitalism, as well as its chief ideology, consumerism, are loosing their appeal. Thirdly, even though the monetary economy today commands the lions share of material production, that share is likely to diminish in the future. Trends in desktop manufacturing, in rapid manufacturing and tooling, in easy to localize multi-purpose machinery, in personal fabricators that move from plastic to metals, will tend to distribute physical productive capacity and undermine the industrial model of capitalism. The problem is that as physical production will become more distributed, and associated with financial trends such as social lending and the direct social production of money and wealth acknowledgement systems, any strategy that aims to replace lower rates of physical profit with higher rates of immaterial profit, will tend to be undermined by the generalization of open designs. So we have a deepening crisis of accumulation of capital on the horizon. Finally, the present model of capitalism is rapidly loosing legitimacy. It begins to be obvious to more and more people that a model that builds on the creation of an artificial abundance of non renewable natural resources and an artificial scarcity of easy-to-renew immaterial resources is not only unsustainable but also ethically corrupt.

Given these scenarios, states and other political actors would do well to develop strategies to strengthen and enable the productivity of the ethical economy. This would entail an increasing state involvement in social productive practices facilitating access to technology and other means of production, enabling (instead of repressing) sharing and other new forms of distribution and standing up against global pressures to enforce restrictive IP legislation. Second it would entail some form of comprehensive valorization of the ethical economy so that the many participants producing social wealth outside of the market would be able to live off their efforts.+

More Information


Arvidsson, A. 2006, Brands. Meaning and Value in Media Culture, London; Routledge.

Arvidsson, A. 2007, ‘Creative class or administrative class? On Advertising and the Underground.’ Ephemera, 1, 2007,

Bauman, Z. 1993, Postmodern Ethics, Oxford; Blackwell.

Bauwens, M. 2005, ‘The political economy of peer production’ Ctheory, 1/12-2005,

Bonini, S.M., McKillop, K. & Mendoza, L.T. 2007, ‘The trust gap between consumers and corporations’, McKinsey Quarterly, 2, 07, pp. 7-17.

Brian, L.L. & Joyce, C.I. 2007, ‘Better strategy through organizational design’, McKinsey Quarterly, 2, 07, pp. 21-29.

Chatterji, A. & Levine, D. 2006, ‘Breaking down the wall of codes. Evaluating Non-Financial Performance Measurement’ California Management Review, 48, 2/06, pp. 1-23.

Florida, R. 2002, The Rise of the Creative Class, New York; The Free Press.

Holt, D. 2002, ‘Why do brands cause trouble?’ Journal of Consumer Research, 29, pp. 70-90.

Lazzarato, M. 1997, Lavoro immateriale, Verona; Ombre Corte.

Oritzky, M., Schmidt, F. & Rynes, S. 2003, ‘Corporate Social and Financial Performance: A Meta Analysis’ Organization Studies, 24(3), pp. 403-441.

Ray, P. & Anderson, S.R. 2000, The Cultural Creatives. How 50 Million People are Changing the World, New York; Harmony Books.

von Hippel, E. 2006, Democratizing Innovation, Cambridge (Mass.); MIT Press.

Zaloom, C. 2006, ‘Trading on numbers’ eds. Fischer, M. & Downey, G. Frontiers of Capital. Ethnographic Reflections on the New Economy, Durham (NC); Duke University Press.

More Information

Dornbirn Manifesto