Kudunomics

Kudunomics refers to property rights for the information-based economy Samuel Bowles looks at the foraging economy to understand the knowledge economy.

(Kudu = An antelope of some sort hunted in Tanzania for its massive caloric value. When one is killed, it’s widely shared (perhaps 2/3 outside of the nuclear family).

Description

David Bollier:

"A kudu is a species of antelope that hunters in the Pleistocene era used to hunt. Bowles makes a fascinating comparison between the property rights of subsistence economies that once hunted kudu, and what he calls the “weightless economy” of digital information today. Huh? Here’s Bowles’ analysis:

Millennia ago, a band of hunters in Africa might bag a kudu once a month, and be rewarded with about 160,000 edible calories of highly perishable meat. When thinking about an economy based on kudu, several significant things stand out: Kudu are quite difficult to acquire (it takes a village to hunt an animal); difficult to own privately (it’s a wild animal); and wasteful if not immediately shared (there was no refrigeration, and so the kudu would spoil unless shared among many people).

In such an economy, the culture rewards generosity toward others and a modesty about one’s personal talents in hunting. It’s a group thing. Self-aggrandizement is bad form. No one can snare a kudu by themselves, and no one can individually consume one. It makes perfect sense for an economy reliant on kudu to share and have minimal or no property rights.

Many of these norms started to change 8,000 years ago with the rise of private property, noted Bowles, especially with the domestication of animals. When there is a cow or sheep that can be owned by an individual, the idea of private property rights suddenly make more sense. One can feasibly own a cow and fence the land that the cow grazes on. In the long sweep of history, then, the idea of private property rights is fairly recent.

So what does a hunting economy have to say about our times?

Bowles proposes that the Internet has created all sorts of digital resources that are as fugitive and difficult to own as wild game on the hoof. No one can really make a software program all by themselves (it takes a lot of people to make one), and it is difficult to own software privately (because it is so easily copied and therefore very expensive to “fence in” as private property).

Software is wild and fugitive in its own way. There are high costs in creating the first copy of something digital, but then very low to zero marginal costs for each copy. An owner can enforce a higher, artificial price for the good by using the power of the state to enforce copyrights or patents. But this, of course, but that prevents goods from being sold at the marginal cost, which violates the fundamental principle of the Invisible Hand, that the aggregate public benefit comes from acquiring goods at the incremental marginal cost under conditions of competition. While software programs and other digital resources may not be as perishable as kudu, the aggregate “social welfare” benefits are surely greater from sharing them than from locking them up for private use only at artificial (monopoly) prices.

The question for our time, Bowles proposed: “Is software application more like a kudu or a cow?” Meaning, can software really be practically owned, like a cow? Or does it just make more sense for it to be shared, like a kudu?

Bowles speculates that technological advances (such as software and other digital innovations) and new types of “between-group competition” can over time make new types of property rights regimes more attractive. Strict private property rights may not make as much sense if software and social networking websites and other online information resources resembles kudu.

One way to test these ideas, Bowles has found, is through agent-based computer simulations that amount to “artificial histories” based on different experimental parameters. One such set of experiments divides communities up into sub-groups of “bourgeois” individuals, who defend what they own and try to acquire things for their private use; “sharers,” who share their resources with everyone; and “civic” individuals, who share with sharers, but punish those who don’t share. Bowles can also set certain baseline conditions such as the size of groups and the degree of competition among them. (You can download the program and run it yourself by clicking here.)

So what sorts of governance systems emerge in the simulations?

Bowles found that if property rights are well defined, then the “bourgeois” faction will prevail and become an “evolutionary stable strategy,” meaning it will resists displacement by other approaches. Moreover, the winning group (of bourgeois individuals) will then provide the cultural model that losing agents will emulate. However, if property rights become ambiguous – perhaps because new technologies make them more problematic – then the “civics” can feasibly ally with the “sharers” to become the default equilibrium strategy.

Based on his simulations, Bowles found that communities can handle ambiguities of property rights more readily than state- and market-based systems, but they tend not to prevail when there are already inequalities among people. Interestingly, the digital economy creates both – substantial ambiguity and contestability about property rights (think digital music, film and text), but also high levels of inequality (because in networked economies, dominant players enjoy strong feedback loops and benefit from winner-take-all dynamics)." (http://bollier.org/why-sharing-makes-sense-pleistocene-hunters-and-digital-economies)

Discussion

Presentation by Samuel Bowles summarized by Ethan Zuckerman:

1.

"The big idea behind Bowles’s recent research is that some of the fundamental laws of economics – notably Adam Smith’s invisible hand, may not work in the “weightless economy – the economy that can’t be weighed, fenced, or conveniently contracted for.” Rather than being based on material wealth, knowledge-based economies are based on embodied and relational wealth. In these economies, individual-posession based property rights are difficult to enforce, and socially harmful to enforce.

Bowles suggests that we may gain some insight about the evolution of institutions under these conditions by studying the reverse transition: by studying the transition from the late Plioscene forager economy, where weath was difficult to own, to agrarian and industrial economies, based on ownership. We can study this by “running history backwards” with an agent-based model of the weightless economy. We understand the forager economy fairly well due to ethnographic research, and we might gain insights about the governance of this emergent weightless economy from studying governance dynamics in forager economies.

Bowles offers a model of wealth where the wealth of a person is the sum of network wealth, embodied wealth and material wealth. He puts exponential weights on these types of wealth in a Cobb-Douglas production function. He plots different types of economies in a triangular graph, showing their wealth in terms of these three different dynamics – material, network and embodied wealth. Recent economies based on the domestication of plants and animals concentrate in the material corner, while older economies cluster around the network wealth – embodied wealth axis.

Network wealth is the contribution made by your social connections to your well-being. This could be measured by your number of connections, or by your centrality in different networks. A simple way to think about this is the number of people who will share food with you. Embodied wealth is a combination of what you know and how strong you are. It measures factors like hunting prowess and grip strength. Bowles asserts that we’re moving from a history where network and embodied wealth mattered more that material wealth – we briefly (for about eight thousand years) moved into a world of embodied wealth, and now we’re moving back."

2.

"In the weighless economy, positive feedbacks and winner-take-all dynamics are very important. Those who get ahead will tend to stay ahead. They don’t need to be the best, just first and good enough. This dynamic tends to generate significant inequality – whether we’re considering pop stars or dentists. Private firms can’t confirm to the price equals marginal cost theory – marginal costs are much less than average costs because of the increased first copy costs. And property rights become both ambiguous and difficult to enforce."

3.

"The culture of the foraging band emphasizes generosity and modesty. There are norms of sharing. You depricate what you catch, describing it as “not as big as a mouse”, or “not even worth cooking”, even when you’ve killed a large animal. In the Ache people of Eastern Paraguay, hunters are prohibited from eating their own catch. There’s complex sanctioning of individually assertive behavior, particularly those that disturb or disrupt cooperation and group stability. This makes sense – if hunters can’t expect that they’ll be fed by other hunters – particularly by a hunter who suddenly develops a taste for eating his own catch – the society collapses rapidly.

Mobile foraging bands and accompanying collectivist and egalitarian norms were displaced by a society based around property rights, made possible through the domestication of crops and livestock. Initially, this domestication probably reduced individual human productivity… but it increased land productivity. This led to an idea that you should define a set of resource as yours and invest in those resources. This idea preceded states – they were enforced by interpersonal conflict, not by third parties – but the system became more efficient in a system with strong state actors."

4.

"Bowles’s model (which you can download and run on a Window machine) looks at three different strategies for coping in an economy:

- Bourgeois – if you’re in posession of an item, defend it

- Share – Share and don’t punish those who don’t share

- Civic – share and jointly punish those who don’t share

The civic strategy succeeds if there are lots of civic members in a group. If there are very few, they tend to fail. This is one of the dynamics which leads to multiple equilibria in a system. The bourgeois strategy is stable (an asymptotically stable symmetric Nash equilibrium) if property rights are well defined. But if property rights are ill-defined, the bourgeois stragegy is no longer evolutionarily stable.

The simulation introduces costs for conflicts between “firms”, groups of individuals which share a strategy. Because there’s a cost to conflict, firms that resolve conflicts without much expenditure of energy are going to outlast those that spend resources on conflict. Individuals within these firms are paired with cultural models drawn from a group of possibilities, conveye by “conformist transmission”. Individuals might simply draw from neighbors, or might compare how others are doing and change strategy. Losing groups are not eliminated – instead, they lose resources and tend to adopt the cultural model of the winning group. Individuals who are in losing firms will have a strong tendency to adopt the strategy of winning firms.

In these simulations, some fraction of the time, a bourgeois player will challenge someone over a resource he doesn’t own – i.e., he’ll attempt to steal it. Because of this, if there are very few bourgeois, civics will do well, and vice versa.

It turns out that simulations where all actors are bourgeois are stable. The two strategies where sharing is involved are equivalent if there are no bourgeois actors. A smiluation might drift between sharing and civic strategies without outside influences. As a result, All C (civic) is not a stable equilibrium – it’s subject to drift. And all B (bourgeois) is not stable if property rights are not well defined."

5.

"As we consider evolution of institutions in the weightless economy, we know of at least three forms of economic governance: communities, states and markets. Markets allocate resources well in conditions where the individual hand applies. States have superior powers of enforcement, which allow for powerful civic strategies. And as Elinor Ostrom has pointed out, communities can handle ambiguity of property rights, but tend to fail where inequalities between members are large.

Hayek’s work questioned the efficiency of central planning versus that of the market. At the center of that question is information – in societies where information is easily available, central planning might be very efficient. If it’s harder to acquire information, markets can act to aggregate that information. To govern in these systems, you can either adjust prices to get an equilibrium or collect sufficient information to engage in efficient central planning. Ostrom suggests that we need different mechanisms to govern by communities" (http://www.ethanzuckerman.com/blog/2009/11/17/samuel-bowles-introduces-kudunomics/)