Supermodular Goods
= for the related concept of Antirival Goods, see Anti-Rivalry
Description
Cip.org :
"Supermodular goods, which are more efficiently provided at scale rather than individually, are ubiquitous. Focusing on funding and governing supermodularity therefore presents the clearest opportunity to deliver great collective benefit.
In supermodular contexts, pure private ownership is economically incoherent because of the collective nature of value creation."
(https://cip.org/supermodular)
Characteristics
Cip.org:
"Supermodularity particularly characterizes ecosystems that develop and deploy transformative technology: open-source software, inventions, scientific research, protocols and standards, and organizational innovations. Here are a few features of supermodularity that demand consideration:
Supermodular goods are often anti-rival. Anti-rival goods go beyond mere non-rivalry (where use by one does not take away from use by another): instead, use by one adds positive value that others can enjoy. The term was coined by Steven Weber at Berkeley to describe open-source software, but can be extended to categories far beyond it: from discoveries and inventions (ex. solar cells) to ideas, to systems of law (ex. liberal democracy) to protocols (ex. blockchain protocols) and standards (ex. TCP / IP), to institutions (ex. Creative Commons). Anti-rival goods enable increasing returns to the network. These are sometimes directly referred to as ‘network goods’, although not all network goods are anti-rival given network constraints.
Supermodularity can apply differently to different aspects of the same good. Olleros uses the example of a US $10 bill. The bill itself is submodular: it is alienable and cannot be replicated at zero marginal cost. But the use of the bill contributes to the supermodular American currency system, which benefits from greater collective use. This also emphasizes the designed nature of many anti-rival systems. Anti-rivalry of currency is managed and protected, often by force or some other mechanism; it is often not a purely natural occurrence but a choice, with complex pluses and minuses.
Supermodular systems benefit from innovation in inclusion rather than exclusion. By their nature, supermodular goods benefit from being shared, often in rough proportion to the amount of sharing. This has deep consequences for the way that goods are managed. Instead of innovating ways to exclude at cost, benefit accrues from innovation in inclusion. Managers of supermodular goods think in terms of inductance, not in terms of resistance."
(https://cip.org/supermodular)
Discussion
Cip.org:
"Existing economic incentives treat private goods as the default. Other modes of provision are turned to when necessary and corrected—through innovation in excludability mechanisms such as DRM or subscription pricing—whenever possible. In a world of accelerating supermodularity, this leaves significant collective value on the table.
Instead, we would encourage a general expansion of supermodular funding mechanisms. This requires greater overlap between funding models. Corporations should get some public funding in return for governance rights and commitments, and public organizations should engage in submodular rationing to reduce inefficiencies.
- Funding models for transformative tech that incorporate supermodularity (ex. capped returns with public goods distribution mechanisms for surplus)
- Internal public goods mechanisms at corporations (ex. QF for money set aside for carbon offsets within corporations, including longer-term infrastructure offsets; cross-cutting internal infrastructure as internal public goods)
- Introducing submodularity into public goods provision (ex. community currencies, voucher systems)
- Partial funding of private corporations by supermodular mechanisms in return for stakeholder governance (ex. liquid democracy-style representations, Soulbound Token issuance to employees)
Expanding the scope to supermodular networks across public and private mechanisms can enable more democratic input over all categories of provision, lead to collective intelligence innovation, and enable better coordination of goods provision across scales."
(https://cip.org/supermodular)
Why pure markets don't work: Plural Provisioning for Supermodularity
Cip.org :
"The fundamental principle of efficient pricing in a market is that people are paid in accordance with their marginal product. This holds in submodular situations, where the decreasing value of marginal contributions theoretically enables both fair compensation for inputs and surplus, which is taken as profit.
In supermodular situations, by definition, the marginal contribution made by the addition of any component exceeds the total amount created.
In these cases, one cannot pay out the full value of marginal contributions. Take the limit case of perfect complementarity (zero value from individual contributions, value only achieved through full participation) — in this case, the marginal contribution of every component is the total value. Paying marginal contributions is impossible.
Thus, the very principle by which markets theoretically achieve efficiency leads to enormous losses in supermodular cases. The whole notion of profit that capitalism is built on only arises in submodular conditions, where the sum of marginal products is less than the whole.
Diverse and hybrid modes of provisioning that combine sub- and supermodular processes are necessary to unlock collective value from these goods. Supermodularity particularly characterizes ecosystems that develop and deploy transformative technology: open-source software, inventions, scientific research, protocols and standards, and organizational innovations.
...
These properties (see: Characteristics, above) make supermodular systems difficult to deal with under existing capitalist defaults.
Supermodular systems are prone to capture and underfunding due to misapplied notions of private property. Private property is best suited to decreasing returns (sub-modular) contexts, and thus when incorrectly applied can erode beneficial supermodularity through rent-taking and capture. This is evident in the existence of data monopolies, hyperconcentrated foundation models, and massive web2 platforms, which operate on network effects, but hoard privately-owned power to the detriment of the larger ecosystem. Vaccine delivery is another example—the inherent supermodularity of pandemic prevention means that purely private innovation and delivery are unequal to the task. A combination of underfunding and rent extraction can lead to massively constrained societal outcomes, limiting network growth.
Supermodular systems tend toward monopoly. In a system where monopolies are strictly private and incapable of democratizing, this is unacceptable. However, scale is beneficial when divorced from dominance. We recommend instead a collective intelligence approach that accounts for the interests of the groups that are disempowered by monopolies, replacing monopoly prevention with democratization.
Supermodular systems have submodular components, meaning that pure public provision is often misled, while pure private provision leads to under-provision or excessive value capture. Beyond congestion pricing, carbon pricing, and the like, market mechanisms can be useful in dealing with the elements of supermodularity that are scarce. Expanded voucher systems, shared pools of credit, token-based collective financing, and more can all serve to bring in the information potential of markets without privatizing returns.
Thus, supermodularity requires hybrid prioritization and decision-making mechanisms (henceforth, collective intelligence mechanisms) that combine democratic, market, and community governance. It is here that the nascent public goods funding ecosystem of web3 can contribute. Take grants programs like Gitcoin’s which are based on quadratic funding (QF): they utilize a democratic market mechanism (QF) to match philanthropic (private) funds with community needs. The collective intelligence imaginary of supermodular goods takes these examples and expands on them to envision a broad range of mixed decision-making mechanisms that can serve to both provide and govern supermodular goods, to ensure availability, but also protect against negative-sum transitions. Recent innovations in building ‘Decentralized Society’ expand the possibility-space of such mechanisms through rich layers of community attestation and verifiable social identity."