Wednesday, November 06, 2013

Some Notes on Sharing


Looking through my laptop, I found a couple of saved documents intended for Lost Legacy but events intervened and I did not post them. I have read them again and post one of them today because it remains appropriate.
Some ideas in an Editorial in Financial Times 11 August 2013 HERE:
Technology sponsors a complementary form of capitalism”
“The foundation of modern economics is Adam Smith’s observation that an individual who aims only for his gain may still be led “by an invisible hand” to make choices that bring economic benefits to others.” 
Comment
Putting to one side the obvious – Adam Smith used “an invisible hand” as a metaphor not as a stand alone theory – what can we say about the Editorial’s “observations”?
Well, for a start, as with so much of newspaper economics, it all depends on what happens next, in the sense where is the editorial about to take us with its new, emerging “idea”?
FT: “Last week, the Financial Times reported that a complementary view is emerging in the form of a sharing economy’.”
Comment
Really?  Surely Adam Smith wrote in Wealth Of Nations in 1776 that every individual is dependent on the cooperation of other individuals, because “he stands at all times in need of the co–operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons” (WN I.ii.2.) This is hardly an “emerging view”, somehow new to economists today?  It is still true.
The so-called “emerging view has always existed and known to anybody familiar with Adam Smith’s Works, and is only unrecognized by those limited in their above very narrow definition of self-interest gleaned from some other sources.
FT: “Most productivity growth may still be powered by self-interest. But modern information technology is helping the invisible hand become a whole lot more collaborative.”
Comment
Again muddled thinking about self-interest and collaboration.
There has been too much breathless talk of how IT would revolutionise the economy, so it is useful to distinguish changes that are truly transformational from those that merely make it easier to do what one was already doing.
FT: “Three broad trends assert themselves.
First, the internet makes it much cheaper for individuals to offer traditional goods and services to a larger market.”
Comment
Yes, but what has changed in a larger market is more anonymity that has always existed in markets.  We don’t know people a few links along the supply chains.
FT: “Take short-term accommodation: there have always been homeowners wanting to rent out a spare room, and the hotel industry is of course of old vintage. IT does not bring fundamental innovation in this case. But – as websites … show – making it possible, for free, to connect with customers anywhere in the world cuts transaction costs and shrinks the advantage of scale that hotel chains hold over homey bed and breakfast operations.”
A lower cost structure is not itself a shift from the pursuit of one’s self-interest to a passion for sharing. It is nonetheless significant. When it becomes profitable to occupy rooms that would previously have stayed empty, it is a boost to the efficient use of society’s resources.
Comment:
But before IT, small adds in local shops and local newspapers sufficed to “fill local rooms! I experienced this form of finding accommodation as a student in Glasgow, Scotland and before that in Sydney, Australia, in both cases, when somewhat penurious in funds, like tens of thousands of others, every week. Hence, nothing fundamentally new here.
FT: “The same can be said for how the internet has made more personal services affordable for those outside the ranks of the super-rich. Those with more cash than time can outsource small chores to those in the opposite situation. The vehicles are sites that match tasks – from picking up the laundry to settling the utility bills – to those with time to spare.
Second, the information revolution facilitates genuine sharing in consumption. Barter – long seen as the height of inefficiency – is enjoying a revival through house swaps, where the internet can deepen the pool of swappers, making compatible pairings more likely.
Comment
I can recall many instances of academics arranging with others abroad, house exchanges with strangers during scholarly leave in other countries, by making such agreements by correspondence with other departmens, hence the principle is not emerging and has always been available.
FT: “Many city residents are ditching car ownership in favour of web-facilitated car sharing. Car clubs that allow down to half-hour car rentals exist in cities around the globe.“  
Comment
Multiple uses of Taxis have always existed in cities.
For long distance we used informal “thumbing” a lift – always free - but it had its personal safety risks. I hitched all over Western Europe as a student without such problems.
FT: “In France, buzzcar.com allows “peer-to-peer rental”: private car owners rent out their vehicles when they do not need them. Sharing can be a lifestyle as well as an economy.”
Comment
Sharing is not new: markets have always existed on the basis of sharing in exchange behaviour.  They could not work without sharing.  We are dependent not alone in an hostile world.
FT: This underpins the third, most innovative and exciting trend: sharing in production. The open-source movement in software coding, Wikipedia, and some artists’ renunciation of standard copyright show how work that is carried out voluntarily and co-ordinated spontaneously can result in economically valuable products.
Comment
Yes, it is called the market!  It promotes and promotes its purposes through co-operation.  Recall Adam Smith on the supply chain involved in the Labourer’s common woollen coat (WN I.i.11) and all the trades involved in it.  Today’s products are produced by immensely developed complex and lengthy supply chains well beyond the basic woolen coat of 1776, but it’s the same principle.
FT: Like traditional capitalism, markets rely on trust and on supporting institutions for their success. These can be provided by the market itself – from the informal, such as user reviews, to the formal, such as Creative Commons licensing standards.
Comment
Correct.
But “capitalism” and the “market” are not synonymous! Both require basic regulations and systems of justice.  From the beginning markets were regulated; in modern “capitalism”, political cronyism is rampant (in some places it is corrupted and corrupting).  

3 Comments:

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I let this comment through but my judgment was very marginal. Lost Legacy does not carry commercial posts, not least because I do not authorise the quality or reliability of whatever is offered.
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