Thursday, November 10, 2011

Stewart Brand and the Economics of Information


It seems to me Brand was committing the classical (literally - going back to Aristotle) fallacy of separating and then confusing "use-value" with "exchange-value". There is not a tension here. Information as a good should naturally be cheap and it should have a high consumer surplus. Production of original information may be extremely challenging, which changes the marginal cost of information if what you're interested in is new information. Reproduction of new information for distribution after it has been produced is quite cheap. In that sense, there is a real tension between the producers of new information and the producers of reproduced information. But the fact that information is extremely valuable doesn't really introduce a tension at all.



    Can you expound on this?

  2. So upon cracking open Politics again, Aristotle is not as bad as some of the later writers, but only because he doesn't really try to delve into exchange value itself. He writes:


    It's the old diamond and water issue. If we want to talk in terms of "use value" and "exchange value" we need to understand that exchange value is generated by marginal use value. Aristotle began this process of separating out the two "values" and then comparing them and - finding a divergence - declared one natural and one un-natural. The whole "use value as natural value" dropped off by the 17th century, but you still had this distinction being made and an underappreciation of the marginal principle that related the two.

    Brand's mistake here, I think, is the old one of saying "because information generates a lot of 'value' it ought to be 'valuable'" - ignoring the huge difference between value-as-welfare and value-as-price.


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