Readers may have seen reviews of Yochai Benkler's book, The Wealth of Networks, by Patrick Ross and Nicholas Carr. Now, Professor Lior Strahilevitz from the University of Chicago has provided his insights on Benkler's work. Wealth without Markets? U Chicago Law & Econ, Olin Working Paper No. 315, 2007.

Strahilevitz commends Wealth of Networks as worth reading, and important to IP scholarship. However, Strahilevitz is skeptical of economic assumptions underpinning many of Benkler’s arguments. This is important. Benkler argues that legal rules will interfere with the potential of social production, however, if basic economic forces limit Benkler’s theories, his policy recommendations on IPRs become less significant. If IP policy is not a primary deterrant to the growth of social production, there is less reason to change it to accomodate social production.

The review summarizes Benkler’s core arguments. It suggests several shortcomings, including the fact that Benkler never gives a clear definition of social production. Strahilevitz cites the closest explanation as: “(social production is) not based on exclusive proprietary claims, not aimed toward sales on a market for either motivation or information, and not organized around property and contract claims to form firms or market exchanges.” If Benkler's statement illustrates his concept of social production, then many examples he uses do not fit within its parameters.

However, as Strahilevitz remarks, Benkler sometimes does little for his theory:

...many of the examples of social production that Benkler provides were organized by, and remain controlled by, profit-seeking firms...IBM, which has turned Linux-related service contracts into a major revenue stream. ..Myspace has become a profitable social networking site with a successful business model, having convinced its almost 80 million users to create engaging content for free and placed ads alongside that content. Youtube follows a similar business model...

… these examples suggest that social production is as likely to become a tool of market production as a competitor to it. There is little reason to think that nonprofit entities will outcompete proprietary firms using the same, decentralized, useroriented production methods.

Another drawback of Benkler’s work comes from his dislike for patents. Benkler does not address how individuals or entities will leverage other kinds of IPRs in the absence of patents. This is an important omission. What Benkler does not say reveals that his underlying argument posits social production as a superior, or displacing, method of wealth creation over monetary incentives provided by IPRs.

Benkler’s book does not discuss trade secrets protection... a puzzling omission in a 473-page book about innovation policy. If patent protections are weakened, as Benkler advocates, then some firms will be driven toward a social production business model (and) some ...toward a trade secrets business model. Even in the “new” economy, it is hard to believe ...the former ...would trump the latter... one can construct a compelling argument that society is worse off if more of its innovations are protected as trade secrets than as patents... that ...explains the presence of patent laws in every developed nation on Earth. ..

…there are other places where Benkler gets ahead of himself… Broad generalizations … are in my view premature, especially when confronted with a growing empirical economics literature that has achieved decidedly mixed results.

…It is far easier to imagine such developments in the marketplace than Benkler’s scenario of market-driven television’s displacement by amateur uploads to YouTube.

Benkler writes of social production as closing the gap between the haves and have nots, probably due to the diminshed importance of capital with social production activities and the fact that socially produced goods/services are often free. Further, Benkler sees this as a way of transforming the global economy, bringing to poor folks access to technology and other necessities to compete and sustain themselves. However, Strahilevitz writes that Benkler’s arguments run into several problems:

… while Benkler is extremely well versed in transaction cost economics, his book neglects to grapple with a more recent... development(s) in law and economics: optimal redistribution analysis. If we take account of the literature on redistribution, we will emerge less enamored with the wisdom of using the tools that Benkler has identified...

Benkler seems insufficiently sensitive to the way selection effects and competitive pressures will govern the rise and fall of social production. Whenever social production creates a valuable resource that large numbers of citizens want to use, that resource becomes an attractive target for the mischief makers, proprietary competitors, free riders, sketchy opportunists, and wellmeaning dolts whose arrival can drive away the cooperators who built the successful network.

… It is premature to write about the success of social production without analyzing how social production networks can respond to the threats posed by early successes. Social production in the hands of... trolls, and spyware developers is hardly worth celebrating.

Strahilevitz has given us an exceptional review of Benkler's work. The bottom line- Benkler’s book is worth a read. He’s a talented scholar. However, as Strahilevitz points out, many policy recommendations and economic lessons in the Wealth of Networks should be viewed skeptically and the theories taken as premature.