Chris Anderson’s new ‘economy of free’: The hidden costs of information infrastructure

March 1, 2008

A comment on Free! Why $0.00 is the Future of Business’ published Feb. 25, 2008.

Editor in chief at Wired, Chris Anderson, believes that ‘free has emerged as a full-fledged economy’.  In the good old days companies might provide things free or at a very low cost to consumers (shaving handles, cosmetics samples, loss for leader goods…) as promotional devices that incited brand loyalty and future purchases.  In the new economy of free, argues Anderson, the costs of producing digital storage devices have dropped so low that there has been a ‘vaporization of value’ in the web world.  Digital space has become infinitely abundant because it is ‘too cheap to matter’. 

Following Malcolm Galdwell’s bestselling argument in The Tipping Point, what is scarce in the new economy of free – where newspaper content, email service, software, Craigslist postings, search engines etc are all accessibly without direct payment from users – is reputation and the attention of consumers.  To make it in the new economy, providers of digital goods are increasingly forced to make their stuff available for free.  Thus, the new mode of dono libere (I made that up) requires a set of new business models that have emerged to capture this increasingly precious resource: you.

As Anderson points out, however, “Just because products are free doesn’t mean that someone, somewhere, isn’t making huge gobs of money”. For example, the act of using a “service creates something of value, either improving the service itself or creating information that can be useful somewhere else.  “To follow the money”, he writes, you now “have to shift form a basic view of a market as a matching of two-parties – buyers and sellers – to a broader sense of an ecosystem with many parties, only some of which exchange cash.”  Here, he sorely misses what the social anthropology of the gift, with its grasp of circuits of value, might contribute to his analysis.  This is because he interprets ‘gift’ in the layperson’s sense of being given totally and absolutely without return. 

As usual, Anderson has grabbed onto an emerging phenomenon in an engaging way and has made it his own.  But in his enthusiasm for explaining the new free economy, some of its salient ‘costs’ seem to have escaped his immediate analysis.  ‘Externalities’ that he fails to count up are the costs in setting up the digital apparatuses that access digital space.  Sure, the search engine is free, providing you are equipped with a computer and operating system.  Anderson passes (too) quickly over ‘China and global sourcing’ as thought suppressed wages are not indeed a price that is paid (in multiple ways) for the production of cheap digital memory.  And sure, digital is becoming cheaper to make and to acquire, but as the NYTimes has recently reported the human and environmental cost of disposing of all of this technological trash is piling up.  All while the carbon emissions ‘commons’ are being lassoed into market forms. 

The emergence of new economies supported by elaborate information infrastructures have costs as they imply the investment of labor, inventiveness, movement, experimenting, training, physical infrastructural building, maintenance, renewal and destruction.  Mark Levinson’s excellent book, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (2006), shows how container transport achieved the Ricardian assumption that transportation costs could be modeled as insignificant.  But this was only once containers were designed, rail and road was defeated, unionized dock workers were displaced and a set of global standards were set up and locked in place at ports around the world.  Then and only then does the economic cost reasonably appear to approach zero.

Following the details of these kinds of changes is, perhaps, not Anderson’s focus as he is in the business of reporting on the latest and greatest effects in the digitization of everything.  His piece however, is a timely call to the social studies of markets and finance which is thorougly equipped to take on the task of capturing this movement’s origins and to trace the ample infrastructural costs of configuring the digital economy of ‘free’. 

Anderson’s book Free is to be published by Hyperion in 2009.  The price has not yet been announced.

 

2 Responses to “Chris Anderson’s new ‘economy of free’: The hidden costs of information infrastructure”

  1. yuvalmillo Says:

    Well, I feel slightly old now, oh dear. I remember when the very same Wired published a piece back in the mid 90s about the New Economy: Friction Free and all that (http://www.wired.com/wired/archive/5.09/newrules_pr.html) and well, this sounds just like that. Once you ignore all embedded infrastructure and inherent qualities built into the product/service, there is little wonder that online storage is very cheap. Sure, I agree that Social studies of finance/financial markets should address this, but the only problem is: would these ideas be around long enough to be analysed? The Friction Free Economy vaporised long ago; transaction costs are still with us…

  2. tinaguenther Says:

    “Free” as in Google, Youtube and the numerous other services at your fingertips always raises the questions of how the companies get their money and how the consequences are coming back to the consumer in a second step. In Web 2.0, it seems to be the marriage between the search engines on the one hand and advertising marktets and advanced marketing techniques coming back to haunt the customer in the form of spam etc. My guess is that these frictions actually occur between the Web as a market and business model and the web of user, citizens, scientists in the non-market spheres of social action…


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