Coase's penguin, or, Linux and the nature of the firm

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Citation: Yochai Benkler (2002) Coase's penguin, or, Linux and the nature of the firm. Yale Law Journal (RSS)


Download: http://www.benkler.org/CoasesPenguin.html

Tagged: economics (RSS), law and economics (RSS), peer production (RSS), FLOSS (RSS)


Summary:

Benkler's article primary contribution is its introduction an important new term, commons-based peer production, that Benkler uses to describe a type of economic production or organization that describes a variety of phenomena including: work in the free and open source software movement, Wikipedia and collaboration in other wiki-based projects, and a variety of other Internet-mediated, large-scale collaborative projects. Benkler later took up the concepts of peer-production in greater detail in his 2006 book The wealth of networks. Coase's Penguin can be understood as an early attempt at the exploration of the ideas in Wealth of networks -- and in particular Part 1 of that book.

Benkler's argument in favor of peer production as a type or work organization is radical. He argues that peer production is most properly understood as a category of economic organization that is fundamentally different from either market or firm based work. In doing so, he ties together a set of examples including free and open source software -- which in 2001 had recently been thrust into the popular consciousness during the dot-com boom -- with examples like commenting and moderation on Slashdot and with work on Wikipedia (then a "small to medium sized" project with only 30,000 articles). Each of these projects were facilitated by the Internet, incorporated contributions from large numbers of individuals, and were driven by voluntary free-revealing of contribution -- frequently without monetary compensation.

Benkler's empirical work in the article is limited to the presentation of a grab bag of examples that try to describe the breadth of the peer-production and argue for both its continued existence and potential value to society. In Wealth of Networks, the number of examples is expanded but the nature of the empirical work is not fundamentally different. Benkler's goal with the article, and alter with the book, is not empirical -- it is primarily theoretical and subsequently based around the construction of relevant policy arguments.

Benkler aimed to provide a economics-based theoretical explanation to explain the rise of Internet-based, volunteer-driven production of information goods of kinds and in ways that were previously unseen. In doing so, Benkler turns to Coase and Williamson's discussion of transaction cost economics; Coase argued that firms exist because costs associated with use of markets would often outweigh the market's benefits in efficiency. Benkler argues that the costs of collaboration on the Internet have reached a threshold where new forms of collaborative work are being ushered in. In constructing this argument, Benkler creates a way to tie together work in projects as diverse as Slashdot, Wikipedia, and the Free Software movement -- a tactic that been used by many scholars subsequently. Benkler mentions that sociological approaches at understanding the phenomena may be useful but he makes no attempt to explore these in the essay.

And yet, while the paper's primary contribution seems to be the presentation of an economic theory, it ends with a discussion of law and policy. After all, Benkler is a professor at a law school (then NYU, now Harvard) and his essay was published in the Yale Law Journal. Benkler's ultimate thesis is that copyright and patent law place restrictions on the free flow of information and, in doing so, prevent commons-based peer-production. Because peer production can be shown to be effective, Benkler argues that policy makers should reconsider the scope and contours of intellectual property with an eye to allowing peer production to flourish.

Theoretical and practical relevance:

The paper is a reference to Coase's (1937) The nature of the firm. The title is a reference to the fact that Benkler's argument about peer production essentially boils down to one about a novel arrangement around transaction cost economics, a major theme in organizations.

Peer production has become a common way for a variety of researches to frame their research and a phenomena in its own right. This paper was the go-to citation for the phenomena until Benkler release Wealth of networks which is largely based around the core idea at the heart of this paper.