Digital technologies are calling into question assumptions about the “nature” of many older economic processes in industries that are more likely to see the digitization of their content [publishing, entertainment, software, tele-communications among others]. In particular such technologies appear to be raising questions about the very conceptions of property rights [how is it organized, who controls it and how is it distributed, among others] that potentially could have serious implications for the division of power in the global political economy.

Question: How can the changes being brought about through the digital infrastructure [economics of the network + digital devices] contribute to significantly different outcomes about conceptions of property rights ? How could these rights affect the balance of power in the global economy?

With cheap availability of medium grained digital communication and storage devices (i.e. devices that cost low enough to justify personal purchase yet have excess capacity e.g. router, hard disk) along with internet, network effects increase manifold. The output generated is difficult to be appropriated (i.e. converted to private property) by any one player as the production depends on the collaboration among multiple nodes. For example, use of peer-to-peer networks. These networks can be used for data computation (Fightaids@home), storage (DC++) and communications (Skype). However, it does not mean that it cannot be appropriated.

Networked information economy complicates the notion of property rights that were conceptualized for rivalrous physical goods, and based on assumptions of scarcity, efficiency and anticipated benefits from trade of well-defined properties. Information goods are abundant and in fact, have to be artificially made scarce by exclusion (patent/copyright). Since marginal cost of these goods is zero, any price attached to it only reduces its economic efficiency. While property rights grant static efficiency to these goods, dynamic efficiency falls due to increased cost of future innovation dependent on easy availability of information goods in the present.  This dynamic efficiency figured less in old proprietary regimes because innovation was only possible in-house due to huge costs associated with physical infrastructure – which is no longer the case.

At the same time, the amorphous nature of activities on a network make it difficult to assign well-defined property rights for trade. This does not mean that exchange or value creation does not happen. For example, Linux operating system and open source software have become a success outside the paradigm of markets and firms. Projects were sufficiently modularized and varyingly granulated to suit the distributed contributions of developers and subsequent improvements. These outputs are licensed under General Public License (GPL), which prevents appropriation of the product by any one person. It becomes a ‘common’ good which can be used and modified by anyone under the same GPL.  In the old property rights system, this would have led to ‘tragedy of the commons’ with negative externalities for the collective. However, there is no such externality in this case as the good produced, software here, is non-rivalrous. In fact, the more it is used and tinkered with, the better and more robust it becomes (for example, Wikipedia). This is quite opposite to what one expects in property rights regime.

This creates a friction between the incumbent imperatives of property regime and the increasing salience of non-proprietary networked processes and outputs. For example, spectrum auction- based property rights system creates an artificial scarcity in wireless communication. Spectrum-based business models, which depend on preventing non-subscribers from accessing the communications, will gradually become obsolete as increasing adoption of wireless connectivity (e.g. WiFi) devices with excess capacity makes it possible for need-based peer to peer connectivity to take place. This reduced the power of telecommunication companies.

As the fuzzier boundaries become difficult to enforce, the balance of power will shift in the global economy to mark the increased salience of non-proprietary production processes. For example, the maintenance of Linux is done by a group of companies including IBM which pool in resources. This acts as a counteracting force to the polarizing influence of Microsoft while creating a potent non-proprietary resource which can be used for free. This has even more importance in the current context of global economy because of the increasing cost of technological development and shortened shelf-life of products that come out of these highly capital intensive investments.

However, this does not necessarily mean that economics of the network and the cheap availability of devices will lead to a more diffused form of property, moving towards a commons regime. The potency of distributed computing, storage and communications from dispersed capacities can be no match for the consolidated and highly organized computational and data storage capacities of giants like Google, Facebook, Amazon etc. They not only use their wide reaching networks to capture as much data as possible for monetization, they also appropriate the monetary benefits that emanate from the non-monetary, non-proprietary activities of users of their services.

This further problematizes the conception of property rights by delinking the ownership of the physical device from the ownership of intellectual property that it collects. For example, hardcopy of books could be resold in the market but a digital copy of a book on Kindle cannot be sold. In fact, Amazon learns from the reading patterns of Kindle users and monetizes those insights – something which was not possible. The user, while owning the physical device (Kindle), has no ownership of their own data being gleaned so seamlessly round the clock while. In fact, Amazon can remotely delete content from Kindle without permission of the ‘owner’, as it did in 2009.

The conception of property rights is also complicated in the area of agricultural technology with increasing digitization. For example, John Deere traditionally sold agricultural tools whose ownership would transfer to the farmers on sale. They could be easily repaired by self or by trained mechanics without paying the company repeatedly. With digitization and remote transmission of data to and from the company database, there is a separation of ownership of equipment (say, tractor) from ownership of data. Moreover, software debugging, device repair and remote update create new problems for the farmers as it increases their dependency on the company, reducing the supposedly exclusive control that a ‘property’ is supposed to offer to an ‘owner’.

Therefore, we see that the same network effects and availability of cheap devices, that tilt the regime of property rights towards a more diffused ownership or commons, can also be exploited by firms to render the property right claim of the user effectively useless as the value no longer lies with the device or the equipment owned but in the intangible data gleaned through them. In this new paradigm of networked devices, the former has the potential to reduce the agglomeration of power in the global economy, the latter can lead to further consolidation in the hands of a few companies and a few or even just one country. Nonetheless, old property rights become difficult to enforce and even be undesirable.