The digital economy is disrupting our old models

Diane Coyle at The Financial Times: “One of the many episodes of culture shock I experienced as a British student in the US came when I first visited the university health centre. They gave me my medical notes to take away. Once I was over the surprise, I concluded this was entirely proper. After all, the true data was me, my body. I was reminded of this moment from the early 1980s when reflecting on the debate about Facebook and data, one of the collective conclusions of which seems to be that personal data are personal property so there need to be stronger rights of ownership. If I do not like what Facebook is doing with my data, I should be able to withdraw them. Yet this fix for the problem is not straightforward.

“My” data are inextricably linked with that of other people, who are in my photographs or in my network. Once the patterns and correlations have been extracted from it, withdrawing my underlying data is neither here nor there, for the value lies in the patterns. The social character of information can be seen from the recent example of Strava accidentally publishing maps of secret American military bases because the aggregated route data revealed all the service personnel were running around the edge of their camps. One or two withdrawals of personal data would have made no difference. To put it in economic jargon, we are in the territory of externalities and public goods. Information once shared cannot be unshared.
The digital economy is one of externalities and public goods to a far greater degree than in the past. We have not begun to get to grips with how to analyse it, still less to develop policies for the common good. There are two questions at the heart of the challenge: what norms and laws about property rights over intangibles such as data or ideas or algorithms are going to be needed? And what will the best balance between collective and individual actions be or, to put it another way, between government and market?
Tussles about rights over intangible or intellectual property have been going on for a while: patent trolls on the one hand, open source creators on the other. However, the issue is far from settled. Do we really want to accept, for example, that John Deere, in selling an expensive tractor to a farmer, is only in fact renting it out because it claims property rights over the installed software?

Free digital goods of the open source kind are being cross-subsidised by their creators’ other sources of income. Free digital goods of the social media kind are being funded by various advertising services — and that turns out to be an ugly solution. Yet the network effects are so strong, the benefits they provide so great, that if Facebook and Google were shut down by antitrust action tomorrow, replacement digital groups could well emerge before too long. China seems to be in effect nationalising its big digital platforms but many in the west will find that even less appealing than a private data market. In short, neither “market” nor “state” looks like the right model for ownership and governance in an information economy pervaded by externalities and public goods. Finding alternative models for the creation and sharing of value in the digital world, when these are inherently collective and non-rival activities, is an urgent challenge….(More).