Bryan Caplan  

The Walled Garden That Never Was

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I'm old enough to remember the days when many people seriously believed that America Online's gated content was the wave of the future.  Over at Cato Unbound, Adam Thierer takes apart Lawrence Lessig, influential past prophet of techno-doom:
Had there been anything to the Lessig's "code-is-law" theory, AOL's walled-garden model would still be the dominant web paradigm instead of search, social networking, blogs, and wikis. Instead, AOL -- a company Lessig spent a great deal of time fretting over in Code -- was forced to tear down those walls years ago in an effort to retain customers...

[...]

...Lessig admits things haven't turned out to quite as miserably as he predicted they would, yet he quickly reassumes his skunk-at-the-cyber-libertarian-garden-party posture by noting, "I concede that some of the predictions made there have not come to pass -- yet. But I am more confident today than I was then," he proclaims. More confident? Can he muster any evidence to support that assertion? I suppose we'll have to wait another decade or so to see if Lessig's continuing cyber-pessimism is warranted, but I remain an unrepentant techno-optimist -- and, at least so far, I generally have history on my side.
The funny thing about the Internet is that economic literacy probably leads one to underestimate it.  After all, in what other market do people eagerly supply high-quality products for free?


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COMMENTS (13 to date)
RL writes:

Bryan: "The funny thing about the Internet is that economic literacy probably leads one to underestimate it. After all, in what other market do people eagerly supply high-quality products for free?"

Do you think behavioral economics has anything to offer by way of explanation?

Ryan Singer writes:

Great question, RL,

I would check out Mike Masnick's great blog about the economics of the internet. Check it out at http://techdirt.com

david writes:

Thierer is spouting rubbish, to put it politely. It's easy after the event to say: aha, there was no disaster, therefore there was never a risk of one to begin with. It's also wrong.

Does he think that, say, the Apple Store conceded to selling nonDRMed music out of the goodness of their hearts?

DRM has failed precisely because of the attitude introduced by Lessig and other writers: that breaking DRM and other such measures, even in violation of the DMCA, is morally and ethically acceptable. Yes, it's illegal! Does Thierer even realise that he's saying that markets work because consumers break the law en masse? What does he think Lessig is campaigning about?

And anyone who thinks that there haven't been economic losses to such attempts at restriction has never dealt with Microsoft software and their myriad issues. Or worse - thinks that such software is as good as it could be.

AOL's gated community failed due to specific usability and performance issues. Don't confuse that failure with some kind of market triumph: Apple has shown that "easy to use" allows corporations to bring vertical monopoly to the forefront.

Felix writes:

Bryan:
"After all, in what other market do people eagerly supply high-quality products for free?"

Entertainment.

David:
AOL's gated community failed due to specific usability and performance issues.

More broadly, AOL was taken over by people attracted to running a milk cow. They drove off anyone interested in building more cow. Then the cow ran dry.

Peter Twieg writes:

If if Lessig ended up being too pessimistic, I can't say that ex ante his predictions were unreasonable. As Zittrain observes in his article, even if the internet itself isn't "walled off" there are specific services such as Facebook that appear to be moving in that direction.

HH writes:

"After all, in what other market do people eagerly supply high-quality products for free?"

Entertainment was a good answer. People around you crack jokes constantly without charging. It's obviously a status game, which fortunately has nice positive externalities for the rest of us.

Joe Mansfield writes:

The walled garden may have disappeared (for the most part) as a problem for PC & Mac users but the walled garden remains a huge problem for the vast majority of internet connected devices today. The approach is the default for almost all Cellular Data services provided by mobile phone companies. You cannot (in general) use Skype on mobile phones even when you have a data plan and a network that is technically capable of supporting it, non standard protocols generally don't work (business VPN traffic is notoriously blocked by almost all cellular data networks unless you explicitly pay for it). The technical freedom that has made the Internet at large the dynamic hotbed of innovation that it is is not a feature of those networks and if the incumbents have anything to do with it that will not change.
That's not to say that I think that Walled Gardens are necessarily all bad - the iPhone ecosystem is a classic walled garden in all respects and it delivers a fantastic end user product.

George writes:

The technical freedom that has made the Internet at large the dynamic hotbed of innovation that it is is not a feature of those networks and if the incumbents have anything to do with it that will not change.

Then they're stupid and they'll die. (To paraphrase Darryl Hannah in her most intimidating role.)

Some smart business-school professor whose name eludes me pointed out that in the layer where a single open standard dominates, there's not much money to be made — but in the layers above and below, there are lots of opportunities. So nobody made a lot of money off the TCP/IP standards, but Cisco et al. below and the entire Web economy above profited handsomely.

Providing a stream of bytes to people away from their desks is getting commoditized as surely as providing that stream at their desks. The carriers don't want this to happen, but seem oddly uninterested in either (a) selling hardware to let me set up a neighborhood-sized wireless data network or (b) developing applications that would make me want to fork over the current prices for their anemic 3G service. Maybe Gilder's right for once, and they sealed their doom when they became "law firms with an engineering business on the side."

Boonton writes:

From the original:

In Code, Lessig painted an extraordinarily gloomy picture of the unfolding digital age. Early cyber-theorists such as Ithiel de Sola Pool, John Perry Barlow, George Gilder, and Nicholas Negroponte had foretold of a world in which the invisible hand of code would generally be an agent of empowerment and liberation. Lessig, by contrast, viewed code as an agent of control; the prime regulator of our modern digital ecosystem. “Left to itself,” he warned, “cyberspace will become a perfect tool of control.”

I'm not sure it's clear either set of prophesies have come to pass. Yes we all don't live under the boot of AOL. But many of us do seem to use Google and Wikipedia to secure 80% of our online information. Perhaps these monopolies are 'soft' in the sense that their customers would bolt at the first sign of excessive control...but that still is wishful thinking. What happens remains to be seen.

On the global front, are we so sure code is not an agent of control? In the US the gov't is trying to get a woman sentenced to two years in jail for violating Myspace's 'terms of service' boilerplate. Granted she spoofed a teen boy and hurt a girl's feelings so might have motivated a suicide. Still the meme seems to have shifted from 'beware, on the internet no one knows you're a dog' to one where you're expected to behave online as you would in a shopping mall. And maybe that's not too bad. But it isn't the free wheeling 'anything goes' type of place envisioned by the optimists.

Overseas it's a bit more troubling. China seems to have perfected combining peer pressure (nationalism, appeals to patriotism) with skillful use of code and filtering to enhance the government's control of the population. Lessig may have been too negative in regards to the US but he seems to be more on the mark overseas rather than the optimists who predicted instant messaging & URLs would bring down the last authoritarian regimes.

Kat writes:

(On preview, this turns out to be longer than I thought...)

Thierer ignores several problems in his essay. One is that, while it is true that no one is forcing consumers to by the latest products, consumers don't realize the long-term effects -- or even the medium-term effects -- when they purchase the product. But consumer purchases only reflects the knowledge that consumers have when they purchase, not afterward. When everyone has their impulse-bought iPhones and Kindles, and only later realize that their ability to import their existing media, create new applications, and back up their data is restricted, they may not have expected that loss. For any one person, the cost of these restrictions may be small; for the whole community of users it's a huge loss.

Thierer talks about the billion iPhone app downloads; he doesn't talk about the apps that were developed that the Apple Store refuses to sell -- Apple knows best what consumers should be able to choose from. He talks about consumers' widespread adoption of the iPhone; he doesn't talk about the Apple's campaigns against open, unpatented media formats that compete with theirs and that Apple's devices won't play. The cost of learning about the features (and lack of features) of new devices as compared to what is available generally and what you may want is high, and most people will not.

(Thierer, as well as many technologists, continue to talk about hackers' ability to break restrictions and allow for unfettered access, as if this were a real solution to the fears of overly-controlled information. But how free is something when only a small percentage of the population has the means to access it? For example, it is possible for citizens of mainland China to access government-blocked sites, but not without significant risk and difficulty. It's good enough to have the desired cultural effects.)

There's also a bit of the broken windows fallacy; if there had been no need to develop open alternatives in response to the restricted products, the creators could have been developing new things instead. That the world has not succumbed to Lessig's fears expressed in Code is because people have had to duplicate efforts.

Finally I would argue with his characterization of the "cyber-collectivists". For one, several of the corporate interests have been using government intervention for their own advancement. And for another, last I checked, you didn't need to be a collectivist to see that markets fail and coordination problems exist. Lessig's proposed solutions may not be the only possible or even the best possible -- it doesn't mean that his forecasted problems are not problems.


Boonton: There's an important difference between Google and Wikipedia: Google is gated, Wikipedia is not. Wikipedia was created in response to the fears of dependence on walled gardens; the license allows for anyone to take the complete content and the complete software and set up a fork or mirror site (and some do, but none have become).

If Wikipedia folded tomorrow, someone could take the entirety of what had been done and restart it (they'd have to attract users to it to continue building the project, but the data would still be there).

If Google folded tomorrow, no one else has their software and their data, and no one else is allowed to have it.

Duncan writes:

George,
That would be Clayton Christensen you're talking about.

William Newman writes:

Ah, Bryan, but are you old enough to remember when libertarians were routinely reminded that capitalism means that auto manufacturers have no incentive to increase reliability?

Kat: It's true that Google has a lot of private data. But Google-like databases can be mechanically created from public data (mostly the web itself). By now the Google code is very complicated, and they have a lot of independent private data (memories of commonly used search terms, e.g.) that they can use as input for their search computations. But early Google running on simpler code and much less independent private data offered a user experience rather like current Google, and current search services from other vendors do too. Therefore, it seems likely that a fairly vanilla web-spidering algorithm can digest the public data in a mechanical fashion in order to create private data rather like Google's.

Tim Lee writes:

"The funny thing about the Internet is that economic literacy probably leads one to underestimate it."

I think this probably says more about the state of the economics profession than it does about the Internet. How about this: in a competitive market, prices tend to fall toward marginal cost. The marginal cost of distributing bits has fallen very close to zero. Therefore, it's not at all surprising that the price has fallen to zero along with it. I second the recommendation of Mike Masnick for some basic insights on the economics of online content.

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