Social Production and Demographic Changes

One noteworthy trend we’re experiencing of late is the rising prominence of social production—the creation of valuable information goods on a non-commercial basis. Probably the clearest example is Wikipedia, a hugely useful service that doesn’t produce any economic “value” in GDP terms. Of course valuable activity that doesn’t register in GDP is nothing new—just ask moms spending time taking care of their kids. But the transition to the digital economy is changing things in important ways. In particular, it’s simultaneously making it cheaper than ever to produce and distribute information goods, but harder than ever to capture revenues from information goods.

In other words, if you and a friend have a band and want to work with another friend to produce an album that sounds decent and make it available to music fans all around the world, that’s become dramatically easier than it was 20 years ago. But if you want to make people pay money for your album, that’s much harder than it used to be. The marginal cost of distributing digital records is nothing, so the price trends toward zero. And much the same is true of making a movie, moving a news story, or anything else that can be sent around over the internet. This implies that production of these kind of goods ought to decreasingly be conducted on a commercial basis and increasingly done on a non-profit basis. For profit firms are finding it harder-than-ever to make revenues match costs in the news business, for example, but non-profits and hobbyists are finding it easier than ever to gain an audience for their products.

I think this trend has important linkages with the various demographic trends facing the world. At the moment, the costliest element of producing information goods is no longer the capital required to produce them (primarily a computer and an internet connection) but the time it would take out of your busy day to do it.

But many Americans—retired Americans—actually have plenty of time on their hands and famously spend a great deal of time pursuing their various hobbies. At the moment, relatively few retirees have the skills necessary to engage in digital social production. So you’ll find them playing golf or bridge or what have you, but generally not blogging. This skills issue is, however, a pretty transient phenomenon. In the future, it might be common for grandpa to spend a couple of hours a day tinkering with open source software. Or maybe he’ll make it his business to attend city council meetings and write on the web about them. People will write whole books and distribute them for free to people’s kindles. A lot of this material may have a “crank” quality to it. But much of it will be genuinely well-informed, and reflect a lifetime of knowledge. Already, I can see in DC’s local blogosphere that there’s a fine line between an annoying busybody and a vital source of information. As the cohort of people with the most time on their hands to just pursue their interests becomes more digitally literate, I think we’ll probably see an explosion of non-commercial activity in a variety of fields. And one important source of success for commercial enterprises will be finding ways to hybridize commercial and non-commercial elements of the production/distribution process. Someone might make a living organizing and marketing goods that are overwhelmingly made by hobbyist producers, doing a certain amount of “last mile” stuff that’s too dull to be fun for anyone but that no longer produces enough revenue to support an entire paid workforce.

One important implication of this is that we’re almost certainly shifting from a world in which a large and important set of activities aren’t captured in the national economic statistics to a world in which a large, important, and growing set of such activities isn’t captured in the conventional statistics.