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nettime:*Markets and Anti-Markets,3/4 DeLanda
Diana McCarty on Fri, 7 Feb 97 01:18 MET


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nettime:*Markets and Anti-Markets,3/4 DeLanda


The problem with the new modelling strategy that I am proposing, the bottom
up strategy in which wholes are generated as emergent ones as opposed to
postulated a priori, is that it is extremely expensive to rent a
supercomputer or a parallel computer where we can run these models. None of
us here have the resources to do such a thing. What is the use? A possible
solution to this problem would be convert the Internet into a parallel
computer. Indeed, the Internet is already a distributed parallel system on
which many computers are connected at the same time. It is just that there
is no software available except perhaps Tom Ray's AL idea. It would be a
relatively simple thing. You would just need software in both servers and
clients that would allow the users of the Internet to leave their computers
connected all day to the Internet and sell to whoever wants to buy it the
two most important resources that are in the Net: memory and CPU time,
computer processing time. Now most of the time when we are using the
computer we are clicking or reading or waiting for something to happen, and
a lot of memory is being wasted, a lot of CPU cycles are being wasted. If
we had the correct software so someone could buy CPU cycles across the
world and make them cohere, then we would indeed have access to cheap
parallel computers. We would be able to run our simulations all over the
Internet using it as a parallel computer. This is just a possibility on how
to use networks as epistemological devices on how to use networks as the
infrastructure to support new modelling strategies and, therefore, new ways
of thinking about economics.

Recognizing the heterogeneity of real economies may be crucial when
thinking not only of network economics per se, but more generally when
analyzing the oppressive aspects of today's economic system, especially
those aspects that we would want to change in order to make economic
institutions more fair and less exploitative. We need to think of economic
institutions as part of a larger institutional ecology, an ecology that
must include, for example, military institutions. When I use the word
ecology, I do not mean to imply anything about Mother Nature, ecosystems as
Gaia, or anything like that. As I said in the beginning, ecosystems are
simply one example of heterogeneous elements cohering without
homogenization or hierarchy, but there are many other examples from human
culture and institutions. We are not talking about naturalizing or
legitimizing something by appeals to what Mother Nature says. Ecosystems
are  only one example of assemblages of heterogeneous elements that
actually cohere via functional complementarities, such as  predators and
prey, parasites and hosts. Our institutional ecology, the heterogeneous
assemblage that we need in order to replace the idea of a capitalist
system, must include military institutions. Only in this way will we be
able to locate the specific sources of certain forms of economic power,
sources which would remain invisible if we simply thought of every aspect
of our current situation as derived from capitalism. Many of the most
oppressive aspects of industrial discipline, in particular, the use of
machines to control workers in assembly line factories, were not originated
by capitalists but by military engineers in 18th century French and 19th
century American arsenals and armories. Without exaggeration, these and
other military institutions created many of the techniques used to withdraw
control of the production process from workers and then exported these
techniques to civilian enterprises, typically antimarket organizations via
a variety of processes in the United States, specifically via the contract
system. The military would only give contracts to producers of, for
example, weapon parts to companies using its own system of routinization
and standardization in which workers were made into cogs in a larger
machine. The reason why military institutions created standardized
production was to create weapons with interchangeable parts, For as long as
individual artists created an entire weapon, each weapon had its
idiosyncrasies. It fit together and it worked, but it could not be taken
apart and put back together with the parts from another artisan's weapon.
Therefore, it was a big logistical problem for the military to supply
battlefields with spare parts as they would not fit. Every weapon was an
entity in itself. In order to create weapons with perfectly interchangeable
parts, a model weapon was created that every artisan had to copy exactly,
reinfornced by special gauges that measured the tolerances of every new
part created by every artisan and metallic fixtures that guided the cutting
devices. Early on the military realized that to impose standardization in
weapon production implied not only the disciplining of the materials,
making them more homogenous and uniform, but the disciplining of human
beings; for the moment you withdraw individual control of the production
and put it in the hands of management, constant monitoring and constant
discipline were necessary to ensure the proper flow within the factory.
Hence, not including in our economic models the processes occurring within
this wider institutional ecology potentially obfuscates the source of the
very structures we must change in order to create a fairer society and,
hence, diminishes our chances of ever dismantling those oppressive
structures. Virtual environments and the bottom up models they allow us to
build may be the right tools to study these institutional ecologies without
reducing their heterogeneity. [see //computer].

Not to drift from the main subject, let's consider examples from the
industries that created the infrastructure of the Net, itself, that is
computers.

The question of the manufacture of computer hardware and software has many
different interesting angles, not to mention a very close association with
military institutions which I have written about elsewhere. Even though the
computer was created by Alan Turing as a completely abstract device to
solve some very abstract problems in meta mathematics, it took World War
II, problems in cryptology, breaking the Nazi's ENIGMA code, calculating
artillery trajectories, and problems of fluid dynamics in the atomic bomb
Manhattan Project for von Neumann and Turing on both sides of the Atlantic
to realize how hard it was going to take this virtual machine that Turing
had created in the 1930s and actually incarnate it into a real piece of
hardware. For example, the memory of the original Turing Machine was an
infinite paper tape. Now, of course, you cannot build computers in reality
with infinite paper tapes. The question of how to implement an actual
computer memory was a big obstacle for the creation of universal machines
in the late 1940s and early 1950s. The Internet, itself, has military
origins as everybody knows, and its packet-switched structure of
circulation of information exists not because the military wanted it that
way but because it was the only way of creating a network that could
survive a nuclear attack. The military bit the bullet and accepted it as a
reality imposed on them by the necessities of war.

But, today, I would like to discuss a different issue, one related to our
bottom up modelling of heterogeneous institutional ecologies. And, also, it
is an issue that connects with why it is important to stop thinking of
societies as forming a homogeneous system, like the capitalist system,
because only then can we begin to take seriously certain differences in
economic performance, differences in which various industrial regions even
within the same country operate, differences that become much less
interesting if we use the term capitalist system. Capitalist system makes
them all seem the same: they all use money, they all use workers in a
subordinate position, etc. However, when you begin realizing that the
Classics were wrong, that friction needs to be included, that heterogeneity
needs to be included, and not only as an afterthought, "Oh, let's make it
even more accurate," but as an essential piece of what the system is, then
the differences between different industrial hinterlands become
interesting.

Let me just discuss two industrial hinterlands in the United States, very
briefly, that produce the hardware on which the Internet is based: Silicon
Valley and Route 128 in Boston. Both are industrial hinterlands involving
the production of hardware and software. Both are animated by intense flows
of knowledge and information, partly due to their association with large
technical universities, Stanford and MIT respectively. The two ecologies,
however, are very different. And this has made a difference in their
performance. Silicon Valley has much more heterogeneous collection of
enterprises within it but that does not mean that there are not large,
routinized, militarized factories in Silicon Valley. There certainly are,
Intel or Xerox, for example. There are plenty of antimarkets in Silicon
Valley. We are not talking about pure cases. In reality all we get is messy
mixtures of things. But what does matter is what dominates the mixture. Do
prices and real market dynamics dominate it or is it dominated by commands?
I quote here from a study by Annalee Saxenian:

"Silicon Valley has a decentralized industrial system that is organized
around regional networks. Like firms in Japan and parts of Germany and
Italy, Silicon Valley companies tend to draw on local knowledge and
relationships to create new markets, products, and applications. These
specialist firms compete intensely while at the same time learning from one
another about changing markets and technologies. The region's dense social
networks and open labor markets encourage experimentation and
entrepreneurship. The boundaries within firms are porous, that is not rigid
and separating, as are those between firms themselves and between firms and
local institutions such as trade associations and universities."

The growth of this region owes very little to large financial flows from
governmental and military institutions. It was not directly connected to
the military-industrial complex as Route 128 was. Silicon Valley did not
develop so much by the economies of scale typical of antimarkets as from
the benefits derived from an agglomeration of visionary engineers,
specialist consultants, and financial entrepreneurs. Engineers in Silicon
Valley moved often from one firm to another. The typical length of their
stay in one firm is about three years, developing loyalties to the craft
and the region's networks not to the corporations. This constant migration
plus an unusual practice of knowledge sharing meant that innovations can
diffuse quickly through the region. This does not mean that there are not
large routinized firms in Silicon Valley. I am not trying to romanticize
Silicon Valley as a model for the future. As a matter of fact, the kind of
regional dynamics in Silicon Valley today are very old. That is the way
Venice in the 11th century broke away from being a supply zone of
Constantinople; that is the way in which London and Antwerp stopped being a
supply zone, sellers of raw materials, to Venice; that is the way New York,
Pennsylvania, and Boston, selling cheap products to one another, stopped
being a supply zone of England. There is historical precedent for the
existence of these interactive networks of small producers. The key word
here is small because only when there are many small producers do we have a
decentralized decision making system in which prices more or less set
themselves. But it does not mean that large firms do not exist in Silicon
Valley. There are very oppressive antimarket institutions just as
everywhere else. Only they do not dominate the mix. This is all that
matters for my point.

Route 128, on the other hand, houses a completely different mixture of
markets and antimarkets. I quote again from Saxenian:

"While Silicon Valley producers of the 1970s were imbedded in and
inseparable from intricate social and technical networks, the Route 128
region came to be dominated by a small number of highly self sufficient
corporations. Consonant with New England's two century-old manufacturing
tradition, [a tradition which was, by the way, born in those arsenals and
armories that I mention in the beginning of the paper,] Route 128 firms
sought to preserve their independence by internalizing a wide range of
activities. [Internalizing means that a large corporation buys a small
firm. For instance, while Apple Computer was growing up, it bought all its
hard disks, floppy disk drivers, memory, etc., and came up with an open
architecture so everybody could write software for it, therefore initiating
a chain reaction in which many, many small producers, could get involved.
Eventually, some became big antimarkets like the creators of Lotus 123 and
other large software companies. The Route 128 firms like DEC or Digital
were always self-contained, or they had enough economic power and resources
to simply buy a firm that manufactured the hard disk parts or buy a firm
that manufactures software, etc. They thought this exercise of economic
power was actually benefiting them, but as it turned out it did not.] Route
128 firms sought to preserve their independence via vertical or horizontal
integration of a wide range of activities. As a result, secrecy and
corporate loyalty governed relations between firms and their customers,
suppliers, and competitors, reinforcing the original culture of stability
and self-reliance as opposed to risk taking and innovation. Corporate
hierarchies ensured that authority remains centralized and information
flows vertically. The boundaries between and within firms and between firms
and local institutions thus remained far more distant."

The different dynamics of these two institutional ecologies illustrate one
of the potential benefits that computer networks can bring to an economy.
Although the dynamics of Silicon Valley involve networks of different
kinds--social, institutional, educational networks--that formed more or
less spontaneously, networks like the Internet could help energize other
industrial hinterlands around the world including the Third World by making
possible the interconnection of many small businesses, thus allowing them
to compete with large national and international corporations which enjoy
economies of scale. I am not saying you can have a small business fighting
a large multinational corporation. This is ridiculous in reference to what
I just said. The multinational corporation can simply internalize a small
business as it is happening with all the biotechnology companies in Boston.
They were small businesses to begin with, and now they are part of large
oil companies or large food producers that have them as one of their
divisions. The point is to create entire regions in which the skills
developed by learning by doing, by actually creating little pieces of
hardware and software, stay in the region because no small little firm can
move out from the region without ceasing to benefit from the economies of
agglomeration that occur when you put a lot of these small firms together.
All the small firms become undetachable from the region, therefore
eliminating one of the main dangers of antimarket institutions: that when a
large corporation dominates the life of a town, the moment it moves to
another town or country where labor is cheaper, it kills the town because
the corporation internalized all the skills. All the skills are within the
corporation in the research laboratory and move with the corporate entity.
If a network crucially depends on these local dynamics, then it cannot move
away. Even though it may still have other points that we may criticize, for
instance, the treatment of workers, at least it will not kill a region by
relocating.

To speak of these relative advantages is not romanticize markets versus
antimarkets, precisely because markets as self-organized entities grow by
drift. No one plans where they go, so they are inefficient and go through
cycles of boom and bust. Sometimes we can benefit from this drift, and
sometimes we cannot. It is not a matter of romanticizing these things but
getting a better grip on the actual heterogeneity of the world.
Slicon-Valley style dynamics have, for instance, ocurred in certain
European regions. In Italy there is a region mentioned by Braudel and
several other writers where three huge textile corporations were broken
down into much smaller but networked textile producers. I believe the
region is between Bologna and Milan. This revived the region. These
companies compete with one another but at the same time collaborate, for
example, when a company cannot take another job because it is too busy
doing something else, then it can pass it on to another company in the
network even if it is a competitor. They benefit from each other, and they
have enough clout to resist the large corporations that are their real
enemy. We do not know very much how these networks evolve. But we have
empirical data from history: Venice, London, and more recently 18th century
Boston, New York, and Philadelphia. That historical research needs to be
deepened in conjunction with the collection of more data coupled to bottom
up computer simulations in order to understand how these networks actually
work and how we many be able to intervene in reality to allow these
networks to form, particularly in the Third World.

Now, finally, I would like to speak about the economic potential of the
Internet, itself, its capacity to create a space on which to carry brand
new commercial and industrial transactions. The Internet is rapidly
evolving into such an economic space, and the development of electronic
cash and crypto- technology to perform secure and anonymous transactions
will accelerate this trend. Much of these traditional economic systems may
be seen as a means of allocating or distributing resources that are scarce.
Scarcity is one of the factors that determines the nature of Net economics,
at least as we are theorizing about it now. The scarcity in question is not
of computer power or memory, both of which are becoming cheaper and more
plentiful every day, but a scarcity of bandwidth, i.e., the capacity to
transport information through the conduits or channels that link computers
together. Everybody that has to sit in front of a computer waiting for a
web page to come in with a 14/4 modem like myself knows what I mean by
bandwidth scarcity. A change from a world of scarce to one of plentiful
bandwidth would have very important consequences for the Internet. Of the
writers who have analysed the possible impact of such a change, no one has
received so much attention, at least in the United States, than George
Guilder. George Guilder was on the cover of Wired Magazine four or five
months ago. He is an economic guru and advisor to Newt Gingrich, much like
Alvin Toffler. We are talking about the American right wing. Guilder's
technical analyses are, indeed, quite interesting, but their merits must be
assessed against the context of my introductory remarks. Guilder has a
strong ideological commitment to 18th century economic ideas, and he
incorrectly identifies the dynamics of markets with those of antimarkets.
In particular, Guilder is what we may call an extreme "invisible hander,"
i.e., a believer that the economy is guided to optimal performance by an
invisible hand which mysteriously optimizes the match between supply and
demand. However, Guilder's right wing ideology is so transparent that it is
quite easy to separate it out from his concrete analysis of the
technologies that could one day end bandwidth scarcity.

 


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