The rise of an information barter economy
© Copyright 1994-1998, Rishab Aiyer Ghosh. All rights reserved.
Electric Dreams #37

The dawn of the information economy has seen with it a rebirth of the oldest transaction model, that of barter or cooperative exchange. Just as information society reintroduces a pre-industrial emphasis on distributed production, it also contains echoes of an age where the innate value of goods was unknown and difficult to determine, where every consumer was also a producer, and where the lack of trading intermediaries made evaluation in independent currency unnecessary.

Commerce in cyberspace, where the goods and services of a knowledge economy live, has been handicapped by the absence of a widely available and reliable system of monetary exchange. This has been a major reason for the strange shape of the existing cyberspatial 'market' for information services - which is usually assumed to be a smorgasbord of free goodies. In fact, it is part of a community barter exchange that has been operating for over a decade, and may well be a model for future trade in such peculiar and intangible commodities as knowledge, expertise and environmental friendliness!

This free-market in the truest sense of the term is one where trade is not usually conducted in discrete transactions between producer, consumer and the occasional go-between. Rather, commodities have been exchanged in a form of almost tribal community as if each producer adds something to a shared cooking-pot - the Gopherspace, World Wide Web and file libraries of the Internet - to the benefit of innumerable consumers (who have perhaps also contributed something of their own). Without all this. the million or so attracted to the Internet each month would still be staring suspiciously at their modems and computers from a safe distance.

Such apparently free information resources are the public face of this market. Actually the barter or 'cooking-pot' system is what keeps the backbones of the world's infobahns alive. The original government-subsidized networks are largely self-supporting. Most information on the exploding highways now travels on commercial infrastructure - which requires load-sharing and routing agreements between numerous owners. Luckily data communication costs are not dependent on the volume of traffic, or the global info-highway would be stillborn. The conventional process of infrastructure-sharing then, would be for one service provider to rent individual routes from their various owners, paying, naturally, real money. Not only would this result in a lot of money being thrown around - everyone would rent each other's routes - it would be extremely inefficient. Far better than such static arrangements is one whereby each provider dynamically identifies and uses the best routes, regardless of their different owners. This is how commercial Internet providers work. The Commercial Internet eXchange (CIX) for example is a 'club' of Internet providers who pay a membership fee, and agree to route and carry each other's traffic without charging for volume.

Contrary to what is often assumed, lending infrastructure without charging or creating elaborate databases for public use are not loss-making activities - not when everyone does it. Naturally the considerable expense involved in providing services is not directly earned back if they are made available freely. But there are equally considerable indirect gains - free access to the services provided by others. There is also a 'cooking-pot advantage'. The benefit of barter over selling is apparent in the case of the CIX, and while shopping for 'knowledge' and 'expertise' whose value is intangible and subjective, a free-for-all provides a great choice and opportunity to sample - unlike traditional markets.

The notional value of trading in 'cooking-pot exchanges' is immense even at present. Like the traded services themselves, it is intangible; but if one were to attempt to put a price tag on every Web site, free program and bit of advice offered on the Net, the market has a notional value of at least $100 billion. Of course if one were to try (as many do, by and large unsuccessfully) selling services at their notional prices, the market would collapse.

The major premise of cooking-pot markets is that consumers and producers are the same - keeping a balance between what each provides and takes. When this balance changes - with the proliferation of hungry newbies and baby service providers who use but hardly provide infrastructure - then the market falters. CIX, which in true cooking-pot style has so far been carrying the traffic of non-members, is threatening to stop.

What is likely to happen eventually is the creation of huge clubs of more-or-less equal 'prosumers' - all large Web sites in one, all small ones in another - with their own independent cooking-pot markets which outsiders can join as they increase their own output.

Producers and consumers have two alternatives at this threshold of a new economy. They can widen the gap between themselves by charging money for volume and killing the cooking-pot markets, leading to a rerun of television and old, advertiser-supported media. Or they can narrow the gap, add further value and activity to such markets and realize the freedom to produce, leading to something refreshingly new and different.

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