From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Wed Sep 04 2002 - 18:45:56 EDT
Paul writes >What is the value of information? > >More particularly what is the value of software? Depends on what you mean by "value." If you mean it in the traditional Marxian sense, then the answer is immediate, as immediate as the accompanying inference that embodied labor time has very little if any relevance to the determination of market prices for software or other modes of commercial information provision. Here's the problem as I understand it: in a commodity market populated by large numbers of profit-maximizing producers facing strictly positive, non-decreasing marginal (and thus average) costs of production, the price of a commodity would tend to get determined by the interplay of market demand and marginal cost of aggregate production. [N.B.: the typical assumption of fixed-coefficient technology poses no special problem in defining marginal costs, though one does have to be careful to specify the "margin" at which capitalist firms are assumed to be operating.] If we add the condition of free entry and exit, then this intersection must occur at the point where marginal cost just equals average cost of production (where the latter includes a "normal" rate of profit, or, in a Marxian context, the average economy-wide rate of profit, however determined). But the problem with information is that, once it is created, the marginal cost of supplying it to additional consumers is (virtually) zero. Given some strictly positive cost of creating the info in the first place, marginal cost of supply must thus always fall below (declining) average cost, implying that the good cannot be supplied under the competitive conditions described above; price = marginal cost (= zero, or thereabouts) always implies a *negative* rate of profit. The capitalist solution to this has been to encase information in "intellectual property rights" so that what is being bought and sold is not the information per se, but the limited *right* to gain access to that information. Thus the market price is not driven by marginal costs of production in the standard sense but rather the level of demand for the information in question. I thus agree with Jerry (I just checked his incoming, which appeared as I was writing this) that the market price of information, or information embodied in software to speak more specifically, essentially corresponds to a rent. Furthermore it can, under the logic of capitalist markets, *only* correspond to this, if this market is to be reproduced; under the conditions indicated above, (a) marginal labor values diverge from average labor values, necessarily; (b) market competition in the absence of enforcement of "intellectual property rights" would drive prices down to reflect marginal, rather than average, labor values (or more generally, costs of production), and thus (c) the market would self-destruct under competitive conditions. In other words, the supply conditions for information land us in the territory Marx attempted to cover in K.III, Chapter 10, and as I tried to explain in a much much earlier post, he alas made a complete, incoherent hash of that analysis. But hindsight says it wasn't his fault--labor value theory just isn't equipped to cope with the case of zero-marginal-cost supply. For what it's worth, Gil
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