With many economic commentators calling the post-industrial economy - with its cheap decentralised data networks - the "knowledge economy", it is with complete irony the Australian Prime Minister is requesting that Australian youth quit school to jump into the labour market . The "Clever Nation" hits a bump in the road from a "hole in the ground" government. It used to be in the fifties that "do nothing" governments were called "Sheep's back" governments. With our reliance on China's and India's purchasing of our commodities, the Sheep's back has become a hole in the ground. But with a knowledge economy changing the focus of scarcity, is Australia well placed to transition to a knowledge economy? If we maintain the American view of property rights, the answer is no.

Knowledge Economy

The knowledge, or information economy has arisen from the commoditisation of data interchange around the globe. Bandwidth is increasing in a Moore's Law like manner, and the commoditisation of the network build outs mean that bandwidth is becoming cheaper and cheaper for content creators and information consumers. As an example of this, South Sea Republic is hosted in my basement!

In the industrial economy, the creation and distribution of content was capital intensive. Consequently governments established means to subsidize the large capital costs of these enterprises. One was the limited liability company, another was the raising of public funds, and third was what content distributors today call "intellectual property". These commonly take the form of patents and copyright.

Patents and Copyright were a legislative means to establish forced scarcity. They were intended as a trade off between a form of corporate welfare and the common weal. It was expected with patents, that in return for making an invention public knowledge, the creator of this would be awarded a rent on that patent for a fixed period. The same with copyright. In return for publishing their content creation, they would be awarded a monopoly on the distribution of that copyright.

Neither patents or copyright, have any place in an information economy. Innovation often out strips the investment cycle. The pace of change is so rapid that innovation often occurs outside of the intellectual property domain or a legislature's ability to control the innovation. A good example of this is cryptography and peer to peer networks.

The pace of change in the information economy is so rapid, that it commoditises technologies and methods before the old industrial era intellectual property laws release them. A good example of this is the compiler. Opensource software commoditised this technology almost immediately, yet patents mean that a commoditised technology, that has fallen to the cost of zero, may have rents extracted from it by corporations who have adhered to the industrial era intellectual property laws. The common weal is most definitely not being served.

The Age of Abundance

In an abundance economy the scarcity is in a different place to the industrial economy. As the name "knowledge economy" suggests, the scarcity lies with the content creator. Not with the distributor. Not with the entity funding the content creator. The creator themselves, is the point of scarcity.

The cost of tools have dropped to near zero. The least expensive Apple is under $500 USD. To publish opinion or content, it is now as cheap as having an internet connection. Numerous blogging companies enable free publishing. Music was once capital intensive, now for the cost of a computer and some software under $100, a band can record with the same quality that Fleetwood Mac did in the 1970s for umpteen millions. This change is universal in the abundance economy.

The American distribution cartels reigned supreme in the industrial era. Today they are embodied by the RIAA and MPAA. Both these bodies, funded by their sponsors, have been extracting corporate welfare from the United States Congress. The Sonny Bono Act, facetiously named the Mickey Mouse Act since it appeared when Mickey Mouse was close to falling out of copyright, extended copyright ninety years past the death of the content creator.

The distribution cartels also extracted monopolistic rents from Congress with the DMCA, which makes it a crime to reverse-engineer a rights management process. This is obviously doomed to failure, but many will face criminal charges until the world's governments and the distribution cartels are dragged kicking and screaming into the 21st Century. The saddest aspect of this corporate welfare is that it has changed copyright infringement from a civil offence, to a criminal offence that the FBI and AFP can pursue and prosecute.

The industrial economy companies have also extracted their own rents from American Congress, by getting the United States Patents Office to allow business model patents. The other failure of the US Patents Office has been in Software Patents. The period of patents for software is longer than the commoditisation cycle for software. Compilers were used in a previous example, but others exist, from operating systems, to web frameworks to simple libraries and APIs.

This Ain't Your Mum's Scarcity

Software is the first abundance technology, and it innovates faster, and commoditises faster, than any distributor from the industrial economy can manage. It should be the standard by which abundance era legislation, rents and monopolies are judged. If software can commoditise faster than the intellectual property laws maintain distribution locks on distribution/implementation - then that law is not an abundance era law. It is an industrial economy era law and a dinosaur of capitalism past.

The Australian-American Free Trade Agreement requires Australia to adopt the distributor friendly laws that America has been making to protect the "horse and buggy" industries of the industrial economy. In doing this we go further that the Berne Agreements in entrenching the monopolies of the old guard of the industrial era.

If Australia wants to be at the forefront of the abundance economy it needs to liberalize the intellectual property welfare to near nothing. It needs to invest in the vehicles of the abundance economy - which is concurrent education, data networks (deregulate the spectrum!) and deregulation of the means of information transferral. That means no FTA enforced DMCA laws. That means removing patents for the abundance era technologies. That means limiting copyright to licensing by the content creator for no more than a generation (25 years).

The abundance era succeeds through making full efficiency from the openness of data and information interchange. Any inhibition to that is a government enforced monopoly and a form of rent extracting. It adds inefficiencies into the system. For an abundance economy to work, it has to be open slather, where the content creators are not restricted by unfair laws that skew scarcity from them to the undeserving distributors.

When data distribution is a commodity, there is no reason for the government to coerce creators into a relationship with distributors and other industrial era companies. It is anti-competitive and anti-free-market. Government needs to get out of the way. Let the people innovate to the maximum of their capabilities and hearts desire.

Capitalism rewards scarcity - if government laws are skewing where the scarcity is, away from its natural point of rest - then we will be only disadvantaging ourselves by allowing inefficient companies to profitably exist in an economy where they have no place if it was a genuine free market.

cam

Do rules, and hence legislation, of economic scarcity apply in a world of abundance? Jon Healey:

In essence, [Karl] Sigfrid is saying that something in unlimited supply can't be stolen. His position is a variation on a theme advanced by Mike Masnick of Techdirt.com, among others: that the entertainment industry's aggressive copyright-enforcement efforts spring from an outdated, analog-era notion of scarcity.

The catallaxians will be murdering kittens aplenty, Sigfrid's quote in that article calls upon Hayek and Friedman.