WELCOME TO THE CULTURAL ECONOMY
By Eli Berniker

United States Society for Ecological Economics
July 2005

ABSTRACT

There has been a massive shift, from material goods towards cultural goods, in consumption patterns among the young not visible with conventional economic indices.  Cultural goods are products of human imagination such as art, music, games, sports, eco-tourism, theatre, blogs, chat rooms, and e-mail among other forms.  --  The new cultural goods are participative, voluntary, and involve non-rival economic value. Participants interactively produce and consume these goods in exchanges without transactions.  Cultural goods represent an economy of plenty instead of scarcity.  Participative cultural activities are not exhausted when consumed.  --  At a fundamental level, this activity represents withdrawal from the material economy.  --  The time expended on internet games, music, or voluntary “clickwork” science is not time spent in shopping malls or driving vehicles.  Freedom is surfing the web, not being caught in traffic in an SUV.  Thus, a shift towards cultural goods reduces the consumption of material goods and consequent ecological pressures.  --  We would still expect a market exchange economy but it is less likely to be driven by capital and material production.  The critical resources in the Cultural Economy walk on two feet, cannot be capitalized, appropriated, or turn into fungible assets.  --  Individuals will be more proactive, independent, and interactive; i.e. individual responsibility will become a stronger social norm than in the past and vocation will become more central in our identities.  Self-created identities through the web and games will become our “voice.”  Who we are and who we become will be tied up with our roles in the Cultural Economy rather than obscured in the Material Economy.  --  This will be a better world, more democratic, and much more sustainable.  Cultural production and consumption do not tax the environment, require little energy, and are inherently more egalitarian.

INTRODUCTION

The sustainability challenge is to march away from the ecological cliff, irreversible changes in the ecosystem that support life on the plant that will threaten many species and including our own. For the most part, the ecology movement has devoted great efforts to slowing down our progress over the cliff. The arguments against our paths are manifold. My purpose is to describe and evolution that appears to offer some hope of changing directions away from unsustainability.

We will, in this paper, explore two major themes and two sub themes that are corollaries to these themes. The economics of plenty will be contrasted with the economics of scarcity. The natural consequence of plenty is trust; the consequences of scarcity are the transaction costs of distrust. The second theme is the emergence of the cultural economy. The defining characteristic of the cultural economy is participation; the defining characteristic of the material economy is exclusion and rationing. I believe that plenty and cultural consumption interact in ways that lead to sustainable economics.

Taken together, these themes suggest an optimistic future for humanity, although not without a difficult path forward. In order to ground these themes in human experience, we will draw upon a diversity of human societies and historical periods. We will begin by demonstrating that there has been an economics of plenty parallel to our conventional economics of scarcity for all of human history.

A CONCEPT OF PLENTY AND ENOUGH

In the late 1960s, I was designing self-service systems for kibbutz dining halls and I discovered a paradox. While most food was free choice, some more expensive menu items were portioned to control consumption. When I made them free choice, consumption immediately dropped. Portion control creates a perception of scarcity leading to increased consumption. Free choice suggests plenty and consumption falls. The effect was immediate and replicated over many kibbutzim.

The paradox is that measures to limit consumption increase consumption while measures that free consumption reduce consumption. The response to scarcity is “appetite” while the reaction to plenty is “enough.” The kibbutz experience is not unique.

Marshall Sahlins (1972) has studied work and consumption among Australian aboriginal tribes living in semi-desert areas. In his book, Stone Age Economics, he describes the “the original affluent society,” he reviews the literature on hunting and gathering societies with findings that are counterintuitive to those of us steeped in a science focused upon “economic man.” It turns out that the hunting and gathering tribes ranging from Aborigines in Australia, the Bushmen of the Kalahari, South American, and Philippine tribes all enjoyed material plenty, suffered no poverty, ate very well, and worked an average of 15 to 20 hours a week. They were more efficient than French farmers in supplying the food needs of their people.

The tribes experienced plenty under conditions that we would find meager. They worked less, saw no reason to accumulate material goods, and preferred social and cultural pursuits to material gains. Sahlins notes that the “hunter is uneconomic man” whose “wants are scarce and his means plentiful.” He contrasts such a society with "[t]he market-industrial system [that] institutes scarcity, in a manner without parallel. . . . When production and distribution are arranged through the behavior of prices . . . insufficiency of material means becomes the explicit, calculable starting point of all economic activity" (pp. 1-2).

Conventional economics, based on assumptions of scarcity, is a factor in creating the very markets and economic exchanges it seeks to study. George Soros (1994) would describe the relationship as “reflexive.” Demand is not an independent economic factor. It is generated by the perception of scarcity. Thus, the economics of scarcity is a factor in increasing the very demand that is studied as an independent variable. This should be self-evident. Well-developed economies awash in plenty are driven to continued overconsumption by wants justified as “needs” leading McKibbon (2003) to title his recent book Enough.

We might summarize our understanding basic human consumption behavior with the following proposition: "Beyond basic physiological necessities, the experiences of “plenty” and “scarcity” is socially constructed."

Ecological economics might be better served with an understanding of the economics of plenty.

THE CULTURAL ECONOMY

Cultural goods are products of human imagination such as art, literature, music, games, sports, eco-tourism, theater, film, blogs, chat-rooms, and, more generally, the knowledge. Societies experiencing plenty invest in cultural production. Societies experiencing scarcity have great difficulty supporting cultural activity. Our theaters, art museums, and musical ensembles all have to beg the public for support. It would appear that we Americans cannot afford the continued Saturday broadcasts of the Metropolitan Opera. Sahlin’s hunter and gatherers had plenty of time to invest in social and cultural activities.

Specifically, consider the famous Lascaux cave painted 17,000 years ago in Paleolithic times. This is but one of 120 such caves with animal paintings all dating back to the Stone Age before humanity had metal tools. These are works of great art. All of our history tells us that such works can only emerge from well-developed and practiced artistic endeavors. The Lascaux cave paintings are not the doodling of amateurs.

We believe that these people lived in subsistence economies. Yet, they experienced plenty sufficiently to invest precious resources and time into developing fine art.

Welcome to the Cultural Economy. The Cultural Economy appears to be governed by the following proposition: "Societies experiencing plenty invest time and resources into cultural production."

Let us leap to the 21st century. There is a quiet revolution occurring among young people in developed societies the world over. It is not an ideological revolution. Nor is it expressed as opposition to the economic order. It is a lifestyle revolution. They are opting out of the economics of scarcity and directing their time, energy, and resources into culture production and consumption.

Today’s youth are the first generation, in the developed world, to experience plenty. They take for granted the basic necessities of life. Their grandparents suffered through the Great Depression and World War II. Their parents grew up in the shadow of those experiences. We were determined to protect our children from those experiences. The result is a secure sense of plenty and a shift towards cultural consumption and production.

A student at Simon Fraser University built a game called Counterstrike and gave it away. In a matter of months, it became the most popular multi-player action game in the world. Players numbered 1.7 million and spent 2.4 billion minutes a month playing Counterstrike. The most popular TV show that year, “Friends,” generated 2.9 billion viewer minutes per month (Keighley, 2000). My students inform me that there was an expensive server on our campus dedicated to Counterstrike. Others declared that they had neither television nor cable in their rooms but they did have DSL for their computers. (There is now an acronym to describe these kinds of Internet games, MMORPG -- Massively Multi-Player Online Role Playing Games.)

Yochai Benklar (2002) discusses NASA’s Clickworkers, who are volunteers who mark craters, classify, or search the terrain of Mars on website maps. Users numbered 85,000 and made 1.9 million entries. The automatically computed consensus derived from Clickwork is virtually indistinguishable from the work of trained geologists. Clickworker volunteers are creating knowledge for the fun of it. There is an Internet universe called “Blogistan” where hundreds of thousands of people busily create and post their identities in Weblogs. There must be 100 million people around the globe making music. The fastest-growing participative sports are “fantasy baseball” and “fantasy football.”

Most telling is the attitude towards the automobile. After discussing these ideas at a faculty lunch, a colleague told me that I had explained his son to him. The young man had turned 16 and did not want a car or a driver’s license. Three years later, he still disdains owning a car but will forced to get a license. Checking with high school students of the Tacoma School of the Arts, I found that a surprising number of them did not drive. They did not get around to getting licenses. They had other priorities.

What is happening here? There has been a massive shift among the young, and the not so young, away from the material and service economy towards the Cultural Economy. The 2.4 billion minutes expended playing Counterstrike was time not spent listening to advertising on "Friends," or shopping in malls, or driving an SUV.

Freedom, for this generation, means the freedom to surf the web, download whatever they want, blend and fuse cultural products from anywhere without limit. Freedom is not experiencing gridlock in an expensive automobile. It is unlikely that these students will ever buy an automobile on the basis of status. For this generation, status will be achieved on the web via cultural artifacts.

There are many examples. We could argue long about their relevance and significance. Let us assume, for discussion purposes, that such a shift may be occurring and explore potential implications.

IMPLICATIONS OF THE CULTURAL ECONOMY

When a jazz combo improvises during a jam session, are they producing culture or consuming culture? Do Clickworkers producing knowledge for NASA produce or consume culture? Do millions playing Counterstrike produce or consume the game? The answer is self-evident. Production and consumption are the same activity. While demanding of time, none of these activities involve prices and markets. These are interactions and exchanges between people without transactions. To be sure, there are the costs of using the Internet, game subscriptions, or the drinks at the jam session. Economically, these may be likened to paying for parking to attend a free concert.

Cultural goods, for the most part, are not rival goods. Concert tickets are rival goods. There are only so many seats for sale. Beethoven’s Ninth Symphony does not wear out no matter how often performed. The jazz combo will continue to improvise because there is no limit on the ways music can be interpreted and performed. Amateur and professional musicians can play together just as professional basketball players will play pick up ball in their hometowns. If another million players participate in Counterstrike games, the game is likely to become more enjoyable to all of its players. The point is that material goods and services are consumed while cultural goods are experienced. The economic implications of this distinction will be discussed later.

A unique characteristic of the emerging Cultural Economy is that it is participative. The number of minutes spent viewing "Friends" was 2.7 billion, compared to 2.4 billion minutes spent playing Counterstrike (Keighley, 2000). Fantasy baseball is a participative sport; professional baseball is a spectator sport. Professional baseball and TV programming represent the old broadcast economy. Culture is mass-produced and broadcast centrally to millions mimicking mass production industries. Computer games, music, art, and knowledge work represent the new interactive economy where consumer/producers actively select, define, and produce their cultural experiences.

The costs of cultural production have dropped dramatically. This is especially evident in the music industry. We lament the shifts from old recording media to the tape, cassettes, and now CDs and MP3s. We expect to lose all of the old great recordings. That does not happen. Not only are they reissued but also obscure composers never recorded are now available. When the costs of cultural production go down, the supply and the demand both increase.

Exchanges without transactions, nonrival cultural goods, and participation combine to generate trust among people. And trust has great economic significance. Conversely, scarcity generates distrust and the enormous transaction costs of our distribution systems. Our large corporations are hollowing out because they cannot manage their overhead costs. They do not trust their employees so they impose supervisors over them. With little trust in their own managers, large bureaucracies are erected to control behavior and costs. Overhead should be understood as the internal transaction cost of distrust.

The shift towards the Cultural Economy will reduce ecological pressures. Knowledge production, music, art, and computer games do not pose burdens on the environment. Material goods will lose their dominance in the economy and become commoditized. Status, conspicuous consumption, and identity will all be driven by cultural artifacts and activities rather than “stuff.” Material-driven consumption will recede and no longer command so great a proportion of economic resources. The ubiquitous garage sale, representing feeble attempts to recycle excess consumption, will signal the generation gap for buyers and sellers still anchored in the old economy.

Individuals will be more proactive, independent, and interactive. Individual responsibility will become a stronger social norm than in the past. Self-created identities through cultural activities will become our voice. Who we are and who we become will be tied to our roles in the Cultural Economy rather than be obscured in the Material Economy. We will become subjects in our cultural production instead of objectifying our work in stuff to be sold.

REVISITING HARDIN'S TRAGEDY OF THE COMMONS

Hardin (1968) exemplified his arguments about the conflicts between the utilitarian goal of the greatest good for the greatest number and the limitations of a finite world with the example of the common pasture. It is useful to map out the workings of the Cultural Economy in Hardin’s pasture.

Hardin points out that the economic interest of individual herdsmen is to add livestock to maintain or increase income. The grass pasture is a rival good. Either one herdsman’s sheep eat it or the other. Once consumed, it is only replenished through growth. The collective effect is to overgraze the pasture and bring ruin to all. Scarcity must be managed and his solution is to either sell off the commons to private owners or otherwise ration access.

Now consider the cultural commons as a knowledge pasture. Knowledge is a non-rival good. It may be grazed but is not consumed. Indeed, the more knowledge is grazed, the faster it grows. So, too, with cultural production. Lévi-Strauss (1966) has pointed out that the structures of myths, art, rituals, and games serve as frameworks in which the same elements are juxtaposed and combined in diverse combinations in a process that may be characterized as bricolage; a finite set of elements is combined and recombined in an indefinitely large number of ways. Improvisational jazz exemplifies the process well. Plenty need not be managed or controlled. Thus, the unfenced common knowledge or cultural “pasture” is far more productive than the fenced pasture. This inversion signals the impact of the knowledge economy on conventional business arrangements.

THE FUTURE OF CORPORATIONS?

So far, we have discussed the Cultural Economy as an adjunct to the “real” economy. It may act as a distraction to the incentives generated by perceived scarcity. It may even produce value for consumers of culture. We have yet to demonstrate how it might compete with, or even displace, economic scarcity as the engine for producing economic exchange value. Capitalist hierarchically organized corporations remain the most effective mode of production in the global economy.

The future of large capitalist corporations is problematic especially with the advent of the knowledge and cultural economies. That assertion requires a developed explanation given the great power of multinational corporations in the global economy.

First, we should note that the modern corporation has but a short history of about 100 years. Capitalism has only been around since the late 18th Century. Given millennia of human history, we assume too much if we believe that the modern forms of economic activity have not much evolution in front of them.

Second, capitalism is driven by growth and our economic system requires growth to sustain itself. The reason for an ecological economics conference is our concerns about the effects of unlimited growth on the ecosystem. It follows that those sectors of the economy that exhibit the greatest growth and growth potential are the leading edge in economic development and command the greatest influx of capital. Those are also the areas of greatest vulnerability to the corporate system.

There is an epic battle at the leading edge of the modern economy: software development and the Internet. That battle, and its relevance to our concerns, might best be mapped out in Garrett Hardin’s “common pasture.” I am referring the competition between Microsoft and Linux in operating systems and the drive by corporate lobbyists to extend the protections over intellectual property. The corporate world is struggling to fence the knowledge and cultural commons via proprietary software systems and copyright laws. The challenge comes from what appears to be a much more productive commons.

Capitalism has succeeded because it has been far and away the most productive system for producing economic value for large populations. A threat to corporate dominance will not come from ideological perspectives but from more efficient modes of economic organization. Linux, the open-source operating system, is an example of just such an alternative.

Eric S. Raymond’s series of essays under the title The Cathedral and the Bazaar (2001) is a window on this battle over the software commons. This book should be read from the perspective of an ecological economist wondering about how organized economic activity might take shape in the future.

We cannot do justice to the evolution of Linux in this paper. For our purposes, it is sufficient that a very effective, secure, and powerful computer operating system was developed by a loose collection of elite programmers from every continent without a corporate organization, hierarchy, bureaucracy, salaries or wages, property rights or ownership. Microsoft testified in their antitrust trial, that Linux was their most serious competitor. The company is faced with developing a strategy and business plan against a value-producing economic activity that has no defined business organization, no business plan, and no claim to property rights. The licensing agreements for Linux explicitly allow anyone to change or add to the software. What no one is allowed to do is to copyright any part of Linux or what is added to Linux. Linux is growing in popularity as many nations (and corporations) adopt it as their standard. Their reasoning is quite clear. They see no reason to ask Microsoft’s permission to do business, to develop their own software, or to pay the price for Microsoft system when the alternatives are equal or better and are available free.

The arguments we developed above apply to the evolution of Linux. The elite hacker global community that contributed to its development is well supported by their conventional work. They enjoy plenty and chose to invest their surplus time in this great common endeavor. The nature of the “software commons” is that all could contribute, share, and develop each other’s work as long as no one owned the outcomes. The result was a commons that was able to marshal more talent more efficiently and without great administrative overhead than the proprietary software “pasture” fenced in by copyright laws and exclusions.

A parallel development is occurring in the battles over intellectual property and copyright laws. Here the works of Lawrence Lessig (2001) present the issues. The music industry and the film industry are leading the battle to restrict the reproduction of cultural production. It is, of necessity, a losing battle. First, both industries have a long history of exploiting artists and creators. Second, the new cultural communities will simply bypass industry. Hollywood is not needed to produce films for the Internet. The record companies are not needed to produce, reproduce, or distribute music. They will gain control over their old music and the new music will simply elude them.

My conclusion is that the corporate world driven by the economics of scarcity will be very challenged in trying to gain control of the leading developments in the cultural economy. They will be defeated by their histories and by the economics of plenty. More important, capital assets will not drive the Cultural Economy.

OUR HUMANITY AND "HUMAN CAPITAL"

There is a complex set of interactions between capital resources, the efficiency of corporate economic activity, the emerging cultural and knowledge economies, and our understanding of our humanity. The anomalies inherent in those interactions are well expressed in the absurd notion of “human capital.” These interactions are relevant to our ecological concerns. Unless, and until, our humanity is sustainable, we cannot expect to create sustainable ecological economics. The Paleolithic painters of the Lascaux caves, the Bushmen of Africa, and Sahlin’ s Australian Aborigines all enjoyed plenty, that is, they could take their own sustainability for granted. Therefore, they had no difficulty living in balance in their various ecosystems.

Buckminster Fuller (1981) discusses the origin of the modern limited-liability corporation with the chartering of the British East India Company by Queen Elizabeth in 1600. What was the limitation on their liability? The investors were liable for their investments in goods and ships. They were not liable for the lives of sailors lost at sea. Employees are, fundamentally, expendable and they remain so to this day. We see that in the layoffs, the Enron débâcle, and in the systematic dissolving of contracted employee pension obligations by many of the largest American corporations. Such arrangements worked as long as employees were interchangeable parts assigned simple tasks. That has changed in the new economy.

Years ago, the CEO of Boeing Commercial Airplane remarked, on the day that Microsoft’s stock market valuation exceeded that of Boeing, that one could take all of Microsoft’s physical assets and park them on one Boeing parking lot with room to spare. Microsoft’s assets are not physical; they are talented and skilled people. We can call them “human capital” but we cannot put them on the books. They walk around on two feet and are free to move whenever and wherever they please. In the new economy, corporations cannot own the critical assets who are free people.

The response has been to emphasize, “people are our most important asset.” That has not worked very well because it rarely represents a significant change in corporate policies. Such changes are all but impossible because people are fundamentally expendable as noted above and because of corporate inefficiency.

One result of the economics of scarcity is distrust. If people are fundamentally expendable and must be forced to work because of scarcity, it follows that we cannot trust them to work hard enough to justify their wages. This is built into the Protestant Ethic. Those without grace, as demonstrated by wealth on earth, are judged lazy and must be put to work. John Locke (1997) argued, in 1690, that the children of the poor must be forced to work to produce more wealth than they consume from the age of three. He was not writing theoretically. Children of that age were living and dying in English factories. If we cannot trust people to work, we must place foremen over them, managers over them and continue the evolution until we have large inefficient bureaucracies that get in the way of the very creativity and imagination that are the critical capacities in the new economy. Corporate overhead is, largely, the cost of distrust. Buckminster Fuller estimated that maybe 30% of our employees are engaged in adding value while the rest are “checkers of checkers” of many sorts. An economics of plenty can afford trust and, thereby, can be very competitive with the economics of scarcity.

MARKET SOCIETY IN THE FUTURE

Market exchange is remarkably efficient and has a long history as an adjunct to subsistence economies. Capitalist market society has a short history. We may expect market exchanges to characterize the new economy as they do the old. The evolution of Linux, for example, involved complex and frequent exchanges around the globe. These were exchanges of valued work even if not accompanied by economic transactions. The evolution of music among the young is also characterized by rich exchanges.

It would appear that the role of capital will recede as will the role of capital markets. George Soros (1994) distinguishes between the “real” economy of production and exchange and the financial economy where only assets are exchanged. The leading organizations of the new economy -- Microsoft, Google, and Yahoo, for example -- were not built with capital.

ORGANIZED ECONOMIC ACTIVITY IN THE FUTURE

The collection of propositions and arguments developed above suggest an optimistic, almost utopian, view of the future, and, certainly a more ecologically sustainable future.

--The shift away from material consumption towards cultural consumption will dramatically reduce pressure on ecological systems.

--An emerging economics of plenty will reduce the demands for material goods and services.

--People will work less.

--Individuals will become more proactive, independent, and interactive resulting in a strengthening of individual responsibility as a social norm.

--Identities and status will be tied to our roles in the cultural economy rather than be obscured in the material economy.

--Trust will allow for very efficient organized economic activity.

--Trust, and plenty, will reduce the enormous transaction costs of our present distributions systems.

--The world will be more democratic and egalitarian.

Buckminster Fuller’s estimate is remarkably similar to the data summarized by Marshall Sahlins. Humanity could enjoy plenty if we all created value about 15 to 20 hours a week. It is not a technological problem. We have the means but they are misapplied in an economy of scarcity.

We cannot expect an easy path forward. Powerful elites will not yield their power readily. We can expect that a future élite will emerge along with different systems of power. That appears to be the human condition. Nevertheless, we can expect a better world with more open societies based upon a stronger foundation of democratic institutions and sustainable economics.

REFERENCES

Benklar, Yochai. "Coase’s Penguin or Linux and The Nature of the Firm." Yale Law Journal, vol. 112 (2002).

Fuller, R. Buckminster. Critical Path. New York: St. Martins, 1981.

Hardin, Garrett. ”The Tragedy of the Commons.” Science, vol. 162 (December 13, 1968). Pp. 1243-1248.

Keighley, Geoff. “Game Development à la Mod.” Business 2.0 (October 1, 2000).

Lessig, Lawrence. The Future of Ideas: The Fate of the Commons in a Connected World. New York: Vintage, 2001.

Lévi-Strauss, Claude. “The Science of the Concrete.” In The Savage Mind. Chicago: University of Chicago Press, 1966. Pp. 1-34.

Locke, John. Political Essays. Cambridge: Cambridge University Press, 1997.

McKibbon, Bill. Enough. New York: Holt, 2003.

Moody, Glyn. Rebel Code. Cambridge, MA: Perseus, 2001.

Raymond, Eric S. The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary. San Francisco: O’Reilly, 2001.

Sahlins, Marshall. “The Original Affluent Society.”  Extracted from his book Stone Age Economics (1972).

Soros, George. The Alchemy of Finance. New York: Wiley, 1994.

--Eli Berniker, Ph.D., is Professor of Business at Pacific Lutheran University in Tacoma, WA, where he has taught since 1982. He can be reached at bernike@plu.edu or 253-535-7289.