Wednesday, January 6, 2010

Markets as an Innovation Commons

A market is a type of commons as well, and in some cases may even be considered an "innovation commons".

I have read about mythology, anthropology and history, but I am by no means expert. Over the years I've developed a sense of the development of markets that I want to share. Much of this has been developed through conversations with people, especially my partner, Donna Prestwood. It is not rigorous research, but I do want to share the story I've developed. I've put this Italics, because it is a story, not a history.

During times when our ancient ancestors were hunter/gatherers and lived in tribes, the concept of territory was developed (See I told you it was a story. I started with "once upon a time".) Knowledge of what existed outside the territory was limited. The "other" who lived outside your territory was either enemies or strangers. Both were feared. An incursion into your territory was almost surely to provoke an attack, even if the incursion was not an attack itself.

As the boundaries of the territory became established and known or even marked, the "other" avoided incursion unless intent upon an attack. Paths of travel began to be developed along the boundaries of the territories. The first paths bypassed the territories of the tribes.

Sometime during this development people got the idea of bringing gifts to the boundary of their own territory, to the edge of the known. The gifts were left a s a peace offering. Among some tribes this led to the development of concept of potlatch. The tribes brought gifts to the boundary in a type of asynchronous exchange. Potlatch cultures developed when winning meant giving the better gift. Either as peace offerings or potlatch, the practice did reduce the amount of physical conflicts.

Since strangers passed along these boundaries in transit around the territories, it was only natural that somehow they began to enter into the mix. The resulting development led to the creation of markets along these boundary/paths. And, eventually this led to the concentration of villages around the markets, especially at crossroads.

Early in our development, humans developed the sense of having to bring gifts to the edge of the known. In some cultures this ended up as sacrifices. In others, it was food or precious goods. We carry that tradition on now in the form of gifts brought to the altar of our religion. The altar representing symbolically the boundary between what is known and the unknowable.

As a result, the original concept of a market was that it was held on "sacred" ground; it was safe. The boundary was not a place for war. It was a place of peace. Markets today should be "sacred" in that sense. This may be why we are so incensed when someone violates the trust of the market and cheats, lies, or steals.

In some cultures the concept of exchanging gifts at the borders, (Still celebrated by the way every Friday evening in the fall at Texas high school football games with the students of the two schools exchanging gifts at the 50 yard line before the start of the game. Apparently the gifts don't work to bring peace and hostilities have to be undertaken however ritual the hostilities are.) led to the development of a bartering system. From that came the concept of the development of value for different types of goods. Note that adding strangers into the mix brought different types of goods into the market not indigenous to the tribes.

In what sense is a market an innovation commons? Goods produced or manufactured are the embodiment of knowledge. In the ancient market, an individual skilled in making axes could teach the "other" how to make the ax. But, it's more efficient and rewarding to exchange the ax for other things needed or money. Even if the goods are grown, harvested, hunted or extracted, their presence at the market embodies the application of knowledge. Information was also exchanged at a market as well, in a loose bartering sense.

One of the things that makes a market work is the mechanism of valuing goods and services. Another is the trust and safety. Others? I welcome comments.

Are we now at a point in the development of civilization where an innovation commons would work? If so, what are conditions or principles that would assure its success? What can we learn from successful markets?

What can we learn from e-Bay? I don't know enough about it to comment, so I would welcome other comments. One element of e-Bay I do know about is the rating system. Buyers and sellers rate each other after the transaction. A bad reputation prevents you from further participation in the market.

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