Crowdsourcing Capitalism

Both outsourcing and "crowdsourcing" offer the same proposition to reducing one of the core components of Capitalism - "free" movement of labor (the other components being free movement of capital and resources) The desire for cheaper labor directly depends on the cost of access to that labor. Both these phenomenon are neither new nor particularly surprising. The incentives are baked into the profit equation. What IS stunning is the rate at which technology has broken barriers and increased the supply of skilled labor. Something that has been historically expensive to procure. (SETI hoodwinks aside)

One could probably correlate the rate of technological innovation with the cost of any of these components. From the wheel lowering the costs of transportation in finding new markets/distribution to the telephone lowering communication costs in all facets of life. In particular, this weeks case highlights the role of the internet in dramatically increasing labor supply in functions as disparate as professional photography, basic R&D and TV shows development. While it does have amazing potential to redefine markets and harness the power of "collective" knowledge, I believe it's a corollary to the Economic Calculation Problem and a derivative of Market Clearing Price

In fact, price discovery in the most basic sense is "crowdsourcing" - the collective knowledge of what a good or service is "worth" is determined by many people over a broad range of the market. Sure this can be distorted across markets, products and regions, but not for long. The impact of the internet simply shortens the time prices can be "distorted." This can be measured by the variability of price changes across markets which should decrease with each new technology (diminishing marginal price variability - note this does NOT impact price volatility, but price variability across markets) These new technologies expand consumers and producers access to information about the market - including increasing supplies of labor that the Computer Age is connecting with unheralded speed. Similarly, the investment and growth of the internet is also dependent on the profit motive. "Crowdsourcing" may be a new buzz-word, but it's far from novel. Price discovery will always be a play between consumer, producer and market "distortions" - anything to mitigate those distortions increases the effectiveness of delivering goods to consumers and labor resources to worthy endeavors.

The more important questions are:

1. Can the rate of progress be sustained? What are the key factors enabling this progress? Political / Socio-economical? How to reinforce those factors?

2. Can knowledge of the crowds be wrong? It was once true that the "Crowd" believed the Earth flat and the center of the Universe. This wasn't simple laymen believing this, this was the specialized science community "fact" at the time. Science is NOT consensus nor is consensus Science. (see SETI/Aliens above)

3. What are the risks to relying on the "crowd"? In what markets does relying on the crowd work well? In what markets is it deficient?

4. All data not equal. Surely there is more power to leverage if consumers made public their credit card / financial transactions. Identifying fraud and theft would be easier if you could mash up phone / credit / tax records. But who wants to pay the cost of intrusion on privacy? There are limits to this phenomenon.

These are just a few broad questions. I suspect Ehab has not gotten this far - will find out tomorrow.