In The Wealth of Networks Harvard Professor Yochai Benkler details the current shift away from an economy organised around property-based markets and hierarchical organisations. The centre of gravity, he argues, is shifting towards an emerging networked information economy arising through increased collaboration, facilitated by communications technology. 

Yet this is not simply another book about the impact of technology. Benkler describes how our historic understanding of economic production has been that individuals order their activities in one of two ways: either as employees in firms, following the directions of managers, or as individuals in markets, following price signals. In the past decade, through the rise of open source and social media, we are seeing the emergence of vibrant, innovative and productive collaborations, whose participants are not organized in firms and who do not allocate resources to projects in response to prices. 

Benkler argues that these new cooperative arrangements are underpinned by sound economic principles that have systematic advantages over markets and managerial hierarchies. This is especially true when the object of production is information or culture, and where the capital investment necessary (ie computers and communications capabilities) is much more widely distributed than ever before. He also shows that there are rapidly increasing returns to scale in their use: the resultant gains increase quickly with the increase in the number of individuals and resources that are part of these networks. Finally, Benkler describes a variety of technological and social strategies to overcome the collective action problems usually solved in managerial and market-based systems by property and contract.

The main strands within The Wealth of Networks resonate closely with our experience of open and networked innovation at Nesta. We have noted that many innovation policies and investments are focussed purely on original ideas in isolation, and the subsequent ‘iconification of the inventor’. This however, misses the fact that many innovations occur through collaborations that span the boundaries of disciplines, sectors or organisations. In other words it is the context or the networks within which these ideas flourished, that are critical in stimulating innovation, but are often overlooked.

Whilst this subject matter in this book is not necessarily new, the academic rigour and verve with which Benkler researches and conveys his thesis, means that this book is an important step forward in understanding the difficult questions arising for policy makers, econo-mists, and legal professionals, that need to be addressed in moving towards a more networked economy and society.

The arguments are laid out coherently and clearly, though the text is not for the faint hearted, and can be heavy going at times. Yet Lawrence Lessig describes Yochai Benkler as “the leading intellectual of the information age”, a statement with which I can’t disagree. With a title that draws direct comparison to Adam Smith, Benkler’s magnum opus The Wealth of Networks is similarly ambitious in scope and may perhaps in time be considered just as prescient.

Roland Harwood

Director of Open Innovation at NESTA