Journal of Evolutionary Economics

, Volume 26, Issue 2, pp 407–441 | Cite as

The evolution of control in the digital economy

  • Fabio LandiniEmail author
Regular Article


Control over digital transactions has steadily risen in recent years, to an extent that puts into question the Internet’s traditional openness. To investigate the origins and effects of such change, the paper formally models the historical evolution of digital control. In the model, the economy-wide features of the digital space emerge as a result of the endogenous adaptation (co-evolution) of users’ preferences (culture) and platform designs (technology). The model shows that: a) in the digital economy there exist two stable cultural-technological equilibria: one with intrinsically motivated users and low control; and the other with purely extrinsically motivated users and high control; b) before the opening of the Internet to commerce, the emergence of a low-control-intrinsic-motivation equilibrium was favored by the specific set of norms and values that formed the early culture of the networked environment; and c) the opening of the Internet to commerce can indeed cause a transition to a high-control-extrinsic-motivation equilibrium, even if the latter is Pareto inferior. Although it is too early to say whether such a transition is actually taking place, these results call for a great deal of attention in evaluating policy proposals on Internet regulation.


Internet control Internet regulation Motivation On-line law enforcement Technology Endogenous preferences Evolutionary games 

JEL Classification

C73 D02 K00 L23 



The author is grateful to Ugo Pagano, Sam Bowles as well as participants to the ISLE 2012 conference at the University of Rome 3 for the useful discussions and comments. The usual caveat applies.


  1. Abbate J (1999) Inventing the internet. MIT Press, CambridgeGoogle Scholar
  2. Aghion P, Dewatripont M, Rey P (2004) Transferable control. J Eur Econ Assoc 2(1):115–138CrossRefGoogle Scholar
  3. Aghion P, Tirole J (1997) Formal and real authority in organizations. J Polit Econ 105(1):1–29CrossRefGoogle Scholar
  4. Baker G, Gibbons R, Murphy KJ (1999) Informal authority in organizations. J Law Econ Org 15(1):56–73CrossRefGoogle Scholar
  5. Belloc M, Bowles S (2011) International trade, factor mobility and the persistence of cultural-institutional diversity, unpublished manuscriptGoogle Scholar
  6. Belloc M, Bowles S (2013) The persistence of inferior cultural-institutional conventions. Am Econ Rev Pap Proc 103(3):1–7CrossRefGoogle Scholar
  7. Benabou R, Tirole J (2003) Intrinsic and extrinsic motivation. Rev Econ Stud 70:489–520CrossRefGoogle Scholar
  8. Benkler Y (1998) Overcoming agoraphobia: Building the commons of the digitally networked environment. Harvard J Law Technol 11(2):287–400Google Scholar
  9. Benkler Y (2001) Siren songs and amish children: Autonomy, information, and law. N Y Univ Law Rev 76:23–113Google Scholar
  10. Benkler Y (2002a) Coase’s penguin, or linux and the nature of the firm. Yale Law J 112(3):369–446CrossRefGoogle Scholar
  11. Benkler Y (2002b) Intellectual property and the organization of information production. Int Rev Law Econ 22:81–107CrossRefGoogle Scholar
  12. Benkler Y (2006) The Wealth of Networks: How Social Production Transforms Markets and FreedomGoogle Scholar
  13. Benkler Y (2012a) A free irresponsible press: Wikileaks and the battle over the soul of the networked fourth estate. Harvard Civili Rights-Civil Liberties Law Review forthcomingGoogle Scholar
  14. Benkler Y (2012b) Wikileaks and the protect-ip act: A new public-private threat to the internet commons. Doedalus, J Am Acad of Arts Sci 140(4):154–164Google Scholar
  15. Benkler Y, Nissenbaum H (2006) Commons-based peer production and virtue. J Pol Philos 14(4):394–419CrossRefGoogle Scholar
  16. Berners-Lee T (1999) Weaving the web: The original design and ultimate destiny of the world wide web. HarperCollins Publisher Inc., New YorkGoogle Scholar
  17. Bisin A, Verdier T (2001) The economics of cultural transmission and the dynamics of preferences. J Econ Theory 97:298–319CrossRefGoogle Scholar
  18. Bollier D (2008) Viral spiral: How the commoners built a digital republic of their own. The New Press, New YorkGoogle Scholar
  19. Bowles S (1985) The production process in a competitive economy: walrasian, neo-hobbesian, and marxian. Am Econ Rev 75(1):16–36Google Scholar
  20. Bowles S (2006) Microeconomics: Behavior, institutions and evolutions. Princeton University Press, PrincetonGoogle Scholar
  21. Bowles S, Choi J-K, Hopfensitz A (2003) The co-evolution of individual behaviors and social institutions. J Theor Biol 223:135–147CrossRefGoogle Scholar
  22. Bowles S, Hwang S-H (2008) Social preferences and public economics: Mechanism design when social preferences depend on incentives. J Public Econ 92(8-9):1811–20CrossRefGoogle Scholar
  23. Bowles S (2012) Economic incentives and social preferences. Journal of Economic Literature forthcomingGoogle Scholar
  24. Charness G, Cobo-Reyes R, Jimenez N, Lacomba JA, Lagos F (2011) The hidden advantage of delegation: Pareto-improvements in a gift-exchange game. The American Economic Review forthcomingGoogle Scholar
  25. Conner K, Rumelt R (1991) Software piracy: An analysis of protection strategies. Manag Sci 37:125–139CrossRefGoogle Scholar
  26. Deci EL, Ryan RM (1985) Intrinsic motivation and self-determination in human behavior. Plenum Press, New YorkCrossRefGoogle Scholar
  27. (2010). In: Deibert R, Palfrey J, Rohozinski R, Zittrain J (eds) Access controlled: The shaping of power, rights and rule in cyberspace. MIT Press, CambridgeGoogle Scholar
  28. Elkin-Loren N, Salzberger EM (2000) Law and economics in cyberspace. Int Rev Law Econ 19:553–581CrossRefGoogle Scholar
  29. Falk A, Kosfeld M (2006) The hidden costs of control. Am Econ Rev 96 (5):1611–30CrossRefGoogle Scholar
  30. Fehr E, Holger H, Wilkening T (2010) The lure of authority: Motivation and incentice effects of power, unpublished manuscriptGoogle Scholar
  31. Foster DP, Peyton Young H (1990) Stochastic evolutionary game dynamics. Theor Popul Biol 38(2):219–232CrossRefGoogle Scholar
  32. Frey BS (1997) Not hust for the money: an economic theory of personal motivation. Edward elgar publishing inc., Chelthenham, UKGoogle Scholar
  33. Frey BS, Jegen R (2001) Motivation crowding theory: a survey of empirical evidence. J Econ Surv 15(5):589–611CrossRefGoogle Scholar
  34. Gagne M, Deci EL (2005) Self-determination theory and work motivation. J Organ Behav 26:331–362CrossRefGoogle Scholar
  35. Goldsmith J, Wu T (2006) Who controls the internet? illusions of a borderless wolrd. Oxford University Press, New YorkGoogle Scholar
  36. Hars A, Ou S (2001) Working for free? motivations of participating in open source projects, system Sciences, 2001. Proceedings of the 34th Annual Hawaii International Conference on. IEEEGoogle Scholar
  37. Hertel G, Niedner S, Herrmann S (2003) Motivation of software developers in open source projects: An internet-based survey of contributors to the linux kernel. Res Policy 32:1159–1177CrossRefGoogle Scholar
  38. Himanen P (2001) The Hacker Ethic: A radical approach to th Philosophy of business. Random House Inc., New YorkGoogle Scholar
  39. Irlenbusch B, Ruchala GK (2008) Relative rewards within team-based compensation. Labour Econ 15:141–167CrossRefGoogle Scholar
  40. Johnson DR, Post D (1996) Law and borders: The rise of law in cyberspace. Stanford Law Rev 48(5):1367–1402CrossRefGoogle Scholar
  41. Lakhani KR, Wolf RG Feller J, Fitzgerald B, Hissman SA, Lakhani K (eds) (2005) Why hackers do what they do: Understanding motivation and effort in free/open source software projects. MIT Press, CambridgeGoogle Scholar
  42. Landini F (2012) Technology, property rights and organizational diversity in the software industry. Struct Chang Econ Dyn 23(2):137–150CrossRefGoogle Scholar
  43. Leiner BM, Cerf VG, Clarck DD, Kahn RE, Kleinrock L, Lynch DC, Postel J, Roberts LG, Wolff SS (2001) The past and future history of the internet. Commun ACM 40(2):102–108CrossRefGoogle Scholar
  44. Lessig L (1996) The zones of cyberspace. Stanford Law Rev 48(5):1403–1411CrossRefGoogle Scholar
  45. Lessig L (1999) Code and other laws of cyberspace. Basic Books, New YorkGoogle Scholar
  46. Lessig L (2006) Code: version 2.0. Basic Books, New YorkGoogle Scholar
  47. MacKinnon R (2012) Consent of the networked: The worldwide struggle for internet freedom. Basic Books, New YorkGoogle Scholar
  48. Marx K (1970) Il Capitale: Critica dell’Economia Politica. Roma, Newton Compton editoriGoogle Scholar
  49. McManis CR (2008) The proposed anti-counterfeiting trade agreement (acta): Two tales of a treaty. Houston Law Rev 46(4):1235–1256Google Scholar
  50. Mitchell WJ (1995) City of Bits: Space, Place, and the Infobahn. MIT Press, CambridgeGoogle Scholar
  51. Naidu S, Hwang S-H, Bowles S (2010) Evolutionary bargaining with intentional idyosincratic play. Economic Letters forthcomingGoogle Scholar
  52. Parsons T (1963) On the concept of political power. Proceedings of the American Philosphical Society June, 232–262Google Scholar
  53. Posner RA (1974) Theories of economic regulation, mimeoGoogle Scholar
  54. Post D (1995) Anarchy, state and the internet. Journal of Online Law (3)Google Scholar
  55. Reidenberg JR (1998) Lex informatica: The formulation of information policy rules through technology. Texas Law Rev 76(3):553–593Google Scholar
  56. Shaw A (2008) The problem with the anti-countereiting trade agreement (and what to do about it). KEStudies 2Google Scholar
  57. Shy O, Thisse J-F (1999) A strategic approach to software protection. J Econ Manag Strateg 8:163–190CrossRefGoogle Scholar
  58. Simon HA (1951) A formal theory of the employment relationship. Econometrica 19(3):293–305CrossRefGoogle Scholar
  59. Slive J, Bernhardt D (1998) Pirated for profit. Can J Econ 31:886–899CrossRefGoogle Scholar
  60. Sterling B (2002) The hacker crackdown: Law and disorder on the electronic frontier. Bantam Books, New YorkGoogle Scholar
  61. Strahilevitz LJ (2003) Charismatic code, social norms, and the emergence of cooperation on the file-swapping networks. Virginia Law Rev 89(3):505–595CrossRefGoogle Scholar
  62. Takayama L (1994) The welfare implications of unauthorized reproduction of intellectual property in the presence of demand network externalities. J Ind Econ 42:155–166CrossRefGoogle Scholar
  63. von Hippel E (2005) Democratizing Innovation. MIT Press, LondonGoogle Scholar
  64. Weber M (1978) Economy and society. University of California Press, BerkeleyGoogle Scholar
  65. Wu T (2003a) Network neutrality, broadband discrimination. J Telecommun High Technol Law 2:141–176Google Scholar
  66. Wu T (2003b) When code isn’t law. Virginia Law Rev 89(4):679–751CrossRefGoogle Scholar
  67. Wu T (2010) The master switch: The rise and fall of information empires. Random House Inc., New YorkGoogle Scholar
  68. Young HP (1998) Individual strategy and social structure: an evolutionary theory of institutions. Princeton University Press, PrincetonGoogle Scholar
  69. Zittrain J (2000) What publisher can teach the patient: Intellectual property and privacy in an era of trusted privication. Stanford Law Rev 52(5):1201–1250CrossRefGoogle Scholar
  70. Zittrain J (2003) Internet points of control. Boston College Law Rev 44(653)Google Scholar
  71. Zittrain J (2006) The generative internet. Harvard Law Rev 119(7):1974–2040Google Scholar
  72. Zittrain J (2008) The future of the internet and how to stop it. Yale University Press, New Haven and LondonGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.SEP - LUISS UniversityRomeItaly
  2. 2.CRIOS - Bocconi UniversityMilanItaly

Personalised recommendations