Friday, September 17, 2004

Hayek Smiled: Why Blogging Works

Once again the power of the bloogers is documented. - Sailor

Hayek Smiled: Why Blogging Works
By Michael Van Winkle
Published 09/16/2004
Tech Central Station

If Nobel Prize winning economist F.A. Hayek had been watching last week as bloggers spontaneously responded to fraudulent documents aired by the program "60 Minutes", he would've grinned in humble satisfaction. Hayek's work centered on the effectiveness of spontaneous, decentralized organization, which is precisely what occurred on PowerlineBlog on September 9th. Regardless of the political consequences of the Killian Memo controversy, Hayek's work has been vindicated and his critics undermined.
Why is it that the blogosphere continues to thrive despite incessant warnings of misinformation and partisan gossip? As of this writing Technorati, an online link-tracking service, is tracking 3,872,561 blogs, hardly something to sneeze at. How is it that some of these relatively unknown bloggers, with no direct access to experts and forensics, were able to uncover the truth about these memos before anyone else? Is it only because CBS was consumed by its own bias? Or is there something remarkably efficient about the blogosphere? Despite the apparent truth of the former, students of Hayek know that the latter explanation is far more significant.

Hayek's work focused on how it is that complicated and reliable systems of cooperation come about without any centralized direction. When they do, they outperform systems of "command", systems that rely on central direction. Hayek was an economist and so his primary object of study was the market and how, seemingly counterintuitively, it can work without commands; and why it outperforms large scale centralized economies like the Soviet Union. It doesn't take a directive from Washington to get Apple Computers to make more iPods. Why? Because the market tells Apple how many will sell.

Hayek theorized that markets worked better primarily because of their ability to facilitate the use of 'on the spot' knowledge, knowledge that is very unique to a particular person or place. Steve Jobs knows more about making iPods than George Bush. Everyone has something he knows more about than just about anyone else, even if that something is as basic as his own car. A command system requires the person with the knowledge to wait on the guy without it. A market system gives the person with knowledge the freedom and power to act on it.

Some of this seems rather commonsensical now, but at the time he was really rocking the boat. Economics had been dominated by a paradigm that sought the proper equation for centralized direction. Hayek shifted the paradigm, at least in some economics departments.

Today almost no one would disagree that spontaneous cooperation is better for some tasks, namely production and consumption. Yet, some critics still like to distinguish among kinds of knowledge. For instance spontaneous systems are good at delivering cheese, but not very good at delivering something more intangible … like information … or fairness.

We've all heard critics of the Internet claim that, because no one "controls" it, no one can control it from disseminating the most outrageous rumors and conspiracies. A similar critique was leveled at Hayek's arguments about markets: Sure, markets (spontaneous systems) can deliver food at reasonable prices, but advertising and marketing often mislead people about which foods they should buy.

This traditional criticism of the internet has now been aimed at the blogosphere and is embodied by big journalists like Jonathan Klein who, while defending the CBS story to The Weekly Standard remarked, "You couldn't have a starker contrast between the multiple layers of check and balances [at '60 Minutes'] and a guy sitting in his living room in his pajamas writing." Klein misses the point that it's not whether you can trust some guy in his pajamas, but whether you can trust a spontaneous system of thousands of guys in their pajamas trading information and imparting small, sometimes deceivingly insignificant, bits of information.

What we've seen in the last few years is a gradual refutation of the Klein myth, that "Big Media" is more capable of sorting the truth than are 3,872,561 blogs. Slowly but surely a loose network of bloggers is sometimes beating the designed, controlled systems of checks and balances at deciphering what's true and what's not. This is exactly what Hayek would've predicted.

In 1997 CBS falsely reported that a US Customs agent was corrupt. It took three years of investigation to clear his name. It won't take a month to get to the bottom of this one.

Big media isn't dying. It never will. The proof of this is that most bloggers get the grist for their mills from traditional big media sources. The impact of the blogosphere is to change the way the media does business. Five years from now, the news channels doing well will be the ones who take the blogosphere seriously, finding ways to use it to better its own reporting and analysis.

Michael Van Winkle is a graduate student at the University of Chicago. He's is creator and editor of The Chicago Report.

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