The Evolution of Control in the Digital Economy

Control is becoming increasingly frequent in cyberspace, to an extent that puts into question the latter’s traditional openness. In order to investigate the origins and effects of such change the paper formally model the historical evolution of digital control. In the model, the economy-wide features of the digital space emerge as a result of endogenous differences in culture (users’ preferences including motivation) and technology (platform designs). The model shows that: a) in the long-run there exist two stable culturaltechnological equilibria in the digital economy: one with intrinsically motivated users and low control; and the other with purely extrinsically motivated users and high control; b) under a closed economy - i.e. before the opening of the network to commerce, the initial emergence of a low-control-intrinsic-motivation equilibrium can be explained by the specific set of norms and values that formed the early culture of the networked environment; and c) the opening of the network 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.