Economy of Scope

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= doing more with the same thing, related to 'mutualization'


Contents

Definition

According to the Wikipedia:

"Economies of scope make product diversification efficient if they are based on the common and recurrent use of .. an indivisible physical asset." (http://en.wikipedia.org/wiki/Economies_of_scope)


Description

1.

"An economy of scope exists between the production of two goods when two goods which share a CommonCost are produced together such that the CommonCost is reduced.

The affect of an economy of scope is to increase the efficiency of production as a result of increasing the number of different but related products offered.

This may happen when the same knowledge and information is required both to produce something and to consume that product within subsequent productions. Also, this may happen when similar information is required both to produce something and to produce a different product." (http://appropriatesoftware.net/wiki?EconomyOfScope)


2. Michel Bauwens:

"My short definition of EoS is very simple and should be understandable I think: "doing more with less"; and this is mainly achieved by mutualizing infrastructures, both immaterial (open source knowledge, code, design) and material (co-working, fablabs, carsharing, idle-sourcing ...); for contemporary implementations we should add: using distributed machinery in distributed workplace to allow local production in microfactories, through the process of manufacturing on demand, while achieving scope through the global immaterial cooperation on both the design of the products, the design of the machinery to produce them, and even the processes through which to make both the previous aspects (ex. the xtreme manufacturing methodology of OSE/WikiSpeed)."


Discussion

Tom Atlee: MY CURRENT UNDERSTANDING OF ECONOMIES OF SCALE AND SCOPE

Tom Atlee:

"ECONOMIES OF SCALE (ground economics in "growth" - i.e., efficiently produced and monetized mass commodities which leave people hungry for more and more as they produce and consume more and more). This involves making lots of stuff at a cheap per-piece rate and getting everyone to buy it all so you make a good profit (partly to pay back the infrastructure investment required to make lots of stuff cheaply and massively). Externalize costs wherever possible, so you can continually profit while degrading society and nature wherever you deem it necessary for your business. Make things that break down so people have to buy replacements. Maintain a sense of scarcity: Make people feel inadequate (intrinsically or in contrast to others) and don't truly satisfy their deep needs, but keep them coming back to buy temporary pseudo-satisfyers (your products and services). Get people working at jobs they may not like in order to get money to buy the stuff you make, which they often buy to counter the stress they have accumulated doing their jobs. Privatize all parts of the commons you can manage so that people have to pay you to use them. Ship things from cheap-production areas to expensive consumption areas - even if they must be shipped great distances - to improve your profits (which works as long as you can externalize the environmental and social costs of all that transformation). Design machines and create technologies to facilitate mass production, to increase per-person "productivity" and to replace expensive human labor - and thus increase profits. Set up a massive financial industry to profitably manage the movement of money and to facilitate bets on the ups and downs of the resulting out-of-equilibrium economy. Use GDP as the primary economic indicator to keep the focus on the flow of money and the growth of consumption. The "efficiency" of such economies of scale lies in the monetarily cheap per-piece rate achieved by the mass-productivity and cost-externalization in the system as a whole.

ECONOMIES OF SCOPE (ground economics in the free creative participation of everyone, in the true satisfaction of deep needs, and in the natural abundance of peer production, immateriality, community, creativity and the commons). Make only the "stuff" your community really needs to function. Focus on satisfying deep personal/interpersonal needs using primarily non-material aspects of life like spirit, learning, beauty, community, relationship, nature, activity, conversation, creativity, games, celebration, and other forms of deep enjoyment and mutual pleasure that involve little material or money. Share ideas, culture, designs and all other immaterial knowledge, resources and enjoyables freely. Set things up so that people can meet most of their material needs through sharing and gifting networks: This vastly reduces how much "stuff" they and their community need to have on hand, thereby reducing environmental impact (less material flow-through) and making up for the possibly higher per-piece cost of locally producing smaller quantities of needed "stuff". Set things up (with, for example, guaranteed minimum income for everyone) so that people tend to do productive work that they enjoy; their productive activity then becomes part of their high quality of life, rather than a drain on it. Design machines and technology to facilitate on-demand local production and for replacement of unpleasant human labor to free people up to do what they want, thus enhancing quality of life while reducing environmental impact. Use quality of life/sustainability statistics as the main economic indicator(s) so that monetary considerations do not trump the long term (sustainable) satisfaction of deep human needs. Minimize the financial sector that does little truly productive work, freeing up resources for productive work and lessening the danger of arbitrary financial colonization or collapse. Likewise, minimize bureaucracy. The "scope" of economies of scope embraces the scope of participation and the depth, breadth and longevity of the needs met. The "efficiency" of such economies of scope lies in the lower costs (financial, social, and environmental - all!!) of reduced material consumption in the context of a refreshed sense of abundance and quality of life." (email: march 2013)


Michel Bauwens

"“And what are economies of scope? As a teaser, for now, this short definition: “An economy of scope exists between the production of two goods when two goods which share a common cost are produced together such that the common cost is reduced.” In other words, something that brings down the common cost of a factor of production, not by producing more of a unit but through shared infrastructure costs.

[…]

Indeed, economies of scale work well in periods of energy ‘ascent’, when more and more energy is coming online, but they work less and less in periods of energy ‘descent’ when the overall supply of energy and resources are diminishing. What you need then are economies of scope, when you can ‘scale up from one’, as with today’s emerging “making on demand” infrastructure.

Economies of scope is exactly what peer production (in its different iterations of open knowledge, free culture, free software, open and shared designs, open hardware and distributed manufacturing, etc.) is all about.

Let’s recap what is wrong with the current global system, which is entirely predicated on economies of scale, and actually in many instances makes economies of scope illegal.

Our current system is based on the belief of infinite growth and the endless availability of resources, despite the fact that we live on a finite planet; let’s call this feature, runaway ‘pseudo-abundance’. The current system believes that innovations should be privatized and only available by permission or for a hefty price (the IP regime), making sharing of knowledge and culture a crime; let’s call this feature, enforced ‘artificial scarcity’. Peer production methodologies are based on the exact opposite economic and social DNA. Peer production communities believe that knowledge is a commons for all to share, and hence, no innovation can be withheld from the human population as a whole.

In fact, withholding a life-saving or world-saving innovation is seen as unethical, and this represents a true value inversion. And peer production designs for distribution and inclusion, i.e. small scale, even personal fabrication. Planned obsolescence, which is a feature and not a bug of the current system, is totally alien to the logic of peer production. In other words, sustainability is a feature of open design communities, not a bug.

[…]

So, what are the economies of scope of the new p2p age? They come in two flavors:

The mutualizing of knowledge and immaterial resources The mutualizing of material productive resources The first principle is easy to understand. If we lack knowledge as individuals (and nobody can know everything) as a community, local or virtual, it is much more likely that someone knows. Hence, the mutualizing of knowledge and ‘crowd-accelerated innovation’, now already a well-known feature of the collaborative economy. But the advantage of scope is created when that knowledge is shared, and thus, it can be used by others. With this social innovation, the common cost of the joint production factor that is knowledge, is dramatically reduced.

Take the example of the paradigmatic Nutrient Dense Project.

This global community of agrarian workers and citizen scientists is interested in experimenting with better nutrients to obtain better quality food. Hence joint research can be carried out to test various nutrients in various soils and climate zones, and they will instantly benefit not just the whole participating community, but potentially, the whole of humankind. Strategies that are based on privatizing intellectual property, cannot obtain such advantages of scope, or at least, not at that level.

[…]

The second principle, of mutualizing physical productive resources, is exemplified [in] collaborative consumption. The general idea is the same. Alone, I may lack a certain tool, skill, or service, but seen from the point of view of a community, it is likely someone else has it, and that other person could share, rent or barter it. No need to all possess the same tool if we can access it when we need it. Hence the proliferation of p2p marketplaces.

Let’s take an illustrative example: car-sharing. Car-sharing projects can be mutualized through the intermediary of a private company which owns the cars (fleetsharing, like Zipcar), through p2p marketplaces which link car users to each other (RelayRides and Getaround), or through nonprofits or public entities (Autolib in Paris). But they all achieve economies of scope. According to a study cited by ZipCar, for every rented car, there are 15 fewer owned cars on the road. And carsharing members drive 31% less after they join. So, in 2009 alone, car-sharing diminished global carbon dioxide emissions by nearly half a million tons.

Imagine similar developments in every sector of production.

So, what will the new system look like if economies of scope become the norm and replace economies of scale as the primary driver of the economy and social system? We already mentioned the global open design communities, and we suggest that it will be accompanied by a global network of microfactories, who are producing locally, such as the ones that the open source car companies like Local Motors and Wikispeed are proposing and which are already prefigured by the networks of hackerspaces, Fablabs and co-working spaces.” (http://thescienceofdestruction.wordpress.com/2012/04/17/michel-bauwens-on-peer-production-and-economies-of-scope/)

More Information

  1. Transaction Costs
  2. Coordination Costs
  3. Economy of Scale