Self-Rewards and Transaction-Free Activities

The concepts of self-reward and transaction-free activities, as I use them to describe the functioning of the free innovation paradigm, are connected: I define self-rewards as those private benefits that can be obtained without compensated transactions. A compensated transaction involves explicit or implicit arrangements to provide a specific party with "this” thing—perhaps a good, a service, or a financial instrument—in exchange for "that” thing. Therefore, when I say activities in the free innovation paradigm are transaction free, I mean that no compensated exchanges of this nature occur within it.

Compensated transactions are not involved when I gain personal use value from an innovation I develop and/or gain enjoyment and learning from engaging in the process of developing it. All of these reward types can be reaped without any requirement of related actions by or effects upon others—they are self-rewards. But what about the rewards associated with altruism that were asked about in the Finland survey? After all, others must adopt or benefit from my innovation before I can legitimately feel I have done something altruistic. Similarly, when I display or freely offer an innovation to others—reveal it without protections as the definition of free innovator requires—I may be hoping for a reward in the form of an increase in my personal reputation in the eyes of others (Lerner and Tirole 2002). In both of these instances, others have to do or experience something before I am rewarded. Why is this not a compensated transaction? The reason is that these hoped- for reactions are not an exchange of "this” for specifically "that” with a specific exchange partner. Instead, the freely revealed innovation is a casting of bread upon the waters, perhaps with expectations or hopes of return gifts in the form of "generalized reciprocity.”

To clarify, let me digress briefly into the nature of gifts. First, note that compensated transactions, fitting the criterion of "specifically this for specifically that,” can exist even without money or precise accounting as social transactions (Benkler 2006). Social transactions, Benkler explains, differ from economic transactions not in the absence of obligations for exchange, but in the precision of exchange. A market transaction has greater precision that "derives from the precision and formality of the medium of exchange—currency” (Benkler 2006, 109). In contrast, social exchanges are less precisely calculated. Benkler (ibid.) illustrates with a quote from Godelier in The Enigma of the Gift: "The mark of the gift between close friends and relatives ... is not the absence of obligations, it is the absence of 'calculation.'” Still, as Mauss (1966, xiv), quoting from the "Havamal” in his book The Gift, put it, "a gift always looks for recompense.” Examining the elements of any gift,

Mauss discusses the three obligations involved—giving, receiving, and repaying—within which "the obligation of worthy return is imperative” (ibid., 41). As illustrated by Benkler, Godelier, and Mauss, when a gift is between specific known givers and recipients, it is a social transaction involving a compensated exchange of property, and such a gift is thus not "transaction free.”

Second, note that gifts—such as those motivated by altruism in the case of our free innovators—can be transaction free when the givers expect generalized reciprocity rather than compensation from specific others. Generalized reciprocity, according to Sahlins (who first specified the term), is characterized by transactions that are generally accepted to be "altruistic,” a "pure gift,” and with expectations of recompense or direct material return being "unseemly” and at best "implicit” (Sahlins 1972, 193-194). It refers to "the return of a gift only indefinitely prescribed, the time and amount of reciprocation left contingent on the future needs of the original donor and abilities of the recipient; so the flow of goods may be unbalanced, or even one-way, for a very long period” (ibid., 279-280). Some have called generalized reciprocity "'helping a person backward,' where there is no chance of reciprocation by the person helped” (Ladd 1957, 291) or "paying it forward,” described as the principle of "'I help you, and you help someone else'” (Baker and Bulkley 2014, 1493), but Sahlins expresses the essence, stating that "failure to reciprocate does not result in the giver of stuff to stop giving” (1972, 194).

Benjamin Franklin (1793, 178-179) made his important inventions available to all without patent protections. He explained his motives in terms of generalized reciprocity, saying "that, as we enjoy great advantages from the inventions of others, we should be glad of an opportunity to serve others by any invention of ours; and this we should do freely and generously.” A smaller and more ordinary example of generalized reciprocity is the telling of the time to a stranger who stops one on the street to ask for that favor. You do not expect to see that individual again, nor to receive a return favor from precisely him or her. However, by contributing to a culture of generalized reciprocity, you can confidently expect that in the future some stranger will be willing to tell you the time if you ask. Very importantly, expectations of generalized reciprocity associated with a gift are transaction-free because, as was noted above, "failure to reciprocate does not result in the giver of stuff to stop giving" (Sahlins 1972, 194).

Within our context of free innovation, then, expectations of rewards in the form of generalized reciprocity such as gratitude or reputational enhancements evoked in the minds of others may motivate free innovators, and still not be compensated transactions made with specific others. However, there clearly can be a gray zone between transaction- free behaviors and transaction-based behaviors. For example, the number of active developers in an open source software development project may range from many to just a few. In the case of many developers, the situation contributors face might be most accurately called one of generalized reciprocity. However, as the number dwindles, awareness may grow that some specific person is developing and contributing X useful innovation to the commons and is doing so because another specific member will develop and contribute Y. In that case, the situation becomes one involving a compensated transaction.

To conclude, let me note that idea of transaction-free behaviors may seem odd, but in fact these are common in life—and justifiably so, in view of the costs and complexities that can be associated with arranging and executing compensated transactions (Tadelis and Williamson 2013). Baldwin (2008) points out that collaborative innovation projects, such as open source software development projects, are transaction free by design. She also points out that families and communities, when engaging in the activities of daily life, generally also engage in transaction-free interactions, often within a framework of generalized reciprocity. One can be confident, for example, that almost any adult will immediately rush to protect any young child from danger. According to Ladd (1957, 254), such help is offered "without the thought or expectations of reciprocation; and the reciprocation, when it does come, isn't considered a return but a new act of goodwill."

 
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