The Problem With Digital Public Goods

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The Problem With Digital Public Goods

Everyone is raving about India's digital public goods -- or its digital public infrastructure, aka DPI. But is the picture all rosy? What is the flip side of this technological achievement? This weeks edition covers one of the episodes of Everything is Everything, a weekly podcast hosted by Amit Varma and Ajay Shah.

In this episode, Ajay and Amit talk about how such a government monopoly cannot be a good thing. In the long run, suppressing competition will hurt us. Firstly, it empowers the state more than it should, and power corrupts. Secondly, it stifles competition, and thus, innovation.

Language is a powerful tool that shapes how we perceive and engage with the world. In the realms of economics and public policy, the precision of language is not just a matter of semantics but a cornerstone of clear and effective discourse.

When technical terms are misused or diluted, they can lead to significant misunderstandings that affect policy decisions and public perception.

The Importance of Language Precision

In any technical field, terminology carries specific meanings that convey complex ideas succinctly and accurately. Economists, for example, have carefully defined terms like "public goods" to describe goods that are non-rivalrous and non-excludable. These characteristics mean that one person's use of a public good doesn't diminish its availability to others, and it's impossible (or highly impractical) to exclude anyone from using it. Classic examples include clean air, national security, and public health efforts like the eradication of smallpox.

However, the misuse of such terms can create confusion and misguide policy discussions. For instance, open-source software, such as Linux, is often labeled as a public good because it’s non-rivalrous and non-excludable in the digital realm. Yet, labeling a government service or product as a "public good" simply because it is publicly provided can distort the true meaning of the term. This was evident in the debate over India's Unified Payments Interface (UPI), where some have mistakenly referred to it as a public good. In reality, UPI, while a publicly accessible service, does not meet the strict economic definition of a public good because it is excludable and its use can be rivalrous under certain conditions (e.g., system bandwidth limitations).

When terms like "public goods" are used loosely, it not only muddles public understanding but also risks "greenwashing"—where positive connotations associated with a term are exploited to justify certain actions or policies, regardless of their true nature.

The Dangers of High Modernism

High modernism refers to the belief that society can be designed and engineered from the top down by a central authority, often with a heavy reliance on technical expertise. This approach, however, can be fraught with risks, particularly when it ignores the complex, decentralized nature of human societies.

The UPI system is an illustrative example of the pitfalls of high modernism. While UPI is an impressive technical achievement, it was designed by engineers with a top-down approach that failed to account for the system's real-world complexities. One major oversight was the absence of a sustainable business model. Participants in the UPI ecosystem—banks, payment service providers, and merchants—are expected to support the system without a clear revenue stream, which undermines the long-term viability of the platform.

Moreover, the centralized, government-controlled nature of UPI has led to several practical issues, such as frequent transaction failures and inadequate consumer protection mechanisms. These problems highlight a broader issue with high modernist projects: they often lack the flexibility and responsiveness needed to adapt to changing conditions and user needs.

The Power of Bottom-Up Innovation

Contrast this with the development of the internet, where open-source standards like TCP/IP emerged through a decentralized, bottom-up process. Unlike government-mandated standards such as X.25, which was pushed by telecom monopolies and governments in the early days of computer networking, TCP/IP thrived because it was open, adaptable, and driven by a diverse community of innovators.

This bottom-up approach allowed for continuous experimentation and evolution, leading to the robust, resilient infrastructure that underpins the modern internet. The competition among different standards, protocols, and implementations ensured that only the most effective solutions survived, fostering an environment of constant improvement.

In the context of public policy, this highlights the importance of fostering competition and diversity of thought rather than imposing a single, top-down solution. The success of open-source communities in technology should serve as a model for how we approach complex societal challenges: through a decentralized, collaborative effort that leverages the collective intelligence of a broad community.

Can't get enough of this conversation? Us neither! Check out the full episode below to satisfy your craving for more insights and ideas. 😃