1.4 Institutionalization

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The tools I use are drawn from institutional economics. Institutional economics looks at the interaction of law, economics, and politics; it examines how societies solve collective action problems by defining property rights and establishing governance arrangements. It is interested in technology insofar as it creates new resources that must be incorporated into legal and institutional regimes, or causes changes in transaction costs or relative prices that lead to a breakdown in a preexisting order.

The root-not specific people or organizations-is the protagonist of this story. The development of internetworking endowed the name and address spaces with enormous social value. The Internet's origins in informal, noncommercial, and relatively nonpolitical research and education organizations, however, placed these valuable resources outside the control of existing institutions. The root was essentially unowned, and its inherently global nature made it difficult for nation-states and traditional international organizations to respond. Consequently, as the Net became public and commercial, it fostered an international struggle over the definition of property rights and governance arrangements. The governance problem could only be solved through the development of new institutional arrangements. This is therefore a case study in institutional innovation, all the more interesting and complex because it happened on an international scale.

Admittedly, institutionalization is an ugly and seemingly unexciting word. How much more interesting to talk about the vast amounts of money that can be made from e-commerce or the exciting new capabilities of information technology. But institutionalization is the only word that gets to the essence of what happened (and continues to happen) to the Internet from 1996 to 2001.

When we ask who controls the Internet, the response typically takes one of two extremes. The first, favored by many technologists, is to say that no one controls it. The Internet is inherently uncontrollable. Technology is more powerful than governments, traditions, cultures; the Internet 'routes around' censorship, and so on. The other extreme is to search for the names of a clique of people or corporations who are said to have overwhelming power to issue authoritative commands. The Internet is run by MCI, or AOL, or the U.S. government. Both responses, I think, miss the point. For any complex sociotechnical system, especially one that touches as many people as the Internet, control takes the form of institutions, not commands. Contending parties work out rules and procedures that make their interactions less costly, more stable and predictable. They supplement these rules with organizations that monitor compliance and sanction those who break the rules. In such a process, control is never perfect and no one gets exactly what he wants. But it is false and misleading to say that there is no control, no social constraint. Some parties have more bargaining power than others. Rules are never perfectly fair or neutral; they are always formulated and implemented in ways that favor some types of interests over others. Not everyone has the same amount of resources to devote to monitoring and enforcing their rights. Some people break the rules and get away with it. In short, there are winners and losers in any institutionalization process. And there is always continuing pressure for the modification of the rules in ways that reflect the special interests of various parties. The value of the institutional perspective is precisely that it provides a framework for understanding these kinds of interactions.

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