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Coase's Penguin, or, Linux and "The Nature of the Firm"

. The Yale Law Journal, 112 (3): 369 (December 2002)
DOI: 10.2307/1562247

Abstract

For decades our common understanding of the organization of economic production has been that individuals order their productive activities in one of two ways: either as employees in firms, following the directions of managers, or as individuals in markets, following price signals. This dichotomy was first identified in the early work of Ronald Coase and was developed most explicitly in the work of institutional economist Oliver Williamson. Recently, public attention has focused on a fifteen-year-old phenomenon called free software or open source software. This phenomenon involves thousands, or even tens of thousands, of computer programmers who collaborate on large- and small-scale projects without traditional firm-based or market-based ownership of the resulting product. This Article explains why free software is only one example of a much broader social-economic phenomenon emerging in the digitally networked environment, a third mode of production that the author calls "commons-based peer production." The Article begins by demonstrating the widespread use of commons-based peer production on the Internet through a number of detailed examples, such as Wikipedia, Slashdot, the Open Directory Project, and Google. The Article uses these examples to reveal fundamental characteristics of commons-based peer production that distinguish it from the property- and contract-based modes of firms and markets. The central distinguishing characteristic is that groups of individuals successfully collaborate on large-scale projects following a diverse cluster of motivational drives and social signals rather than market prices or managerial commands. The Article then explains why this mode has systematic advantages over markets and managerial hierarchies in the digitally networked environment when the object of production is information or culture. First, peer production has an advantage in what the author calls "information opportunity cost," because it loses less information about who might be the best person for a given job. Second, there are substantial increasing allocation gains to be captured from allowing large clusters of potential contributors to interact with large clusters of information resources in search of new projects and opportunities for collaboration. The Article concludes with an overview of how these models use a variety of technological, social, and formal strategies to overcome the collective action problems usually solved in managerial and market-based systems by property, contract, and managerial commands. This Article contends that the common understanding of Miranda as a direct restraint on custodial interrogation by police is mistaken. Instead, Miranda, like the privilege against compulsory self-incrimination that serves as its constitutional foundation, is a rule of admissibility. As the text of the privilege, the Supreme Court's Fifth Amendment jurisprudence, and the Miranda majority's reasoning all demonstrate, neither the privilege nor Miranda can be violated without use of a compelled statement in a criminal case. Miranda controls police conduct only indirectly, by requiring suppression of statements taken in violation of the Miranda rules. At least two significant consequences flow from this understanding. First, police violations of the Miranda rules alone cannot support civil lawsuits under 42 U.S.C. § 1983. Second, and more importantly, police have no constitutional obligation to comply with the Miranda warnings and waiver regime. Rather, police are free to disregard Miranda if they deem it advantageous. If the Supreme Court had fashioned a stringent Miranda exclusionary doctrine-one similar to that which applies when prosecutors compel testimony by use of immunity grants-police would have good reason to comply with the Miranda rules even absent a constitutional duty. But, the Court has done the opposite, creating a host of evidentiary incentives for police to violate those rules. Thus, it is not surprising that some police officers and departments deliberately disregard Miranda in order to benefit from those incentives. Because many federal appellate courts already have interpreted Miranda as a rule that governs only admissibility, and there is a good chance that the Supreme Court will construe the privilege accordingly when it decides Chavez v. Martinez this Term, Miranda's future appears bleak. It is likely that the Court will signal to police that they have no constitutional duty to follow Miranda rules and, at the same time, will leave intact its decisions tempting police to violate those rules. This Article offers an alternative approach, one by which the Court squares its Miranda doctrine with its treatment of the privilege in other contexts. This proposed approach would mandate that the Court treat Miranda as a rule of admissibility but also would require that it rethink many of the decisions that entice police to violate the Miranda rules.

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