#Transaction cost analysis of distributed production via Fab City OS - Research Outline
In my job as chairmen of Fab City Hamburg Association it is my day to day practice to make distributed production for a circular economy a reality. The idea of fab city is that the, up to this day around 40, fab cities worldwide collaborate on open source hardware documentation, that is then transferred into physical goods in local - mostly standardised digital - manufacturing. However, the transaction cost for the global and even local collaboration is enormous. There are language barriers, insufficient standardisation, silos of communication due to different communication channels and so on. Though, this may change soon due to an EU-funded project in which the digital infrastructure for the global Fab City Initiative - Fab City OS - will be developed. It aims at making processes across all stages of the value chain of distributed production more efficient and competitive to linear production. In my research I want to shed light on what would happen if Fab City OS would become a success? Specifically, how would the economic governance change due to the reduction in transaction cost? Where would we see markets, where would we see firms and where peer production?
First of all, what is Fab City OS? It is an open source software stack. It does not invent so much from the ground but rather interface different existing open source software solutions such as FreeCAD, Git, Reflow OS, Fab Access and Computer aided manufacturing (CAM) software. The hardware documentation is channeled into e-commerce stores such as Otto.de. When a customer buys it, it is manufactured as close as possible to the customer. The core technology of Reflow OS (Roio, Ibrisevic & D’Intino 2021) will be adapted to tracking not only material flows but also who had what share in the distributed process, which will make it possible to reward the contributors accordingly when the costumer pays. In sum, if a success, the transaction cost of distributed production will fall. Adapting Coase (1995), Benkler (2002) argues that the rise of the internet has decreased transaction cost of information production in some branches and that this is where peer production has emerged.
In my research I want to adapt Benkler’s methodology for distributed production via Fab City OS. The hypothesis is that tendentially, we would see peer production in the global digital realm and markets and firms in the local, physical realm. Because on the local level, where we deal with physical resources for manufacturing, repairing, adapting and recycling, processes can not be optimised so much that the transaction cost would be sufficiently low for peer production to emerge. Though, the firms dealing with production on the local level may become smaller. The products we use dayly would be manufactured locally, not in China.
References
Benkler, Y. (2002). Coase's Penguin, or, Linux and" The Nature of the Firm". Yale law journal, 369-446.
Coase, R. H. (1995). The nature of the firm. In Essential readings in economics (pp. 37-54). Palgrave, London.
Roio, D., Ibrisevic, A., & D'Intino, A. (2021). Reflow: Zero Knowledge Multi Party Signatures with Application to Distributed Authentication. arXiv preprint arXiv:2105.14527.
