The ‘Cloud’ Is as Old as Interfamily Trade

by Don Boudreaux on September 30, 2011

in Complexity & Emergence, Cooperation, Curious Task, Hayek, Hubris and humility, Prices, Trade, Uncategorized

Matt Ridley’s Manhattan Institute Hayek Lecture on Monday was outstanding.  A portion of it appeared late last week in the Wall Street Journal.

Here are the opening ‘grafs:

The crowd-sourced, wikinomic cloud is the new, new thing that all management consultants are now telling their clients to embrace. Yet the cloud is not a new thing at all. It has been the source of human invention all along. Human technological advancement depends not on individual intelligence but on collective idea sharing, and it has done so for tens of thousands of years. Human progress waxes and wanes according to how much people connect and exchange.

When the Mediterranean was socially networked by the trading ships of Phoenicians, Greeks, Arabs or Venetians, culture and prosperity advanced. When the network collapsed because of pirates at the end of the second millennium B.C., or in the Dark Ages, or in the 16th century under the Barbary and Ottoman corsairs, culture and prosperity stagnated. When Ming China, or Shogun Japan, or Nehru’s India, or Albania or North Korea turned inward and cut themselves off from the world, the consequence was relative, even absolute decline.

Knowledge is dispersed and shared. Friedrich Hayek was the first to point out, in his famous 1945 essay “The Use of Knowledge in Society,” that central planning cannot work because it is trying to substitute an individual all-knowing intelligence for a distributed and fragmented system of localized but connected knowledge.

So dispersed is knowledge, that, as Leonard Read famously observed in his 1958 essay “I, Pencil,” nobody on the planet knows how to make a pencil. The knowledge is dispersed among many thousands of graphite miners, lumberjacks, assembly line workers, ferrule designers, salesmen and so on. This is true of everything that I use in my everyday life, from my laptop to my shirt to my city. Nobody knows how to make it or to run it. Only the cloud knows.

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W.E. Heasley September 30, 2011 at 11:23 am

Most excellent essay by Matt Ridley!

One item that stands out is: “The crowd-sourced, wikinomic cloud is the new, new thing that all management consultants are now telling their clients to embrace. Yet the cloud is not a new thing at all.”

Management consultants and their new “biggest thing” is a rather odd phenomena. You see, what worked yesterday doesn‘t work today because the new biggest thing will solve all your ills.

Please don‘t ask why the last management consultant “biggest thing“ didn‘t solve all your ills as that question is un-ask-able [wink].

Further, when they introduce the newest-newer idea a couple years from now to replace the new idea that replaced the old idea….don’t ask any questions as the newest-new idea will solve all your ills.

You see, the Chinese Water Snake morphs as its oil must change to suit the every changing demographics of the economically uninformed.

Management consultants summation:

“… must know your enemy, and in this case my enemy is a varmint. And a varmint will never quit – ever. They’re like the Viet Cong – Varmint Cong. So you have to fall back on superior firepower and superior intelligence. And that’s all she wrote.” – Carl Spackler [Bill Murray] from the movie Caddyshack

SweetLiberty September 30, 2011 at 11:45 am

Ridley’s perspective on the benefits of trade and the consequences without it is brilliant. Great post.

Jordan Reynolds September 30, 2011 at 11:52 am

What is notable is the recent progress we have made in applying the cloud paradigm to existing services that now seem archaic in retrospect – from music, books and personal data to sophisticated enterprise software, the accelerated adoption of ‘the cloud’ in recent years signifies the biggest shift in innovation since mobile technology.

Jordan Reynolds September 30, 2011 at 11:55 am

It certainly has been a source of human invention all along, but for the first time it is popularly acknowledged as such.

jorod September 30, 2011 at 12:12 pm

The things that really increased knowledge sharing were the invention of writing, paper, printing press, and data chips. All extensions of human memory. These were used to develop mathematics, especially arithmetic, that lead to huge increases in commerce.. Humans remember and use that to make comparisons and evaluate ideas.

Stone Glasgow September 30, 2011 at 12:13 pm

Notice that Wiki has elite editors, and Yelp has corrupt owners who accept bribes. They are not as wide open as they seem; they are similar to first-world governments.

Jordan Reynolds September 30, 2011 at 12:32 pm

Yelp accepts bribes to do what? Delete negative feedback?

Stone Glasgow October 1, 2011 at 6:09 am

Yes. And move listings to the top… they are corrupt. Google it.

vikingvista September 30, 2011 at 12:42 pm

The fundamental problem with governments is that they don’t face peaceful competition and failure. That is not a problem with Yelp.

Stone Glasgow October 1, 2011 at 6:08 am


Stone Glasgow October 1, 2011 at 6:29 am

Production, innovation and wealth are produced by peaceful cooperation, efficiency, innovation, thrift and honesty.

Leading an army, to defend the innocent from slavery and murder at the hands of foreign invaders, is done with top-down, statist, hierarchical organization, prowess, honor, ostentatious waste and violent deception. Soldiers blindly follow their leaders, and that is all well and good in times of war, when warriors support themselves by stealing from productive and peaceful men in order to defend those from whom they steal.

The trouble arrives when statists become friends with productive people, and are so bold and corrupt as to trade their power for material wealth. The result is a gruesome combination of treachery and corruption, leading eventually to the fall of empires throughout history.

vikingvista October 1, 2011 at 6:51 pm

I disagree with the “all well and good” part.

PrometheeFeu September 30, 2011 at 1:31 pm


FYI. The cloud is actually not the crowdsourcing, wikinomics etc… The cloud is actually the concept of storing your data, applications etc off site and accessing it all through the internet. It also refers to the idea that instead of having dedicated servers, you have a big pool of servers that can be allocated between different services. Canonical examples of cloud services are things such as Google Docs, Dropbox, Gmail etc which allow you to take data off your computer and put it “in the cloud” where you can access it any time from anywhere. The crowdsourcing, wikinomics stuff is gaining popularity partially because cloud services makes it easier.

Ken September 30, 2011 at 4:49 pm


I think you’ve missed the point. The cloud is a set of distributed services provide through some network, so that the user doesn’t need to be concerned with the physical location of data or computing power. It means the ability to trade with people you will never meet. The exchange of ideas (in this case data and services) increases human capital. One idea spawns another and so on and so forth.

Additionally, providing cloud services can connect two people who may be on opposite sides of the world, have opposing viewpoints about the world, and may even want to kill each other if they met face to face. But this doesn’t stop one from providing a service to the other or the other from using that service. The person using the service can take advantage of knowledge held by someone he has never, nor will ever, nor even want to meet, that is not readily available to him locally.


EDG reppin' LBC September 30, 2011 at 2:39 pm

” Nobody knows how to make it or to run it. Only the cloud knows.”

This is why we need a cabinet level office, a “Cloud Czar”, to determine best how to make it and run it. Only the cloud knows, but who is in charge of telling the cloud what it knows?

JS September 30, 2011 at 3:47 pm

Hayek just elaborated on what he learned from Mises, although those topics were necessary to be elaborated upon. His 1945 essay was not an original line of thought.

Mises was speaking of ‘thymology’ well before that essay.

I have really enjoyed Hayek as I have read most of his works, but Mises was a superior thinker in all the topics Hayek wrote about. Hayek delved into politcal theory, sort of the way Murray Rothbard did, but Mises’s poltical understanding was superior to both of them. They liked to describe their conception of idealistic socieites without bothering to account for the aspects of human nature that made their attainment unrealistic. Mises had a different approach, more utilitarian and scientific.

ArrowSmith September 30, 2011 at 3:54 pm

Try telling Kim John Il that he doesn’t know how to make anything and see how fast you end up fish food.

vikingvista October 1, 2011 at 7:05 pm

You have him all wrong. He’s just ronery.

Jim September 30, 2011 at 5:11 pm

Wikinomics was written backwards. It predicted that social software would flatten organizations, when it is flatter organizations that communicate better. You don’t need software to do that.

The consulting industry is a systemic issue; large bureaucratically hobbled, nameless, process driven companies are surprised they can not innovate. Spending $50 million a year on fads is small change if it produces anything at all, even if they have to get it from likable, talkative consultants who are still wet behind the ears.

Its like looking for a new accounting idea from the pyramid scheme called the audit industry. They couldn’t find fraud if it stared at them. Like their consulting friends, they’ve been able to remove pretty much any liability for ineffectiveness.

Does that make them a tax layer on society, like say, lawyers? If the economy tanks, a lot of professionals will find themselves doing nothing and no one will notice.

vidyohs September 30, 2011 at 6:13 pm

“and that authoritarian, top-down rule is not the source of order or progress.”

In an otherwise excellent piece, I can only wish he would have expanded on that statement, because I know sure as God made little green apples that idiots like muirduck and his sidekick IB will take everything else and distort it into a socialist screed that the cloud must be made compulsory if individuals chose not to voluntarily participate to the degree they think the individual should.

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