Lots of good observations in the comments to my post from a few days ago, Second Life, Economic Evolution and the CopyBot. Rather than try to address them in the comment thread, I thought I'd go ahead and bring them to the front page.

New World Notes writer James "Hamlet" Au argues:

Jamais, I think it's highly debatable whether SL is a scarcity-based economy, to begin with. If you visit SL and explore it at any great length, the immediate thing you'll be overwhelmed by is *stuff*, content of all kinds, high quality stuff, too. That's always been true. (Indeed, there are numerous "newbie junk yards" where clothes, weapons, etc. can be bought extremely cheaply, or free.) So I think it makes more sense to think of SL as a reputation, brand, or even *personality* economy, in which there's a high premium in owning content from the most successful, popular, and/or admired creators. Those are qualities that can't be replicated by CopyBot.

It's true that Second Life is more of a mixed-mode economy in toto than a purely scarcity-based economy, but the part of the SL economy that (a) has attracted a great deal of attention (due to its convertability to real money) and (b) CopyBot attacks directly is one where there is a "high premium" for original content. Nobody is going to get upset about the use of CopyBot to duplicate the "newbie junk yard" stuff. Some people (and it may be a small minority) are getting upset precisely because the application seems to allow the kind of duplication that both reduces a revenue source and undermines the reputational glow of ownership of particular items. It's human psychology -- part of the cool of having a special object (or whatever) comes from it being unusual and not commonplace. If it's not only (potentially) commonplace, but there's no obvious way to distinguish an original from a knock-off, it loses its special cool.

What's scarce in this economy isn't the product per se -- it's just bits, so there's no marginal cost of making a million instead of a dozen -- but that coolness premium. That's what people are paying for. This app makes it possible for an individual to gain the reputational/cool benefits of particular purchased content without paying the economic cost, while simultaneously shortening the period during which the content will be unusual (and thereby attractive). Designers who can put out new ideas quickly will do relatively well in the resulting economy of novelty, while designers that have counted on ongoing sales of existing designs to build up their in-game bank accounts will suffer.

Taran Rampersad (who wrote for WorldChanging for awhile, and maintains his own blog at Knowprose) observes:

"CopyBot alone may not be the doom of the current model of the Second Life economy, but it's a sign that doom is in the offing."

What?! Seriously, Jamais, there is no premise.

I don't want this to be a debate about the details of CopyBot specifically; my point isn't that the CopyBot application in and of itself is going to destroy SL. It's a broader category of threat, and a narrower target. CopyBot may be shut down, but the larger issue will persist; at the same time, it's not SL as a whole that's in danger, but a very particular way of making money within SL.

Generally speaking, systems that make it possible to make effectively-free duplicates of content make economic models predicated upon the relative scarcity of that content (whether the content itself, or the coolness surrounding the content) nearly impossible to maintain. If your industry is based on selling music, systems that make it effectively free to distribute copies of that music are a serious threat to your existing economic practice. This doesn't mean that new models won't emerge, or that it's impossible to make money (dollars or Lindens) in a free-duplication world, only that economic practices that assume persistent scarcity are doomed.

Drawing this back to my original larger point, this aspect seems intrinsic to "bit-based" economies, where the products being bought and sold (or traded...) exist as digital information. That's what the music industry found, what the movie industry is wrestling with, and what served as the key catalyst for the development of new institutions such as the "Creative Commons." Arguably, the emerging world of commonplace fabrication systems (leading to nanofactories or whatever) seems to be one in which atom-based (i.e., physical goods) production takes on characteristics of the bit-based (i.e., information) world. This strongly suggests that we will see similar fights about duplication of previously scarce products, and similar threats of traditional economic practices being undermined.

What happens in Second Life with this situation is important, therefore, because it will serve as a possible model for how the fabrication future will deal with abundant duplication. My interest isn't in seeing SL market models collapse -- my interest is seeing what comes next, and how people operating in this economy of novelty and abundance learn to thrive.