Societies cut small actors some slack. We don’t expect children, visitors, etc. to adhere to the regulations in the same way we expect those who are closer to the core of the community. There are plenty of reasons for this. For example the small actors are so numerous. We license plumbers, but we don’t attempt to regulate home owners who might engage in a bit of weekend remodeling. It’s not just cost, it’s also ethical. We have a lot of sympathy for those on the periphery. We are all on somebody else’s periphery. We have all been young, sick, stupid, etc. We know that the periphery is a source of innovation. We know that small actors are often the only ones who can afford to speak truth to power.

Where a society draws the line on it’s regulatory frameworks is open to negotiation. My town doesn’t allow home owners to do their own plumbing. I’ve a friend who bought a house from a dentist. The house features numerous repairs done with dental cement. I love that story. It always make me think of home dentistry, or home schooling.

The line between the well regulated systems in a society and the slack we cut small actors creates interesting market dynamics. Herbalife can outsource it’s criminal advertising to it’s small business partners. Ebay continually struggles with how to regulate it’s vast hordes sellers, some percentage of which are criminal and taint the reputation of the market it owns. UPS can abuse the parking ticket system.

The parking ticket system is particularly nice because the society negotiates a price for violations of the regulatory system. That price is set, in part, to cut the small actors some slack. When San Francisco sets the price of parking ticket I doubt they were thinking about a fortune 500 firm abusing the system and were more thinking about the typical citizen breaking the rule as they run into pickup some take out the bought from a small business.

Since these things are negotiable they shift over time and you can shop around for a venue who’s regulatory cut points serve your needs. Firms do that all time. Jane Jacob’s pointed out years ago that as firms mature they become less dependent on the pool of services that an urban venue provide and that in turn enables them to move to lower cost, less regulated, venues. That goes the other way, too. Walmart emerged in a near zero regulated environment. As it has moved into more regulated environments it sometimes adapts, and sometimes it uses it’s market power to renegotiate the rules.

The internet’s effect our our society is rife with these dynamics!

It changes fundamentally the cost of keeping an eye on the small actors and their behavior. It’s big-brother’s best friend.

It has also enabled the aggregation of contributions from huge populations of small actors. Google, ebay, wikipedia, open source, are only a few of the example of new institutions that it has enabled all of which work by plucking value out of the activities of small actors. You could argue that the bot-nets are another example of large actors coopting the hard to regulate small actors.
This posting was triggered by another example of a place where you can see a price placed on the license we grant to small actors to push the boundaries of the regulatory frameworks. I.e. this posting about how the music copyright holders are trying to tighten up their regulation of the small internet broadcasters. It’s a facinating case, in part, because some of the tiny broadcasters are just like the small businesses that herbalife leverages. Acting in the role of herbalife in this varient are the companies that offer to host the tiny (aka personal) internet radio services. I.e. consider this sentence “The minimum fee is $500 per channel per year. There is no clear definition of what a “channel” is for services that make up individualized play-lists for listeners.”