Toward an Economic Sociology of Online Hacker Communities

There has been a great deal of concern with two types of hacker activity: information sharing in online discussion groups (via forums, Internet Relay Chat, etc.), and stolen data markets (such as credit card dumps and billing information). These new forms of underground economic activity deserve scholarly attention in the form of socio-economic analysis, since they generate both market-exchange relations and public-good sharing systems that are independent of state regulation or private-sector firms. This paper unifies the analysis of these two types of activity by understanding them as two varieties of economic organization.

We make use of microeconomic theory to map these hacker activities as economic distribution mechanisms, while also pointing to how hackers have developed social solutions to the economic problems. We combine thinking from economics (on two-sided platform markets, and on local public goods) with that from sociology (emphasizing networks, fields, and practices) to theorize hacker activities. By means of a detailed review of empirical studies of online hacker behavior, we demonstrate how online hacker communities use social trust-creating mechanisms, reputation, internal regulation, and networks to solve problems identified in our economic analysis. Our argument is that the type of economic organization in these online hacker communities reflects the potential economic problems (adverse selection, moral hazard or free-riding) that the participants in the community can face, which in turn leads the participants or forum administrators to take suitable trust-creating mechanisms (among which are banning certain participants; rating the quality of the goods and/or participants’ efforts; escrow services) that directly affect the quality of social communication within the platform. As a result, while stolen data markets allow entrance to the community to people who do not define themselves as hackers but who are interested in hacking activities, the discussion forums generate communities that are defined by a hacker subculture. This discussion forum subculture fosters the feeling of belongingness and is characterized by a social hierarchy regarding the hacking talents of the participants.

Our approach to theorizing and analyzing the organization of underground economic activities of hackers is also a call for sociologists to pay closer attention to the economic models of markets despite their underlying rationality assumptions. The field of economic sociology has innovated crucially important sociological concepts and approaches while often rejecting out of hand the kind of microeconomic thinking that we would like to bring in. Economic models are able to touch upon potential characteristics of the underground and informal markets we study due to the capacity to act rationally of market participants. As we demonstrate, sociologists can contribute realistic reformulations of these models by incorporating the role of emotions, social and cultural interactions, and networks.