Slashdot Mirror
Economics and Open Source Projects
david_christie writes "Dan
Gillmor has a piece on the economist Yochai Benkler's
paper "Coase's Penguin, or Linux and the Nature of the
Firm" which examines open source projects
asan example of an emerging general model of economic behavior that is neither market nor company based. A previous version of the paper was noted
in slashdot back in October, but it's been revised for upcoming publication
in the Yale Law Review and is well worth a second look. Benkler attempts to
explain why open source projects succeed, without falling back on theories about
the special nature of software projects or hacker culture. He suggests that
more general economic principles are at work, which are displacing the
traditional motivations (market prices and employee relationships) that
economists use to quantify individual behavior. If he's right the open source
model could spread to other forms of creative work where the output is
information or culture (music production comes to mind). The author thinks
deeply about the information flows characterizing collaborative projects like
free software development ("commons-based peer production"). That distinguishes
this paper from the usual economist mumbo-jumbo about price points and such.
Like Larry Lessig on the
legal side of things, this is a guy who gets it and has thought deeply about how
his field relates to it."
But then, most open source programmers are, I would guess, full-time programmers. Which helps pay for all those neat toys. None of the professional musicians I know (and I know quite a few, session & orchestral players) would record music and give it away.
What does that leave us? Amateur musicians like myself pimping their home-grown stuff. Which in some cases will be as good as or better than the pros, but the vast majority of it will be as cruddy as all those non-updated open source projects on Sourceforge...
Game dev and music blog
Forbes has a great article looking at OS businesses as the market faces current tribulations. They objectively look at the financials and give a good overview based on history and performance. They disclose upfront that they have a feed from slashdot.
A very good read, and it supports the partnership that VA and Forbes have made.
If we don't fight for ourselves no one will.
If music artists started their own OS projects. Imagine a world where music was free, to make, to listen to, to change.
I remember reading/using an official music book that had the all the songs ever recorded by Stan Rogers (a Canadian folk musician). In his forward, he said feel free to learn these songs, and play them as you want, in the great tradition of folk music. He even ended with if you find a better way to play them, let me know.
I hope the OSS model does in fact become common-place in other parts of culture and public works.
"The large print giveth, and the small print taketh away" -Tom Waits
Open source is the definition of Market Economics. It does not need its own theory- it proves the Marekt theory in the most divergent context imaginable.
If you have an idea and you open source it, you get free engineering. People contribute their engineering and get the utility of yours and others in response. This is a free exchange of value in a free market.
IF your terms suck, or you change direction in mid stream, the others are free to leave your project and start their own, or go along with you if they like your direction.
Linux is a consistant linus kernel because people like linus's direction-- not because he "owns" it. That is direct market feed back to linus.
If you are selling your product to people who are contributing nothing but money to the process, and are just using it, then you are in the traditional software model. but Open source works here as well-- you can incorporate open source into your product and leverage others work to make more money off of your work. At the same time, the MARKET FORCES (not the GPL) will force you to contribute your improvements back to the community. And finally, you're not profiting unfairly from others work because the others contributed freely, and were compensated... and also can sell the results in the market place against you, so if your product is PURELY reselling open source, then you'll loose the inevitable price war-- its hard to beat free.
If, however, you actually add value to the product, on top of the open source, then you CAN charge for that value and everybody wins-- your customer gets a better product with more features and testing than you could otherwise do yourself, the other os developers get the benefit of your improvements and you get more money for selling a better product that cost you less to develop.
This is all free market economics.
The differnce between open source (free market) and communism is that under communism you are forced to work for the state against your will. Here in america, we are %50 forced to work for the state against your will, but they cleverly let us work for private companies and only took the product of half our work in taxes (fees, etc. And yes, last time I did my taxes, my total payments to the state were over %50, and I'm in a medium tax bracket.)
Even with the GPL, however, you are not compelled to work for the "State"... you can choose to not use the GPL for your code, or go make code to replace whats' in the GPL, or just use the gPL code and not change it. ITs a free market of licenses.
Since the government isn't (Yet) regulating software, the emergence of the open source movement proves that free markets work-- whenever one company gets to monopolistic, under free market theory, competitors emerge. Lots of competitors have emerged to Microsoft, but Open Source is the first one to really sustain a battle and change the terms of the war.
As long as the state doesn't mandate Microsoft control (As they may wit palladium) the free market will prevail and the products that offer the most utility value will succeed. For a long time Microsoft was able to distort the market with anti-market means, and also provide sufficent value to have locked up much of the market--- a great example of the market under a lot of stress.
But the emergence of the free market, the resurgence of a variety of MS competitors- from Sun to Apple to IBM to me, shows that the free market does work-- even with the governments help for microsoft, the market is beating them.
Not financially right now, but in terms of brainshare and technology, MS is currently loosing. In order to win, or even survive, they will have to deliver better value for their prices... and since open source software is free, the competition is stiff.
So, no, there isn't a new theory needed-- The Free market works and has been validated, yet again, by opensource. (So stop voting republican or democrat and become a libertarian already.)
Yeah, and you guys panned the ipod too: http://apple.slashdot.org/article.pl?sid=01/10/23
Coase described the size of the firm within the market, and claimed that with competition it would gravitate to the most efficient size.
So if one can call, for instance, the Linux kernel folks a firm, their fixed costs are fixed, but their marginal costs are zero. (barring Linus's scaling issues of course).
Marginal costs being the added cost of each extra unit of "firm size".
So organizations will scale to be quite big over the 'net because of low marginal costs.
And this is what we have witnessed.
I hope the paper has graphs. I like graphs.
-b
Anytime that economists start to see that maybe money/greed isn't everything, I get the creeps.
Which can only mean that asteroid will hit in 2019. Oh well, still 17 years left to party...
Open-Source doesn't really attack corporatism as it does attack Mass-Production Media.
Software, Music, Movies, Books, etc. Are all money makers based on the fact that they can mass produce a product that people will pay for. On an individual basis, the $16 or so made off of a single CD, book or movie doesn't matter unless they can product millions of these $16 products and sell them.
With the internet though, it has opened the possibility of distribution of IP products for free or near free prices. Thus the business model of these IP companies is not applicable anymore without forcing the public to play by their rules by legislating laws into place.
The Open Source Movement has a weird effect of showing what happens when people can produce the same products and share it with everyone else, allowing them to improve on it. Before hte internet, when I coded a small program I could only share it among my close friends easily. Now I can share it with everyone, and if it is useful, everyone can contribute to it.
In a way it is like the folksongs from way back. Somebody thought it up, and shared it among his friends and family, or in performance, thus making his money from his actual work and not a 'photocopy' of his work. Then other musicians got it, and would play with it, producing even better music. Some of the great classical pieces are basically open source folk songs that have been improved upon by the masters. Since folk songs could easily spread by word of mouth, and didn't cost anything to spread, these songs became the equivalent of Open Source Music. Everyone was able to enjoy it, and no one had to pay anyone for the right to hear, see, learn or play the song themselves.
Now, we can pass programs, books, poetry and more using the internet and allow others who may be better (may be worse) then us to improve on them and create a better product in the long run. It's not a new economic model, it's just an old one coming back in a new form.
I heard once that people don't like change, they like things to remain the same as long as possible. I think it would be more correct to say people with power and money don't like change, and will go to great lengths to prevent it.
Some interesting thoughts.
~ kjrose
There's no need to mess with economic theory to explain Open Source. There's nothing new there. Each programmer, as a rational operator, contributes for a number of possible reasons. For example, they may value creative control and consulting opportunities more than they value a salary. In other words, someone who waits tables at night and codes for free during the day isn't necessarily a radical leftwing crackpot--as long as they are doing it for the future hope of consulting $$$ and/or the right to maintain control of their work (witness the not insignificant number of people who have un-Opened their work).
Corporate sponsors have rational reasons too. IBM doesn't support Linux to join the lovefest. They think it's better for some applications, they want to offer consulting for it, they don't like being tied to a proprietary vendor, etc. Any contributions they make are made because they realize it's the price of doing business under the Linux model--they would lose business due to bad PR if they didn't.
As for software being "special", there isn't any need to appeal to such an idea. Coffee is a good example. Generic not-so-tasty coffee is often given away in waiting rooms, hotel lobbies, places like that. Same deal with those little mints on pillows. Same deal with free samples at the grocery store (I've known people who make a meal of free samples on Saturdays at Fresh Fields). In all of these cases, software included, there is a rational economic model that has given rise to support for some free riders. People still have to pay for these products. The payers have deemed that they are better off paying the free riders, much as society has decided that some taxation is better than none.
The OSS model could be regarded as a "natural tax". Once again, there is nothing irrational about it. Advocates just have to realize that neither model is "superior". The free market sometimes moves us towards paying for goods directly. Other times it moves us towards indirect payment (somebody pays for OSS, because TANSTAAFL).
Of course, I doubt that advocates will stop advocating. There is a demand for politics just like anything else, and they supply it. It's just that I hate to see it when the supply-demand for politics pushes the supply-demand for other things out of equilibrium.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Perhaps we're seeing the reemergence of a cottage industry in software development.
Back in previous centuries, whole villages of craftsmen and women would do finishing work on mass-produced pieces that were then sold by a large retail company. The garment industry still operates this way in many instances.
As long as software remains a craft rather than a formal engineering discipline (it has elements of both, but each software project is pretty much unique to this day), then the economics of software will probably most resemble the crafts industry rather than industries based on mass production.
If you post it, they will read.
The Economist has just put up an article about how Open Source's future in the world, and how bright it looks.
Hmm. Not really applicable to open source though, is it? I'd agree that this is the conventional model. However, no-one ever gave anything back in the first place to the developer, so whatever their incentive to start writing was - that incentive still exists.
Cheers,
Ian
No, this is wrong...
The freeloader problem really manifests itself only in the Tragedy of the Commons. That is, freeloaders are only a problem when resources are scarce.
If we assume the marginal cost of distributing free software is 0 (which is probably true for the developer as there a many sites that will mirror popular software distributions), then why does it matter if 100 or 1000 or 1 million people download it?
I think most open source developers would be happier to have a popular application with 10mm freeloaders, rather than pulling a Bill Gates and bitching about all the ungrateful pirates out there.
The real viability issue for open source is whether it is possible to maintain a stable base of developers for an application -- not the number of freeriders.
I seriously doubt that we are ever going to have a completely "economic" explanation of open-source. I can't see an integrated explanation of the phenomenon without significant reference and fallback to psychological/ego factors.
Of course, many open-source advocates are wont to believe that this proposition is false, because to believe so is a tacit admission that some (but not necessarily all) part of their motivations involves the (some might say shallow) gratifications that comes for leading something, or from having their name "known" and praised, or even, from following someone else - it's an admission that we crave peer-approval/recognition. Now, you can assign economic utilities to this sort of peer-gratification, but that means the economic theory MUST fall back on a psychological theory.
Just look at the case of Slashdot, which is discussed at some length in the paper. There's NO way to explain why people contribute lengthy posts from a purely "economic" viewpoint and without reference to very subjective terms. You can't get a job or contracts because of your insightful Slashdot posts. You can't make business contacts through Slashdot posts.
What would happen if Slashdot were anonymized, or if changes were made so that people couldn't receive gratification from moderation ?
Imagine that Slashdot started running threads, sorted and nested as they are now, but with NO moderation totals and NO comments ("Funny/redundant/Interesting/etc"). I bet that posting would become much less popular...but I can't see how you could explain that without psychological reference. It is clear that many if not most posters derive significant psychological gratification from getting the "pat-on-the-back" of an up-moderation and "Interesting" tag...But is there an economic explanation ?
Similarly with the notion of karma. I've gone on too long already, but suffice to say I can't see how you can explain how carefullly many users tender to and monitor their karma without capitulating to the notion that they derive significant gratification from peer-approval.
We may seem shallow for it, and hence we might not want to believe it, but I think it's true.
Economics is not the study of money. It is the study of the flow of resources and value through a system. Early economic systems had nothing being sold - things were given or traded, and in some gift-based cultures you got nothing tangible in return. OpenSource has a definite economic structure and flow of resources - they follow the interest.
Actually, I would make the argument that OpenSource-type movements are only really possible in an already mature and vibrant economy. Could OpenSource have evolved without this strange commodity we call "free time?" Most of human history was involved with very few activities: eating, sleeping, reproducing, fighting, and running away from things try to kill you. Only in the last few centuries have societies evolved with "free time" built into them. Once you have free time, you have time to think about what you "enjoy." Once you know what you enjoy and some extra wealth lying around (either in the form of time, currency, or resources), then you can pursue the things you enjoy. Only in this final state can OpenSource (as it exists today) really work and thrive.
Funny, if my hypothesis is correct, OpenSource is not some anti-American (or anti-Liberal Capitalist Democratic Republic, for those of you outside of the USA) conspiracy, but rather a natural outgrowth of our society.
While a useful current metaphor for the difficulties in managing a shared resource without it being exploited to extinction, the original "tragedy of the commons" was a rationalization for the walling off (actually hedging off) of common lands in Britain.
Basically, your local potentate would do a favor for the crown, and receive a grant of lands that were previously "common". The first thing the new landowner would do was grow impassable hedges around his new lands, effectively walling of a 500-2000 acre chunk of the commons. The concept of the "tragedy of the commons" was invented as an excuse to take the land away from those commoners, who were "obviously" not going to use it effectively anyway.
As more and more land was removed from the commons (by the aristocracy, *not* despoiled by commoner overuse), problems of resources to feed the populace arose. But the overpopulation problems did not start until well after much of the prize real estate was placed in private hands.
So, something to think about when you hear "The Tragedy of the Commons" cliche trotted out--the concept was invented to blame the prior holders of the common for an economic crime being committed against them. Kind of like how the internet needs to taken away from its creators and placed in private hands, because the current situation is, well, too "anarchic".
Remain calm! All is well!