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."

Comments

Open-source music?

[MaestroSartori]

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...

Re:Open-source music?

[a_n_d_e_r_s]

Actually most professional musicians does not get paid by recording CDs - they get paid by performing music at clubs and other venues.

I.e. basically they have a salary paid by others and not by people buying their recorded music.

It's actually very few people who make money selling records - most of them actually work at the record company and are not musicians at all. They are mostly managers, agents and record bosses.

Re:Open-source music?

[Damek]

You know, people are always saying that the problem with amateur (i.e. non-corporate) music/art/software/whatever is that the vast majority of it is cruddy. Pick any artist from MP3.com at random, or any project from Sourceforge at random, and chances are the music will be pretty cruddy, or the project will be lifeless...

But you know what all this is? It's called CHOICE. And it has always been there. Corporate sponsorship of creativity and ideas makes it easy for people who don't like to deal with choice to find a couple of good things here and there. But it doesn't particularly foster the best creativity or ideas, only the easiest to market. It doesn't make the world a better place, it only makes shareholders and CEOs richer.

Choice is good, but it does take effort to appreciate.

As the parent acknowledged, in some cases amateur stuff is as good as or better than the pros. People have become so used to being force-fed their ideas that they can't believe that the good ones might also rise to the top in a truly free idea market. But they will - in a free idea market, without corporate sponsorship, the most visible art and ideas will be the ones you hear about most from other people, some of whom you will trust more than others. Much like internet memes, a good artist will quickly and easily become well known in an absense of corporate interest. Unfortunately, as things stand now, corporate interests drown out amateur efforts.

Re:Open-source music?

[SirSlud]

Making music, is, by definition, and Open Source process.

Open Source. Free as in speech, not free as in beer (or free as in CDs, if that helps.)

Please know what you are talking about before you comment on it.

It's not about giving it away, its about your music being trasparent. Your musician friends are Open Source friendly whether they like it or not - I can go to a show, transcibe their music, make some modifications, alter it. Now, I can't sell it, but that doesn't mean that I'm not able to know how the music was built. I can find out just by listening to it.

Compilers are like (neccessary) noise-makers .. you obfuscate the 'sound' of the software such that I can't transcribe it and use it as imput/inspiration to another creative work. In music, the 'source' and the 'compiled version' are usually, in practice, synonymous.

And the reason your musician friends dont give music away for free is because if anybody gave all their product away for free, nobody would make a living. Duh. That doesn't mean that they should try and prevent people from knowing how their sound/songs were built, because that kind of information is what *drives* culture. No artist has ever created anything original - art is just a history of creative "patches" to others' work.

Same ol' economy, new face.

[MarvinMouse]

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.

No Need To Turn Economic Theory Upside-Down

[istartedi]

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.

Re:He forgot something basic

[merkel]

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.

Slashdot

[tmark]

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.