Algamics: The Dynamics of Gift Society

Robert Levin wrote a piece about what he calls Algamics, i.e. the dynamics of gift society. He points out that it is neither new, nor a zero-sum game such as the "market" as described by conventional economics. In related news, Jakob Kaivo has written a Freshmeat Editorial for newbies about chipping in, and giving back to the Free Software Community.

Comments

A subset of the future?

[Jon Abbott]

I think that the free software paradigm and things like the Internet in general can only lead us to an even higher plateau -- free information for all. Imagine people across the world pooling their minds together to create free books, such as Calculus texts for college or books on how to make electronic devices. These documents could be peer-reviewed, creating a solid, reliable source of information, just as the "open source" model does for software. This information would be written by people who were highly interested and/or experienced in the field, just as free software generally operates.

You may think I'm crazy, but look at some of the free software projects out there today -- look at the KDE or GNOME projects!! They're creating a *large* collection of software to make a good interface, that takes a LOT of effort and teamwork. Why couldn't the same thing be done for information in general?

That's what I'm curious about. I'm hoping that in the future, people who are interested in topics will pool their thoughts and abilities together to create free information for all. Think about it: if you had one good, free Calculus book out there, wouldn't many people use it? Why would students pay over $100 for a decent Calc book when you could get the best one for free?

Of course, you have a problem of document portability, but that's simply a minor technological inconvenience for the time being. With further advents of technology, such as portable document viewers (slimmed down laptops, perhaps the shape of a clipboard), that problem goes away. The technology is there, we just need to harness it.

Additionally, this free information would be worked on globally, making international cooperation more widespread and successful. I don't know about you, but I find that exciting. The more the world works together on things, the more we will advance as a global society.

Here's a quote that comes to mind:

"You may say I'm a dreamer, but I'm not the only one.. I hope some day you join us, and the world will live as one."

Free markets aren't zero-sum.

[nelsonrn]

WTF is he talking about?? Free markets aren't zero-sum. They're always positive-sum for both parties, otherwise they won't engage in the transaction.
-russ

Zero sum???

[mikec]

There is nothing "zero sum" about a market conomy. Where did he get that idea? Game theory is not economics.

Econometrics and Social Cost Pricing

[sinator]

while(!Slashdot.Readers.economic_knowledge)
{
printf("
I think a lot of confusion vis-a-vis viewing the economy as "Zero-Sum" comes into play if you only view money as the tried and true measure of all things economical. I get $X via my labor, and I pay $X for some widgets, and from the perspective of the market, there's been a zero sum. Or so Sengan would have you believe.

Even this is wrong, taking into account inflation, money demand, and the interest rate. Even if money is our only benchmark, the value of money changes. It's so wrong that there's an entire branch of macroeconomics studying money market fluctuations..

Knowing that economics is not* a zero-sum game if we just considered money the benchmark, let's move on to consider social cost pricing**. The intrinsic worth of a transaction is based on:
1.how much one values the object
2. the social impact of having it produced, consumed, and changing hands
3. and various X-factors which I don't feel like listing

In short -- Comparative Advantage is what matters in any given transaction, not Absolute Advantage. A common analogue would be: If I had all the gold and you had all the hamburgers, sure, the gold is more valuable than the hamburgers normally but King Midas has got to eat sometime!

This isn't even taking into account that technology, capital goods procurement, and an expanding labor market increase production as well. Open source fits here quite well, i posit. Nowhere do I have to pay you for your labor in creating Open Source Software. Presumably, the social impact of using this software pays for itself. (No Microsoft Tax on OEM hardware if Linux becomes mainstream, that sort of thing.) On the flip side of things, if the social impact of totally free software becomes cumbersome (net traffic goes to a standstill every time a kernel is released) then the market will attempt to seek a solution (people will fork out $5 for CD-ROM of Linux).***

It is true that no one can truly know everyone's preferences, or measure how much impact social impact is.**** That's why people are tempted to view economics solely in terms of money. Do not be lulled into this trap, however! Armed with basic axioms of consumer preference and an entire branch of statistical economics -- Econometrics -- we can massage cross-sectional and time-series data to infer preferences. Such preferences deny a zero-sum game.

Besides letting us use phrases like "running a white test on a heteroskedasticity-consistent variance-covariance matrix in order to run a robust first-order regression,"***** econometrical analysis allows us to measure the cost of objects in terms of their correlative effects on human behavior. Here's where the zero-sum idea breaks down...

A zero-sum game wouldn't even need a regression line. Because there is no net gain, the correlative impact of X on Y or Z is nil -- do whatever you want, you're going to end up screwed anyway. Given the fact that there is enough variation in human economic behavior to require probability and autocorrelation tests, it's fairly self evident that X has an effect on Y and Z and vice versa.

If X and Y and Z have correlative effects on each other, it means the following:

1. Said economic transaction is not a zero-sum game, because the elements are not independent.
2. Non-Independence means that the variables are covariant.
3. Covariant variables tend to follow one or more of the Gauss-Markov assumptions about spherical disturbances ******. This means that the changes are stimulated in part by "outside forces," known as "Error terms," "disturbances," etc.
4. A zero sum game has no disturbances because there is nothing to disturb.
5. Technology, capital gains, political climate, social change, etc. count as "Disturbances" if they are infrequent or weak enough, else they count as variables of their own. (in which case they are covariant as above)
6. I enjoy saying the phrase "heteroskedasticity-consistent variance-covariance matrix." =P
7. Q.E.D. (sorta)

Discuss amongst yourselves. :)

Whew. That was quite rant.
\n");
}
/* sorry folks, I needed to let out some steam =) */

*(and probably never will be, except in peer-to-peer oligopoly transactions)
**(Campbell and Pereira, 1998)
*** Will the software still be free? Yes. But general procurement will not be. Of course, I have yet to find a person with free Internet access for those downloads...
**** Not 100% true. There is such a thing as experimental economics. Most people's preferences fit within Additive, Leontiff, or Cobb-Douglas utility functions (for substitutes, compliments, and not-quite-either goods respectively)
***** (Pindyck and Rubenfeld, 1997)
****** Even if they don't, they follow the assumptions if you do a robust regression. A robust regression replaces the linear approximation of trends with a taylor series expansion of an nth-degree polynomial fitting the data.

On NO scale are free markets zero-sum.

[Dictator For Life]

You don't understand the nature of an economic transaction. I have money, you have goods. In order for a transaction to occur, I have to value your goods more than the amount of money you want in exchange for them. The same is true in reverse: you have to value my money more than the goods you are offering for sale.

If this doesn't happen, there's no sale.

This is still the case on any scale. The only time this appears to be false is when governments intervene in the markets, thereby distorting prices and making it more difficult for buyers and sellers to arrive at mutually acceptable prices. But even then you have to keep in mind that regulations of various sorts -- and complying with them (or not doing so) -- constitute additional costs in any transaction.

Even so, it is just not true that free markets are ever zero-sum. It won't happen. It can't.

Current Patent Court and profitability

[Col. Klink (retired)]

One of the more common laments over patent law has been over corporations who hold a patent and have no intention of creating a product with it. In some cases, they simply don't want the competition. In other cases, they find that they can make more money simply licensing the patent (and even then, they do so in a limited fashion). Finally, some corpations simply don't have the resources or vision.

In the '60s and '70s, more than 70% of litigated patents were declared invalid. But since the 1980's when Reagan established the Court of Appeals for the Federal Circuit (CAFC, the first circuit court with national jurisdiction) the court has been handing out HUGE rewards to patent holders (eg Polariod won an $873 mil. from Kodak). In the current IP climate, owning a patent can be extremely profitable without even developing a product (Honeywell won $93 mil. from Minolta over a patent Honeywell had licensed to Minolta; Honeywell claimed Minolta used a version of the patent in the Maxxum 35mm).

Many firms who hold patents just don't have the vision to see the products that can be created or the ability to market them. Xerox PARC jumps to mind. Many attribute the failure of PARC to the fact that Xerox was a copier company and had no interest in marketing computers.

Because of the potential profitability of patents, firms will patent everything in site, even if they don't have the resources or motivation to develop these inventions. A single entity just doesn't have the time to produce hundreds (or even dozens) of new products every year. They may not "set out" to limit innovation, but that is the end result.

The success of post-it notes was a fluke. Marketing didn't know what they had (the central premise of Dilbert). The engineers discovered it by accident, and realized what they had. They created a bunch of pads and gave them to the executives-- an instant success. When they ran out, the top dogs wanted (NEEDED) more and were told by the engineers that it wasn't really a product. That's what got the ball rolling...

Even the most ardent supporters of patents admit that there is a tradeoff here. Allowing patents, they feel, gives incentive to motivate. But they also realize that they are creating monopolies and that monopolies are, in general, bad for the economy. They don't have competition, and therefore have lost some incentive to improve their products (that does NOT mean that they've lost ALL incentive).

Hold up a second here...

[FallLine]

While it may be true that a company will 'hold back' certain technologies on occassion, there are normally reasons for it beyond just the desire to maximize short term profits. Additionally, it is not as if their patent on it really holds advancement back for any extended period. IBM owned the PC industry, Compaq sliced and diced them and came up with compatible machines.

Earlier in this thread, someone pointed out that GM has had efficient internal combustion engines for some time, but didn't bother introducing them until the 1970's. The fact of the matter is that demand for efficient machines before that 1970's didnt really exist. Only when the oil crisis hit did people really begin to think about it. My point is basically, that even if this technology was 'open and free' it wouldn't have been implimented anyways. You simply can't force people to use it. If it were 'open and free', there wouldn't have been any incentive for the auto industry to invest the millions that they have in new and better ways.

Furthermore, many times the latest advancement or tweak isn't really in the interest of the greater population. There is a thing known as standards. While IBM did not get everything 'right' or 'fastest' when they created their PCs, they did set a standard. Eventually, Compaq reverse engineering their bios and was able to replicate the entire platform. It essentially became an 'open' standard. This has led to tremendous advances in personal computing. Even today, there are faster platforms and machines nipping at the PC industries heels. Yet the world sticks with this standard. While I agree that there are many things wrong with it, I do not think we would be aided in any way by an industry which only follows the latest and fastest. Anyways, these alternative platforms keep the PC industry on its heels.

The fact of the matter is that this withholding of technology doesn't just happen in commercial industry. Witness IPv4 vs IPv6. IPv4 has served us fairly well, but IPv6 is really the better protocol. Yet IPv6 has not been implimented. Linus has frequently rejected the latest and 'best' techniques in favor of the tried and true standard. You can only reinvent the wheel so many times before you begin to break the greater machine.

I would also go on to point out the fact that "Open Source" is not an "Open Standard", many people seem to think it is. This is simply not the case. Except for the internet RFCs, there are very few 'standards' in the open source world that seem to be fully met. The Linux world has yet to agree on a single widget set or desktop for X -- all of these are open source. There are more examples -- but I haven't thought of all of them. One thing I'm sure of, is that if Linux does really take off, we will see problems like these grow(amongst the open source community). I would say it is Linus' common sense and his control over the Linux kernel that has made it a success.

We need documentation.

[jerodd]

This editorial hit the nail on the head. Documentation is the most critical need in the freed software community. It's the GNU project's most critical need.

Case in point: I'm trying to use the mailman mailing list software with Exim. It's been just no fun. I'll be able to figure it out, but it's going to take some effort.

You can be sure that once I do, I'm going to write up a README.exim and submit it to the manmail maintainers/developers, and perhaps add an FAQ entry.

Writing is not hard, and it really helps.

Agalmic is a poorly defined subset of economics

[PhunkyP]

From what I understand of the article, the author it dealing with a subset of economics, specifically with the economics of a gift culture. As was mentioned in a prior post, economic analysis of gift cultures and voluneerism is not a new thing.

The author's premise is that economics is the study of the allocation of scarce goods. Adam Smith defined economics (or polictical economy) as the study of "the nature and causes of the wealth of nations." Since then, the focus of the dismal science has not changed. Economics is concerned with how nations, or other arbitrary divisions, produce and increase wealth. In its basest terms, it is the study of rational decision making given certain conditions. It is always assumed that the decision makers are rational, and scarcity is nearly always included as a condition of the environment.

So scarictiy is a common condition (much too common for our tastes), but it is by no means the focus of economics. Economics usually deals with goods and services, because for most cultures that is what the culture consumes and that is how wealth is made. Good, by their nature, are always scarce to some extent. Services are limited first by the time of the individuals that provide the service (there are only so many hours in a day) and by the number of people available to perform the service (not everyone wants to code in assembly).

In the US we are seeing the developement of new kind of economy. We have moved from the manufacturing oriented Industrial age to the technology driven Information Age. However, the same economic principles will still apply. Reguardless of how much you 'marginalize scarcity' (a rather dubious concept) it will still exist. If you keep taking a small portion away from something, you still have most of it left (see Zeno's paradox's for more on that).

We are left a poor attempt at an economic analysis of a gift culture. The author is correct that with the case of free software, you can give away as much as you want, and still have the same amount of free software. This is because what is being distributed is neither a good or a service, it is intellectual capital. Its only depreciation occurs as the the intellectual capital becomes more widely used/known. Even then, the inheirent value of the intellectual capital is not changed.

Think about it this way, do the works of Shakespear gain their worth from their scarcity? Of course not! Their worth is determined by their quality. Their lack of scarity is a result of their quality, not other other way around.

Such is the case of any idea. Its worth is determined by its merite. The primary reason that Linux has gained any ground on proprietary Operating Systems is not because it is free, but because it has greater merit. The free price has allowed it to overcome the FUD propigated by those with a vested interest in the the longer established Operating Systems.

There are costs to Linux, and other free software for that matter. If you chose to use linux, you are chosing not to use another Operating System, and that is an opportunity cost.

I believe that intellectual property economics is a good model to start with when dealing with the economics of the free software (or open source, or copyleft...) market. What must be kept in mind are the fundamental laws of economics. They are tried and tested rules that have shown to explain human behavior in many circumstances.

We are all acting in our own rational self interest, reguardless of how irrational that may appear to everyone else. Begin here and you start on a strong foundation.


-Josh
"In all things, moderation"

Misrepresenting Agalmimcs?

[Darkforge]

While sengan described the conventional economy as zero-sum, the author of the Agalmics document doesn't. Here's what he said instead:

7. It is positive-sum. In games theory, a 'zero-sum game' is one in which one player's gain is another player's loss. Conventional economics often describes zero-sum games. When two suppliers compete for the dollars of a single customer, or when two government agencies compete with each other for fixed budget dollars, a zero sum game is played. A 'positive-sum game' is one in which players can gain by behavior which enhances the gains of others. Efficient agalmics is a positive-sum game. For example, when a free software programmer gives his source code away, he gains a large population of users to report bugs; the users gain the use of his programs. By awarding the other players points, the player gains points.

In addition, the "real economist" who posted earlier is right: this is nothing new. But then...

8. It is not new. Gift cultures have existed during much of human history, and other, non-gift cultures have clear agalmic influences. Religious communities have engaged in agalmic behavior, as have governments, businesses and individuals. Charities, standards organizations and trade associations often act agalmicly. It may be argued convincingly that civilization itself is an agalmic activity.

I think it's clear that several posters (I'm not naming names) neglected to read any further than sengan's incorrect summary and the title.

-Dan

Leveraging non-scarce resources to preserve scarce

[TheDullBlade]

What free software is really about is the realization that the most generalized programs (OS's and compilers, for example) are like learned information, not mechanisms. Hackers are equivalent to researchers, and the time and effort of brilliant researchers is the scarcest resource of them all.

We only got one Einstein, one Newton, one Leibniz (list ended arbitrarily here). We can't make them any faster than a few per century. If somebody locks that information up in a vault and uses it for private purposes only, it is a huge loss for humanity.

If UNIX is a proprietary operating system with a huge license fee, none of the hackers can use it at home, and none of them can distribute the UNIX specific programs they make. This is a brutal blow to the technological development of humanity, perhaps as much as physics textbooks being similarly restricted to a few thousand copies hidden away on the shelves of engineers.

Writing and supporting one Linux is much cheaper in terms of sparce developer time than supporting two dozen proprietary OS's, and giving it to everyone who wants it provides far more value to humanity and ends the whole mess of writing new ones.

Imagine a tractor developed around the turn of the century, like a modern tractor but with a button you can push that instantly creates an identical tractor out of thin air at zero cost. Naturally, you'd expect every farmer to have a tractor. But what if the creator of the first tractor (or his employer) built a factory in which the tractors are created in the same costless manner, but then workers pry out the replicator button before shipping them off and charged the price of 10% of the land it could work? Or worse yet, the tractors are sold under a no-replication licence, and anyone caught replicating a tractor is dragged off to jail, regardless of how many mouths it would feed or hands it would free. Well, you might expect war, but the tractor company would become very wealthy and powerful very quickly, and all the tractor owners would leap to protect their competitive advantage. You would certainly expect other people to expend the huge effort to make their own tractors from scratch, but most of them would also want lots of money and would follow the example of the original. Inevitably, though, those farmers who could not afford to buy tractors would pool their resources and remake the tractor themselves, and would not, of course, place restrictions on themselves or the friends they replicated it for, because they want maximum value and they want to give maximum value. Humanity would then forever have tractors, and would enter the post-agrarian age where only 5% of the population can provide all the food, the survival need for the scarce resource of human labor being greatly reduced.

This analogy applies to arithmetic, trigonometry, Newtonian physics, and UNIX equally well. If it's valuable and cheap to reproduce, eventually it will be free, even if empires are built between the time when one group of people gets it and the time it becomes common property, and even if one group of people has to seemingly act against their own interest in releasing it. It is the lower energy state into which all things are doomed to fall and from which they cannot return.

Free Software isn't a paradigm

[Mauricio Macedo]

It's IMHO called "shot first, draw circles later". The author thinks that Free Software/Open Source is a new economy, something that will change the world, and try to obtain an explanation to this "different human behavior".
He forgot that, even if you code 12 hours/day, the other 12 hours you live in a real world, and all things around you, buildings, TV, food, etc are controlled by good old money.
You can help your community and yourself programming, and it's a VERY GOOD THING (TM), but it's overall only 0.0001% of the world needs and does every day, and that won't change.
Jesus said "love your fellow man like you love yourself". Why? because he knew that we love ourselves more than (almost) anything, it's part of the human behavior, that's what created capitalism "I worked a lot to produce this, if you wanna it you must pay something to me". That "something" is the only part that changes with Free Software. You're no more talking about money, but about earning public respect from your community and users, of feeling good inside for sontributing for a movement, or like being in a war against greedy buggy companies like MS, it's just that, when you gave up our rights of receiving money for our code, that was only because you was convinced that you could earn something that could have the same or more value than money, a totally selfish/capitalist vision, and that's ok!

Sorry my poor english,