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Economics and Open Source Projects 214

Posted by michael
from the barn-raising dept.
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."
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Economics and Open Source Projects

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  • Open-source music? (Score:4, Insightful)

    by MaestroSartori (146297) on Thursday July 25, 2002 @11:57AM (#3952114) Homepage
    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...
    • by a_n_d_e_r_s (136412) on Thursday July 25, 2002 @12:04PM (#3952152) Homepage Journal
      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.

      • Yes, and they don't make a great deal of money doing that - I've gigged with a few bands in my time. However, you can't make enough gigging (unless you're prepared to do that full-time) to do much studio recording, which is why many bands go for the explotative record deals in the first place. They don't just do it for fun! :(

      • Actually most professional musicians does not get paid by recording CDs

        I think we know that already. This point only been stated about a billion times on Slashdot before, although it always gets modded up to +5, insightful (sometimes multiple times in the same thread), so I guess it's good for karma whoring.

        - they get paid by performing music at clubs and other venues.

        Actually, most of those people hardly make any money performing. A lot of them have a full time job and they play music in their spare time.

        Let's look at what the OP said:
        None of the professional musicians I know (and I know quite a few, session & orchestral players) would record music and give it away.
        Do you think all the bands out there who are getting ripped off by the labels wanted to give their music away for free? Of course not. They signed a contract thinking they were going to make money but they didn't. That makes them far more likely to sell their music through an alternate channel (e.g. a personal website) than to GPL it.

        -a
    • by Damek (515688) <adam@NoSpAM.damek.org> on Thursday July 25, 2002 @12:16PM (#3952242) Homepage
      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.

      • It doesn't make the world a better place, it only makes shareholders and CEOs richer.

        Oh, but it DOES make the world a better place! My time has a value. I cannot possibly listen to sample music from every artist and every album. "Music as a business" acts as a filter. By marketing it to radio stations to play, I get to listen to music samples filtered towards the "average" listener of the particular radio station. I'll most likely miss out on some really awesome music, but at least I won't have to slog through a mountain of crap just to find an album worth purchasing.

        In other words, "corporate" marketing allows me to make more informed choices.
        • Radio could easily function without corporate filtering. So could you. The answer to your non-radio filters is your peers and friends. Word-of-mouth is what most people use anyway. That's one of the things that makes peer-to-peer sharing so powerful as a marketing tool - people have been sharing music more than ever, and finding new music much easier.
          • Maybe the word "corporate" is throwing everyone off. What if it wasn't a corporation hawking music? What if it were the unincorporated independent producers? What if it were a coop of musicians? The effect would be the same. Someone approaches a radio station and says "here is some music that fits your target audience." I still get the same benefit. I turn on the radio and I here music that is somewhat to my liking, as opposed to downloading a bunch of MP3s by unknown artists until I find one that I like.

            I have a close friend in the alternative music scene (he is a well known reveiwer). From what I can see, the alternative music scene works exactly the same way as the "corporate" music scene, just at a much smaller scale and to a much smaller audience. Music still gets marketed to alternative radio stations. Ads still get placed in mags. Payola of a sort still occurs. And alternative music lovers still look to the mags and radio stations as filtering mechanisms.
    • by idfrsr (560314)
      Sure there are a lot of "cruddy non-updated open source projects on Sourceforge", but I myself would love it if musicians were free to get together and play what they want with whom they want and create truly great music.

      At the moment, if you are a pro musician, you're probably signed to someone, and so you have to do what they say. You can't get together with someone you met at a concert and do a project together unless your label approves it (which is unlikely). That was why even Eric Clapton and George Harrison played under psuedonyms(sp?) on for each others labels, so as not to infringe on the labels that owned their works.

      Not every musician needs to give away their music, but I bet a fair amount would. It would sure lead to some great stuff. The cream would rise to the top (just like OSS) and we would all be beter for it.
    • by SirSlud (67381) on Thursday July 25, 2002 @12:37PM (#3952371) Homepage
      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.
      • by TWR (16835)
        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.

        The battles for control over sheet music at the turn of the 20th century would be very instructive for the majority of slashdotters. Until intellectual property laws were strengthened, it was perfectly legal to send someone to a musical and have them write down the music during the performance. Then sheet music publishers would buy the copied music and publish it themselves, with not a penny to the original composers/arraingers. Gilbert and Sullivan used to complain bitterly about this.

        Meanwhile, in the developing world (which was America at the time), copyrights on European (especially British) content was ignored. Dickens hated America for just this reason. Remind anyone of China in the 21st century?

        Somehow, the world survived the sheet music monopolies and content control system (back when content control meant hiring thugs to destroy businesses that were suspected of "pirating" sheet music), just as it will survive the RIAA, MPAA, and the DMCA. They're just going to be made irelevant by some future technological occurence.

        -jon

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

        I agree, especially with regard to classical instruments, such as piano and oboe, or groups of such instruments, as in a symphony. However, it seems less true with regard to electronic music, where the artist created a "recipe" of synthesizer or amplifier settings to get a particular effect. An electronic artist's tools may be analogous to a compiler, where the input isn't always determinable from the output.
    • by blots (595927)
      Most musicians also have other full time jobs which pay for those neat toys. how often do you hear of a person who has taken the the time and effort (thousands of hours) to become proficient musician who does not own an interment to play? The Sad truth is unless you are very talented, very young, very good looking and very lucky you are not go to make it in the music business (well the popular music business anyway) and even then the large record companies get the lions share of the cash. Can you name any musician that gets radio play that was not at one time in their career young and good looking. I have no doubt that there are thousands of fat old bald guys out there who could blow you away with their music but lack the opportunity and support (and looks) needed for commercial success. This sad reality will change for the better in the information age. Suddenly the fat old bald guy can afford a good quality digital studio in his basement for less money than his instrument. Suddenly he can publish his music for free on the internet. Suddenly anyone can get that music for free and and play it in their car on the way to work. Sure there is a lot of crap out there but the cream will float to the top and more people will listen. The Time for open source music is ripe. It is has been happening for a little while now. As a fat old musician/songwriter with a recording studio in his basement I can tell you open source music is alive and well.
    • The paper predicts that novels wouldn't do well, and I'd extend that to music.

      Here's an excerpt from the paper:

      "This suggests that peer-production will thrive where projects have three characteristics. First, they must be modular. That is, they can be broken up into variously sized components, each of which can be produced independently of the production of the others. This enables people with different levels of motivation to collaborate by contributing variously-sized contributions, consistent with their level of motivation. Second, modules must be relatively fine-grained. That is, the smallest-grained contributions need to be relatively small, so as to capture contributions from very large numbers of contributors whose motivation level will not sustain anything more than quite small efforts towards the project. Novels, for example, at least those that look like our current conception of a novel, are likely to prove resistant to peer-production. Third, and finally, the cost of integrating the contribution needs to be relatively low. If the cost of integration is too high, integration will either fail or will force the integrator to appropriate the residual value of the common project- usually leading to a dissipation of the motivations ex ante. Where the cost of integration is sufficiently low, or where integration itself can be iteratively peer-produced, as where free software is used to integrate the peer-production effort, integration need not appropriately the residual category, and the peer-production enterprise can succeed and sustain itself." (page 8)

      So the three requirements are modularity, fine-grained smallest modules, and low cost of integration.

      Organizing communication by topic, like on Slashdot or K5 clearly meets these three requirements. DMOZ clearly meets the requirements. Free Software projects clearly meet the requirements.

      Music production, however, does not.

      Making music modular is difficult. Sure, music comes in tracks, but those are hardly fine-grained modules, and they are very tightly coupled- so tightly, that I would say that they are a cohesive unit, and not really modules at all.

      This is the same difficulty with novels, alluded to before.

      In the far future, we may have a modular description of music and novels,. Imagine that you paint a novel with a toolkit of styles, characters, events, messages, etc.,. I think it might be possible, but I also think that's a looong ways off.
  • by timothy_m_smith (222047) on Thursday July 25, 2002 @12:07PM (#3952177)
    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).
    Open Source Music Production...so, are we talking about a bunch of "We are the World" records?
  • Investing in OSS (Score:3, Interesting)

    by Real World Stuff (561780) <{real_world_stuff} {at} {hotmail.com}> on Thursday July 25, 2002 @12:09PM (#3952188) Journal
    Forbes has a great article [forbes.com] 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.
    • Economist Article (Score:3, Informative)

      by sien (35268)
      The Economist has just put up an article [economist.com] about how Open Source's future in the world, and how bright it looks.
      • It's a good article, but could be more clear about correcting two misconceptions (aka units of FUD) spread by Bill & Co.. First, regarding the nature of modifications to GPL code -- only if you intend to distribute your modifications must you release them under GPL. If the modifications stay in house, then you can do what you want. Second, at the beginning of the article we hear Bill's view on security, but no correction or even a mention that it will be discussed later.

  • A random thought: The barn-raising example from Gilmour really seems to me like communism at its best: People in the community volunteering, without being forced, to a common project, because of the pride, etc. it gives them.

    It's what always seemed to me flawed with other (arguably) noble Communist experiments, like the Soviet Union. Specifically, that all citizens were forced to participate in this system, in effect with a gun to their head. (You will help! We will be happy, dammit!) Over-simplifying possibly :-) but my main point is that the forced nature of many public-welfare-type projects seems to necessarily lead to resentment and division.

    Given that volunteers to an Open Source project are just that: volunteers, it seems possible that these projects may come much closer to the spirit and the ideal of communism. So the article seems optimistic and hope-ful. And very cool.

    Just my $.02--
    • by Wudbaer (48473)
      And the system certainly also inherits communisms inherent flaws. In the end, communism not only failed because people were forced into it, but because true communism only can work if people in general are acting completely altruistic which they usually aren't. So people tend to press everything they can out from a system that allows them to do it while trying to contribute as less as possible. So sooner or later, the system runs of of money and other resources needed to power the system. Game over. Everybody lost.

      Even in the Open Source world, most developers don't write programs for the good of mankind but to scratch an itch, to show that they can be better than closed source software or for the fun of it. And most users usually give a damn about the free speech aspect, they only want to get really drunk hard with the free beer.
      • Nice theory, but wrong IMO.
        You have to look very closely at the differences of, let's call it "Physical World Communism" (PWB) vs. "Software Communism" (SC), where the latter shall be a crude way of naming the communistic elements you and your parent poster linked to open source ideas. We'll accept the word communism, while I think marxism would be more appropriate.

        "So people tend to press everything they can out from a system that allows them to do it while trying to contribute as less as possible."

        In PWC, this is a very real problem and is perhaps indeed the main point why such systems won't fly. The effect is that "bad" people consume more resources than they create, taking from the resource pool and shortening resources also of the people who create more than they consume, therefore accelerating the effect of people getting "bad". IIRC there are classical examples from game theory/psychology for that.

        OTOH, in SC, it is not so simple to define resources. At least not a resources with the property that you can reduce resources by taking them from the pool. The closest thing that I can think of is "developer time", but the trick is the this resource doesn't follow communistic ideas, it strongly follows the ideas of individuality. Examples are project forks, developers dropping out of projects, etc. - things that happen daily in open source.
        Usage of OS software doesn't reduce any resources of SC, therefore most freeriders in this "software communism" scheme do _not_ hurt the system.

        Now we can look more closely at the resource "developer time", and this is IMO where the differences between BSD-style licenses and GPL come into play.
        BSD-style licenses are in danger of resource exhaustion because a proprietary fork might "steal" mind-share and therefore indeed reduce said resource, but most projects using such license rightly seem not to be concerned about that.
        The problem gets worse if there is more then one party involved which could profit or profits from proprietary derivatives from an BSD-licensed project, because all of a sudden there exists a new resource pool (income by selling the product) which makes it attractive to withhold from sharing resources. An example [slashdot.org] for this can be easily found on your favorite ews site.

        The way which GPL tries to resolve those problems is known, and looking at the sheer number of competing companies contributing to linux suggests that it may be quite successful.

        Oh, and btw., it is not suprising that something like OSS has emerged, IMO it is the best existant model for something like software, where resources are set up like I described above. What I find suprising is that one must always explain that it is the best, although nearly the same model is used in sciences/engineering very successful since their existance.

    • The barn-raising example from Gilmour really seems to me like communism at its best

      Aaaargh!! Cooperation is not communism! Aaargh!
  • Can you imagine... (Score:3, Interesting)

    by idfrsr (560314) on Thursday July 25, 2002 @12:11PM (#3952199)
    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.
    • If music artists started their own OS projects. Imagine a world where music was free, to make, to listen to, to change.

      Indeed, I can imagine that. These were my ideas [theoretic.com]

      I got quite a long way with it - on that page are ideas for how such a musical marketplace could work, how quality would be ensured (ie how do you sort the wheat from the chaff without record companies A&R depts) and answers to questions musicians would commonly have.

      I can so see this happening. Music is, in a way, a parallel of the software world. Music is effectively information and can be replicated and copied for zero cost. It's dominated by a rich and powerful entity (the RIAA vs MS), and the world is crying out for something better. It's ripe for the gift economy to be established here.

    • How about something simpler? What if musicians recorded and released all of their practice sessions? Sure, it would be a huge mess of sound, and not really worth sitting down and listening to. But people would stumble over a bit they really liked, or a song they found catchy, and they'd do post-production on it so they could hear a clean take of it. Then they'd have this thing they created just to hear it, and they'd give it away to other people because, well, why not? Sure, the quality would be somewhat inconsistant, and you'd never find an album's worth of songs that matched each other, but you'd find plenty of good stuff.
  • by BitGeek (19506) on Thursday July 25, 2002 @12:13PM (#3952222) Homepage

    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.)
    • 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.

      I would hate to know what you were doing to get taxes that high. The average family in the United States pays between 20-25% of their income to taxes.

      Of course your pro-libertarian rant left out many of the complexities of the marketplace that cause free market economics. Namely, you left out the ability of consumers to obtain accurate information, and the strong anti-competitive pressure that a network effect can have. As we have seen from recent corporate scandals, consumer often have a very hard time obtaining accurate information about products they would like to purchase. Microsoft is a very good example of this. They can spew FUD with the best of them, and their misinformation machine will cause consumers to purchase items which are not actually in their best interests. Also, the network effect of economics makes it so that many people won't want to switch to a operating system that other people are not currently using, because the OS doesn't give them the value that it normally would with an increased number of other users.

      • I would hate to know what you were doing to get taxes that high. The average family in the United States pays between 20-25% of their income to taxes.

        THis is simply not true. The average family pays that much in INCOME TAXES ALONE. When you add Sales taxes (%8) car taxes, STATE TAXES (say %10), gas taxes, Social Security (%16) Medicair (dunno) you easily get to %50 for the average family.

        Hell, add sales tax and social security to %25 and you're already in the %40... not including the property taxes you have to pay and the phone taxes you have to pay (%12 roughly), etc. etc. etc.

        Pretending that income tax is the only tax you have to pay is dishonest.

        s we have seen from recent corporate scandals, consumer often have a very hard time obtaining accurate information about products they would like to purchase.

        I love it how leftists consider "Fraud" to be the natural state of the freemarket.

        FRAUD IS FRAUD. It is illegal, and thus the only question is if it is being prosecuted enough.

        And, as I pointed out, even despite the Microsoft effect, the freemarket is beating them. Not financially yet, but technologically and mindshare wise. Non-MS operating systems are the fastest growing, and apache seems pretty stable with over %50 marketshare. Did you just not read that part?

        Sheesh.
    • "Open source is the definition of Market Economics. It does not need its own theory-"

      It might be *possible* to describe the Open Source movement in terms of standard market forces, but it is not parsimonious.

      I wonder whether you've read Benkler's paper. It's long, and as he says, he spends "substantial space in this article explaining why peer-production processes appear to respond mostly to cues other than price signals." *That* is clearly one aspect that removes this from the realm of market forces. If you want to argue tautologies about how people always do what's in their best interests, etc., go ahead. But you're not describing standard market economic models unless actions are motivated by profits and regulated by prices. Free-as-in-beer software may be used by some companies to save money, but that's not why most programmers create it.

      "[T]he 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."

      Are you serious? This proves the opposite. It proves that in an unregulated market, monopolists can emerge that can't be dislodged by any competing firm. Only people who are not motivated by profits have a chance, and only by creating a product that has zero marginal costs (digital data) and zero price. Those assumptions overturn all of the first chapter of Econ 101.

      Market forces do not explain all aspects of human behavior. Why do some libertarians get so defensive when that's pointed out?



      • The error you, and many others make, is confusing "prices" with "Value"

        Free software has value, even though its free.

        To claim that the free market is only about pricing things in terms of CASH is false. Pricing includes value, and everything that goes into a transaction-- labor, for instance.

        By your theory, every worker is getting a free ride because they put no money in and get money out.

        Free Market Economics is not about pricing of cash, its about pricing in terms of value. To pretend that "only profits mater" to people is stupid -- a huge profit is pointless if you end up in jail, and thus fraud is rather rare in a free market economy.

        Monopolists MORE OFTEN emerge in regulated markets-- the government creates them. YEs, in an unregulated market, they can emerge, but tehy cannot survive for very long.

        To say that people developing open source software are not motivated by profits is to lie-- either about them, or the definition of "profit" which is to "receive value"... Things other than cash have vale- even to capitalists.

        • "Free software has value, even though its free. To claim that the free market is only about pricing things in terms of CASH is false. Pricing includes value, and everything that goes into a transaction-- labor, for instance. By your theory, every worker is getting a free ride because they put no money in and get money out."

          A basic proposition of Economics is that everything of value is convertible into cash. If I want to take time off from work and go to the beach, there is an implied calculation I make about the dollar value (as lost income) to me of that day at the beach.

          That's still a very kludgy theory, because research shows people don't really make decisions that way. And when you get into free software, standard theory becomes almost impossible. Without pricing signals from either buyers or sellers, you cannot make economic statements or predictions. In fact, you might asymptotic behavior at $0. How much money will it take to get Linus to stop work on Linux? Possibly an infinite amount. Because what he values is *not* fungible to cash.


          • Exactly, you just made my point, not disputed it.

            This "basic proposition" you talk of does NOT EXIST. Its a basic proposition of many leftists...

            But economics is about value, NOT CASH. People are not failing free market theory when they value things other than cash! That's just propaganda and spin to try and undermine free market theory.

            The pricing of free market theory takes these non-cash values into account. People pay more, for instance, for a hotel room where they can get peace and quiet-- they are not getting physical return for that extra investment, but they ARE getting value. So a cabin by the lake is not "gouging" people as leftists would say, nor are people ignoring efficient market by paying more for a smaller room. They are just valuing the peace and quiet.

            That value exists only in cash is the falsehood I'm fighting.

            That someone will exchange something (like labor) that can be exchanged for cash for something that is "free" (like linux) only supports my statement. but it also supports the "cash" position in that labor is a form of cash.

            So, either cash is everywhere and nothing is free- not even linux-- or you include any form of value as value (and linux is still not free.)
      • But you're not describing standard market economic models unless actions are motivated by profits and regulated by prices.

        Economics is not about monetary profits and prices. One recent example that most geeks should relate to: The movie "A Beautiful Mind" showed John Nash receiving the nobel prize. In the movie he discovered the key to this theory while analyzing how guys pick up chicks. It was a funny scene, but it was pure economics. And no market prices or monetary profits anywhere to be seen.

        People acting in their best self-interest may be a tautology, but it is the tautology that ecnomics is based upon. The reason why so much "popular" economics emphasizes money is that money is much easier to measure than than other things that human beings value.
        • "Economics is not about monetary profits and prices. One recent example that most geeks should relate to: The movie "A Beautiful Mind" showed John Nash receiving the nobel prize. In the movie he discovered the key to this theory while analyzing how guys pick up chicks. It was a funny scene, but it was pure economics. And no market prices or monetary profits anywhere to be seen."

          That was an example of Game Theory, not Economics. (One difference being that Game Theory creates a tiny, artificial world, with heavy constraints and no currency that can be used to exchange different forms of value in spheres outside that world. In the Prisoner's Dilemma, you're not 'allowed' to create a third alternative, like making a prison break.)

          Of course, there is the problem that economists don't even agree on what falls in their field, because to do so illustrates the overreaching and unscientific claims upon which it is built. For example, I recently checked out 10 different Econ 101 textbooks. Half of them gave vague definitions, and the other half said quite plainly that "we're not going to define economics; it's easier to just look at the subjects covered in this book."

          The main question here is "can conventional economic theory explain the free software movement?" Now look again at "A Beautiful Mind". The "conventional theory" about getting girls was the "survival of the fittest" contest, as one character put it; everyone goes for the prettiest girl. That is HOW all characters except Nash actually acted! That theory described actual behavior very well; it's just that Nash's theory suggested a more optimal global solution. Similarly, people creating free software are motivated by their own, non-market theory of what they should do. Unlike companies, they were not making market calculations.

          An economist would now say, "watch what people do, not what they say." Meaning that although people don't think they're motivated by market values, they are. Or rather, it's still possible to view them that way, and gives economists a chance to bend the model to encompass them. But in a sphere without scarcity (digital data), and with $0 prices, how can market theory improve the "efficiency' of free software? You already have an answer to the question of people's motivations, and without a scarcity problem or a fungible value system, economists have little to offer here except distortion of motives.
          • That was an example of Game Theory, not Economics.

            Much of economics is game theory. In some ways, economics is really applied game theory.

            But in a sphere without scarcity (digital data), and with $0 prices, how can market theory improve the "efficiency' of free software?

            There's a whole list of economic study topics just waiting to be explored in this area. First, there is a scarcity of programmers. Why does a programmer choose to contribute to one project but not another? Second, there is a scarcity of distribution channels. How can Cheapbytes and Linuxmall get away with charging $2 a CD when there is no scarcity? Why do I maintain subscriptions to FreeBSD and Slackware Linux when I can download them for free?
            • For fun with economics, what is the value of money? Does $2 have twice the value of $1?
              Why do I maintain subscriptions to FreeBSD and Slackware Linux when I can download them for free?
              What is relevant is (Value(Subscription CD) - Cost(Subscription)) versus (Value(Downloaded CD) - Cost(downloading CD)). Same reason I buy RedHat Office Professional and use the first two (now three) CDs.
              Would the value of your subscriptions be worth more or less if downloads were no longer free? Personally, if RedHat stopped the free downloads, I'd be looking for a different vendor.

      • If you want to argue tautologies about how people always do what's in their best interests, etc., go ahead. But you're not describing standard market economic models unless actions are motivated by profits and regulated by prices.

        To put it another way, "free market economics" does not describe all human behaviour, but Game Theory does. In game theory you are more likely to describe rewards and costs in terms of points, but it is easy to equate "points" with dollars. In game theory, free market economics rules because everyone acts in his own best interest, but altruistic behaviour can still emerge (you just have to assign a point value to that "warm fuzzy feeling").

        Are you serious? This proves the opposite. It proves that in an unregulated market, monopolists can emerge that can't be dislodged by any competing firm.

        Exactly. OSS fits the definition of a monopoly as far as I can tell. Selling software below cost is predatory pricing. Forcing the software to be free as in beer is price fixing. (The Stallman argument that you can make money by selling free software is laughable.)

        Someone once posted on Slashdot by stating that OSS was a free market force and they had the nerve to state that "Adam Smith would be proud." For the record, here is what Adam Smith actually said:

        Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it...He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.
        A group of people actively coordinating an economic revolution is not an invisible hand.

        -a
    • You're right and you're wrong.

      Yes, classical liberal economics (the a priori discipline) encompasses open source, and explains its success quite well; but at the same time, there are broad financial models within that discipline which fail to explain open source, even though open source has financial consequences. This paper examines open source with the intent of fitting it into some of those models.

      I'm using the term 'economics' to describe the science which examines the results of human actions and choices, while 'finance' is the subcategory of that which examines only intercomparable human actions and choices, and which uses money as the instrument of comparison. A better choice of words would be to use 'praxeology' for the first term, and 'economics' for the second.

      See von Mises' text 'Human Action' for MANY more details. In that text he covers praxeology in general and economics in specific. Highly recommended, and available as a free ebook on mises.org.

      Oh, and although Mises is the poster child of the Libertarians, he wasn't one and couldn't have been one (there weren't any at the time). So check your prejudices at the door. A lot of what he says is valid even under non-Libertarian assumptions, and much of the rest is valid as long as you don't try to apply it too far (as most Libertarians do).

      Note the big L -- I'm a libertarian, but I'm not a Libertarian.

      -Billy

      • My only prejudice is to figure von Mises is worth reading.

        I know of no difference between Libertarians and libertarians. Except that some people calling themselves libertarians are idiots, but that's to be expected. There are even objectivists who support Microsoft (thus violating objectivist morality.)

        That people may have built financial models that don't account for open source is not an issue-- it simply means that the models may not be correctly applied, and are appropriate only to situations where value is only represented by cash. Hence using the word financial is appropriate.

        But the free market is a free market of value (not cash), and open source fits right in. And that was my point.
        • Good prejudice -- Mises is awesome reading, and I agree with the rest of your points here. Except that you have no other prejudices, of course :-), but that's obvious.

          Well... you imply that no people calling themselves Libertarians are idiots, which is false on its face. I won't attempt to compute a L/l idiodicy ratio, but I will laugh at the thought... :-)

          But the free market is a free market of value (not cash), and open source fits right in. And that was my point.

          This nails the fine distinction the author of the original paper was making. He lists two expected motives for participating in a project: 1) their boss told them to, or 2) someone offered them money to.

          The full scope of the free market is much larger than that (as you state), expanding in general to include me doing something because I judge that the benefit to be gained from doing it is higher than the benefit to be gained by doing something else (including doing nothing).

          In other words, his definition of the "market" is an older, more restrictive one (as you'd expect for someone basing his work on a 1930 economic work). Mises' definition includes his, and is in fact much more useful -- but his is nonetheless a valuable subcategory of the market, since it forms the basis for a theory of business growth.

          So essentially, his paper does what his abstract says: it fits open source into a theory of corporate growth, thereby producing results which attempt to predict and evaluate data on project size.

          I'm still digesting the paper as a whole, but so far it seems quite good, neglecting the terminology error of mistaking the "market" for a small subset of the market (I think we could more accurately call his so-called "market" the "cash-up-front demand market", since it's based on someone offering you a fixed amount of cash).

          It's interesting that he also misses a major group which IS outside of the market: bureaucracies.

          -Billy

          • I wasn't meaning to denigrate the paper. I was expressing my opnions, which I expect are along the lines of the paper--- I just think that the problem is too many people think "free market" is all about money and that there is no other from of value. (I call these people leftists.)

            I thought I said there were idiots calling themselves libertarins. That I find no unlibertrian points to the Libertarian platform, does not mean that all those calling themselves Libertarians are really so, (and not idiots.)

            We can debate the relative percentages of idiots calling themselves all kinds of things, but my main point in responding is to say that I am not disputing the paper, I'm merely saying that it shouldn't be that radical of a finding.

            Its only dispelling something that was poor thinking to begin with.

  • I hope Gene Roddenberry is getting a credit on the paper.

    -Peter
  • There are more than just those "commons-based" motivations in open source.

    I would even argue that isn't a main motivation.

    Motivations to go open source:
    1. Get your name out there

    Something to put on a resume, a way to build relationships with companies who may later hire you.

    2. Other people do some of the work

    Whereas freeware might get your name out there and satisfy the first advantage, it does not allow other people to help you debug and build the work very much.

    3. Makes money through contracts

    Many people contract with open source developers to add features or fix specific bugs that have lingered. This benefits the company which spends way less money than on the closed source alternatives, and also benefits the programmer, by letting them take 100% of the money rather than some corporation only giving them a fixed paycheck. This 100% performance based reward system creates a very efficient marketplace. The programmer also generally gets to keep ownership of the added code, which is a plus.

    Anyway, my point is, one doesn't have to believe in anything but selfish motivations, and old fashioned rational economic behaviors to see that open source is win-win for everyone involved.
  • by Bobzibub (20561) on Thursday July 25, 2002 @12:16PM (#3952246)
    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...
  • by MarvinMouse (323641) on Thursday July 25, 2002 @12:21PM (#3952276) Homepage Journal
    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.
    • I think you should differentiate two factors here:

      - Obsolescence of classical distribution channels

      This is indeed the problem of big media corporations and covers the distribution of the good itself and marketing logistics. The importance of both of them has suffered quite a bit since the internet emerged. I venture a guess the the biggest fear of big media might be not the fact that people can copy and distribute their stuff, but that artist in the long term will loose their dependence on a company to get their stuff to the people.

      - Collaborative work on an open source product (whatever it may be).

      I think the latter mainly will affect software production, because the process of creating "art" does not inherently profit from collaboration. Would Bach's work really be any better if he had done it with a couple of fellows over the internet? Would it really improve if someone took it and came out with Toccata & Fuge 1.1?
      This would be possible today, because there is no copyright etc. on Bachs work, but nobody seems to think it's a good idea.

      • The first point is very true.

        but cannot another artists _interpretation_ of Toccata & Fuge 1.1 be considered improvement. The basis is still there, and it is still the beautiful classical piece. But each artist has the right to play it as they wish. Add a staccato here, a fortissimo there. They all have the right to improve on the general piece. Even some modern jazz, rock and techno artists have taken these pieces and adapted them to their own style of music making them their own. In a way working on a open-source piece of art.

        I remember picasso's quotation, "Good artists innovate, Great artists steal." (I think). Perhaps it is not stealing as much as taking an idea that is good and attempting to improve upon it so the final product is potentially better.

        I know when I hear Toccata & Fugue by the Montreal Symphony Orchestra, it is a much different feeling then when I hear it performed by the Edmonton Symphony Orchestra. I know that I have heard many interesting takes on Ode to Joy by Jazz Artists and Techno musicians.

        Perhaps Art can be open sourced afterall. :-)
        • It's a complex theme, I for one would say that using themes from one musical work in another is not the same as using apache 1.3.18 to make apache 1.3.19. OTOH there is the application server zope, which uses a python webserver named medusa to serve its content. They incorporated it, similary to what happens in music sometimes, but not in the same way.
          So, there are no hard borders, but I don't see anything in music which is analogous to apache 1.3.18 -> 1.3.19.

          But let's take a short trip to reality ;-).

          My point still stands that despite Toccata & Fugue being open source, the world still waits for the 1.1. version ;-).
          And, by the way, there already are certain exceptions in copyrights concerning art, they even extend to trademarks, which at least are allowed to be "violated" by satire.
          • Well, if I may take this to a hypothetical extreme. Let's look at Toccata & Fugue.

            It's common for University students and other music artists to take a piece of "open-source" work and adapt the general theme, chord progression, etc. to another piece. Perhaps the only reason we don't see a Toccata & Fugue 1.1 is because no one who dare call it such a humourous name. Instead, they call it something that would fit their own taste. Even though in the end it is the basically the same base.

            Perhaps all music has developed this way. Taking a piece, modifying it somewhat, and calling it your own. 'cept nowadays, unless you work for the big companies, you cannot take any part of any piece and use it in your own because you would be breaking copyright. (There are artists who have used the same chord progressions and have been sued for it.)

            Maybe, The 1.1 is out, perhaps even the 2.0 is out. It's just that the artists who wrote those pieces wouldn't dare call it T & F 1.1 or T & F 2.0.

            An interesting thought.

            I do like the fact that we can satire pieces of copywritten material, even though we can't do much more. (Maybe we should just make a big joke Windows system that's open source, and full of satire. :-))
      • Would it really improve if someone took it and came out with Toccata & Fuge 1.1?

        This does actually happen in the music industry. A recent BBC radio documentary pointed out that the Beatles and the Stones based a lot of their early music on American Jazz (and even recommended the original recordings to audiences).

        The questions that arise from this are;

        Should people like Muddy Waters have received a share of their income ?

        Why has no Open Source based business broken through to the kind of success enjoyed by those groups ?
        • Because, contrary to the development of music, open source development is directed, it's directed in a sense the evolution was at least directed one point in time.

          You can't say "Beatles are better than American Jazz", but you can say "linux 2.4.18 is better than linux 0.9.9".
          No matter where you look, open source developement is directed, with only small perturbations.

          Can we really say that of music? Where is the uber-musician, standing on the shoulders of giants like Mozart and Bach, creating things they never have dreamed of?
          Noel Gallagher? (amusing little on-topic sidestep [sky.com])

          And that's why I think that the "development" in music is not comparable to that in software, the benefit from copying (in a non-negative sense) is much more untangible, therefore less profitable, and in consequence of less value.


      • Would it really improve if someone took it and came out with Toccata & Fuge 1.1?

        Hang on, in't that exactly what Emersen Lake and Palmer did? They did an interpretation of Toccata and Fuge, and I think, release it as 'Toccata'.

        It got alot of air play, and was pretty good. Some poeple would have called it an improvement (a lot of my friends at the time).

        on Bachs work, but nobody seems to think it's a good idea.

        Well, *I* thought it was a good idea, and so did EL&P's record company.

        Hmm... maybe it was just too long ago, and you kids can't remember anything before rap.

        • Yeah, they did an interpretation not an advancement, at least I really doubt EL&P would have the guts to call it an advancement.

          While many of your friends would have called it a straight improvement, IMO this is only acceptable in the sense of "a interpretation which fits my taster better". Many others would not say it's an improvement.

          Contrast that to the example linux 0.99 vs linux 2.4.18. Is there really anyone saying that 2.4.18 isn't an improvement, even in the original meaning of the word "improvement"?

          Hmm... maybe it was just too long ago, and you kids can't remember anything before rap.

          Heh, let's get that outta way, my UID is lower and I know at least one other big adaption of EL&P of a quite well known classical piece, which is btw. older IIRC. ;-)

  • by istartedi (132515) on Thursday July 25, 2002 @12:22PM (#3952279) Journal

    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.

    • There's no need to mess with economic theory to explain Open Source.

      No one is "messing with" economic theory. Benkler isn't saying that traditional economic theories are wrong. Just that they're not sufficient to explain a newly witnessed phenomenon: Open Source/Free Software.

      I provide free software because I have no reason not to. I don't provide it for the hopes of some future consulting dollars. I don't provide it because I wish to maintain control of my work. I use the GPL because I don't want someone to take work that I've already done and make me pay for it in some slightly different form.

      For Microsoft and Sun and ..., they only reason they produce software is to sell it. They're not actually concerned about using it to solve a problem that they are experiencing. They're not scratching their own itches. They're guessing at the itch that someone else has and trying to produce a backscratcher that will reach. But for me finished software is simply a scratched itch. I do NOT look at it as an oppurtunity to sell a backscratcher to others with the same itch. If they want it, fine. I've already solved my problem.

      But if you want to get some idea of what I really want by releasing my software, it's this. I want access to the backscratchers that others have produced. But not only that with the ability to easily modify their backscratcher to reach my specific itch. This economy is not measured in dollars. It's measured in software, and that, I think is the point of Benkler's article. If you try to measure open source/free software using the traditional mechanisms, you're going to have to start looking for the money. For the *vast* majority of people who produce open source/free software, their just isn't any money involved. (IBM, Red Hat notwithstanding. They provide lots of opensource/free software, but not anywhere near the majority.)

      So Benkler is just saying that there are other "enlightened self interest" factors that are involved. Not just money. Since all of the traditional economic production models have centered around money, they're not sufficient.

      • I provide free software because I have no reason not to.
        You are minimizing what I'd call the "hassle factor". It's possible to put some sort of monetary value on free software, but it's a lot of work to produce rather poor numbers which are misleading at best.
        The "enlightened self interest" does not apply to just Open Source software. There is such as the American Petroleum Institute where the major contributers are mostly really helping their competitors.
    • There's an entirely different part of behavior which used to not be economically significant. People don't like to just sit there, they like to do things. Writing software can be like playing games and solving puzzles, activities that people actually pay money for. People will put jigsaw puzzles together, look at them for a bit, and then take them apart. There is no reasonable motivation for this behavior except that people get bored otherwise.

      Now consider OSS. People play around with it, doing whatever they feel like doing. Getting a program or a feature working is as satisfying as solving a puzzle or winning a game. In fact, more so, because you're probably the first person to solve it in a particular way. Plus, you can show off your results to other people, and they frequently care, even if you're not a professional or anything.

      The trick is that digital copying and long-range communication mean that the value created out of staving off boredom actually is significant in market terms. It's as if your grandmother, to keep her hands busy, knit sweaters for the entire country, at no cost to her. Sure, some people want different sweaters and will still buy them from stores, but everyone has the option of chosing a free hand-knit sweater. Your grandmother, of course, doesn't care either way; she's not interested in selling things, and enjoyed knitting. In the real world, of course, your grandmother can knit a sweater for each of her grandkids, and that doesn't affect the economy. But these days, it is possible for hobbyists to generate enough valuable information that it has economic effects.
    • istartedi wrote:
      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).
      Let's consider taking the bold step of reading Benkler's paper to see what he's talking about. Here's a few quotes:
      In the late 1930s, Ronald Coase wrote his article, The Nature of the Firm, 5 in which he explained why firms clusters of resources and agents that interact through managerial command systems rather than markets emerge. In that paper Coase introduced the concept of transaction costs that is, that there are costs associated with defining and enforcing property and contract rights which are a necessary incident of organizing any activity on a market model. Coase explained the emergence and limits of firms based on the differences in the transaction costs associated with organizing production through markets or through firms. People would use the markets when the gains from doing so, net of transaction costs, exceed the gains from doing the same thing in a managed firm, net of the organization costs. Firms would emerge when the opposite was true. Any individual firm would stop growing when its organization costs exceeded the organization costs of a newly formed, smaller firm.
      And further:
      The emergence of free software as a substantial force in the software development world poses a puzzle for this conception of organization theory. Free software projects do not rely either on markets or on managerial hierarchies to organize production. Programmers do not, generally, participate in a project because someone who is their boss told them to. They do not participate in a project because someone offers them a price to do so. I will spend substantial space in this article explaining why peer-production processes appear to respond mostly to cues other than price signals. Some participants may indeed be focused on long-term appropriation through money-oriented activities like consulting or service contracts. But the critical mass of participation in projects, at any given level of activity, cannot be explained by the direct presence of a price that differentiates different projects and effort levels. In other words, programmers participate in free software projects without following the normal signals generated by market-based, firm-based, or hybrid models.
      So, Benkler is not saying that he has proof that "rational acting" money-grubbing greedy bastards are lame and cause more harm than good (whew, that's a relief, eh?).

      He's talking about a problem in social organization. Previously economists have focused on two ways of organizing things:

      1. direct command and control by centralized management, aka "the firm".
      2. competition between firms, controlled by the "invisible hand" of the market.
      If Gnu, Apache, Linux, etc fit into either of those two categories, it is not easy to see how.

      If there are other examples of sucessful products being produced in a similar cooperative manner -- as their probably are -- Benkler seems to be saying that economists have not paid sufficient attention to them.

      Let me try a simple, general thesis here: Social organization is influenced by available technologies of communication and transportation. That doesn't sound like too much of a stretch does it? It's generally accepted that the viable size of a nation state was smaller in the days of the ancient greeks than it is now. So it would seem that a radical change in our communication technology -- like, oh, say, the development of the internet -- might change the kind of cooperative organizations that are viable.

      istartedi wrote:

      In all of these cases, software included, there is a rational economic model that has given rise to support for some free riders. [...] 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.
      Some exercises for after class:
      1. Could it be that this libertarian inistance that all human motivation can be ecompassed as a form of profit motive is purely an article of faith?
      2. Can you imagine any hypothetical form of behavior for which it would not be possible to explain away as the result of "self-interest" in some contorted way?
      3. If there is no way to falsify the "rational actor", then is there any utility in the concept? Why is it useful to re-state motivations in a "selfish" form rather than an "altruistic" form?
  • by jlowery (47102) on Thursday July 25, 2002 @12:24PM (#3952295)
    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.
  • "I call this mode "commons-based peer-production," to distinguish it from the property- and contract-based models of firms and markets. "

    Commons-based peer-production? How about an enjoyable hobby?

    While the focus of academic specialization has contributed countless practical ideas to our civilization, people have a very hard time working in new concepts within any given academic paradigm. Why is so uncomfortable for an economist to work in the concept of people having a hobby into his specialty?

    Academia needs to work on some intellectual APIs that allow for a more practical invocation of "foreign" concepts within any given specialty. Otherwise, we will continue to slide into the cellular isolation of Vinge's "focus".

    - James

    • Because a hobby is FAR from the only way of gaining the result we're discussing. Many open-source programs are initially written as a hobby; but much work on them is written as part of a company.

      There's no need for him to look at just one of the many diverse motivations possible; the goal is to look at the results, and check whether they're sustainable.

      Hobbys or no hobbys.

      -Billy
  • We humans have come so far, it's difficult to put a new idea into practice anymore without making specialized contributions on top of a mountain of work of others. And it's hard to pin down where the good ideas are going to come from.

    Corporations keep their mountain of work secret, so only their employees can build on top of it. Often they're even more restrictive, the only person allowed to build on top of any piece is the person the company assigns to own that piece. Open source in general, and Linux in specific, make the mountain of work public. Anyone can contribute anywhere they see fit. The pool of potentially inspired and motivated people is just so much bigger.

    There's no reason to limit that to software. I hear progress in steel manufacturing follows a similar pattern. The steelmaking process is public. Whoever gets an idea finds an existing steel company and tacks it on.

    The real trick, economicowise, is to allow motivated people to do what they want to do and monetarily reward them for doing it.
  • ...check out his disclaimer:

    "One important caveat is necessary. I am not suggesting that peer-production will supplant markets or firms. I am not suggesting that it is always the more efficient model of production for information and culture. What I am saying is that this emerging third model is (a) distinct from the other two, and (b) has certain systematic advantages over the other two in clearing human capital/creativity. When these advantages will outweigh the advantages that the other two models may have in triggering or directing human behavior with relatively reliable and reasonably wellunderstood triggers of money and hierarchy is a matter for more detailed study. I offer some lines of understanding the limitations of this model of production in Part III, but do not attempt a full answer to these questions here."

    So does your blustering comment about "the realities of the marketblah blah blah rabble rabble" seem so worthwhile now?

  • I'm a fairly smart guy, and I have a degree in Computer Science. It is reasonable to assume that I can write and OS from scratch, throw a GUI on it, write my own web browser, and word processor. However to do the above all on my own takes too long. I'm not satisfied with with the commercially avaiable equivelents that I can afford so ecconomics suggests that I will do something else. Since it would take me years to write all the above (1 year each for minimal: os, compiler, GUI, gui toolkit, device drivers... working full time).

    I can do it though. However by using open source I can get help. Linux/*BSD are good OSes, by starting with them I can take a good network stack, and replace the schedular with one that is better, and have a good OS. In the mean time someone else can fix a bug I haven't seen yet in the network stack... If I don't like my desktop, KDE/GNOME are good starting places to make things better, without spending years getting to where they are first. And they provide things I consider nice but not critical that I would never touch on my own.

    Open source makes sense, so long as I have income, and there is something I need that I can't get.

  • Slashdot (Score:5, Interesting)

    by tmark (230091) on Thursday July 25, 2002 @12:55PM (#3952487)
    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.
    • If spouting nonsense on message boards (anywhere and everywhere) could be converted into power, we'd have limitless energy. /. is not the only message board in existance, but it is one of the very few with a moderation system. Even if the mod system did not exist, every person here would be posting just as they had before.

      But the explaination of why /. exists or how it works is of no use at all for practical application of time twards concrete efforts. Posting here fulfills all kinds of needs from simply taking a break from working on concrete efforts to megalomania. But the fact remains, people need to eat to survive (and shelter and grecreate to feel that life is worth liveing and, and, and...) and the bottom line is there must be an economy based on exchange of work for goods SOMEHOW. Money is the most convienient as I can at a later time choose what I want to eat, rather than having "FOOD[tm]" handed to me at the end of a work week and "SHELTER[tm]" provided for me in the form of a bed under my desk at work.

      O.S. exists because a lot of people have a lot of free time on their hands. But it has not taken over the world becuase no one has all day every day free time on their hands.
    • I take slight issue with your wording. There most certainly is an economic explanation that will include the psychological/ego factors. It may not be entirely quantitative, but qualitative considerations aren't totally absent from mainline economic theory.
    • Well young Timmy, a long time ago Slashdot was completely anonymized, there were no users, and karma did not exist. You know what happened? Slashdot grew and grew and grew. And the posts were probably longer three years ago on Slashdot than they are today. And of a much higher quality, too. Explain that.

      Here's my explanation: the site's quality and popularity are inversely related. I can grant you that much of what goes on here today is ego-driven without conceding that the site would just keel over and die if you took out that ego drive. In fact, Slashdot was a much better website before its creators gave users a yardstick (karma) to measure themselves by. Discussions were educational because people actually knew what they were talking about, or they were entertaining because everyone was pretty smart. By participating we were all rational actors maximizing our utility, be it through leisure or and time investment spent learning about something new with the hope of a future payoff. And that's just basic econ 101 for you, sans all the normative psychoanalytic babble.
    • No more shallow than the owner of an old classic automobile.
      There's a bit of peer recognition/approval but it is much more an internal sense of rightness. My own opinion of myself is much more important to me than anyone else's, but a bit of approval here and there doesn't hurt.
  • by joneshenry (9497) on Thursday July 25, 2002 @01:00PM (#3952523)
    Ironically this article may be an example of how opinions expressed in more establishment-oriented formats such as journal articles are being made obsolete by rapid change. I'm not going to write 100 pages about how every one of the article's points is inaccurate, but let's just take one popular example of file-sharing and P2P networks. Napster occurred at the time of an exuberance that consumer bandwidth was going to increase exponentially forever. In the wake of the continuing telecom industry collapse, this assumption is no longer valid. With the current American administration, the Federal Government will not be pursuing the historically proven method of building out the last-mile infrastructure, the equivalent of the rural electrification effort. Instead of increasing choice and value per dollar, the US broadband industry will under of the direction of FCC Chairman Michael Powell consolidate into a few cable and Baby Bell monopolies which will shortly impose steeply metered bandwidth charges to consumers for monthly usage over a small amount, say 1GB. This will remove any "slack" bandwidth for file-sharing that would have been available from US consumer broadband users. This is especially important for P2P file-sharing type systems because research has indicated that file-sharing is facilitated by a relatively small group of high capacity super-nodes. The other source of super-nodes has been college students using university bandwidth. But the telecom industry collapse is causing a tremendous reduction in state revenues. The states unwisely planned their budgets under the assumption that the stock market boom would exponentially increase revenues forever. It seems likely to me that states will preserve K-12 school budgets, forcing even deeper slashes in funding for state universities. I expect state universities to impose much more stringent limits on students using bandwidth for non-academic purposes.

    Consumer P2P file-sharing will shortly be history.

  • 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.

    Well duh! As any economist can tell you, money isn't everything.

    Economics is the study of human action. Why do people do what they do? Because they expect that they will either gain by the action, or avoid loss by the action. Since market prices are easy to measure, and most people are very shallow individuals, money is a very common measurement in economics. But money is not the only value. Love, respect, pleasure, fun, satisfaction and a whole bunch of other non-quantifiable things are perfectly valid and accepted economic values.

    Dan Gillmor is not an economist, so he could perhaps be excused for thinking that economics is about market prices, employee relationships, price points, and all that other mumbo-jumbo. Let me clue him in a bit. Hey Dan! Economics is the study of why you chose to write aobut Benkler's paper.
  • Hmmm.... a future where everyone is free to pursue their dreams/interests without hindrance and there's no longer the concept of money. Was Gene Roddenberry brilliant or what? Waaaay ahead of his time. :)
  • I hope Open Source doesn't then turn out to be the "new economy" of the 1990's! That was one paradigm that isn't aging too well at the moment.
  • As an economist, the very concept disgusts me.

    YOU CANNOT QUANTIFY HUMAN BEHAVIOR.

    The insistence that you can is at the root of much of the politico-economic evils of the modern era.
  • The IT earthquake of the 1990s was not Linux, it was Sun's smashing the industry equilibrium with Java. With Java, Sun hoped to annihilate its competitors, both Unix and Microsoft, by providing a common platform for software that it alone controlled. The PC would vanish to be replaced by a dumb terminal, the network computer. These network computers would of course have to be connected to servers. And even though competitors could license Java, for a price (especially J2EE), there was always the subcontext of why would a customer choose servers other than from Java's parent Sun, or maybe IBM.

    A graphic illustration of the hopelessness of a Unix hardware vendor other than IBM trying to sell middleware for Java can be seen in the collapse of HP's NetAction Software Suite. There is simply no place for HP at the Java table.

    But as IBM long ago realized it would be wise to give Sun something to worry about. The remnants of the former Oppose Sun Forever coalition have re-formed, this time with Linux as their project to humble Sun.

    I'm a little worried about history repeating itself. Once again an industry consortium is banding together without a good sense of how to improve computing for everyone. Before Oppose Sun Forever the Unix companies employed researchers whose interests ranged over all of computing and who contributed to the community through papers, code, informal cooperation. There has been a tremendous narrowing of focus in favor of corporate IT computing. But IT spending is not exactly increasing, nor will it increase while the telecom industry is so deeply in debt.

    While Oppose Sun Forever and Sun were fighting the last time, computing for non-business users was ceded to Microsoft. X was a monstrous bureacratic compromise, and there was no equivalent of X for audio or video.

    What indication is there that these clowns aren't just going to create another version of the Open Group while standards go uncreated for natural language processing and artificial intelligence, once again ceding the field to what Microsoft does at Microsoft's pace?

  • His consistant use of the term mars an otherwise fine paper.

What this country needs is a dime that will buy a good five-cent bagel.

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