open source software and "economics"

Peter Kosenko kosenko at
Tue May 8 21:26:32 PDT 2001

First of all, I don't have the answers to the economics of "open source" software.

The initial question on the list was about Microsoft's hostility to Open Source software and the viability of open source itself. Very few things I have seen have assessed the concrete economic impact of the idea in any quantifiable way, but here is an article by Harvard Business School professor Josh Lerner and collaborator Jean Tirole that sums up many of the issue in terms of four major open source projects (Linux, Sendmail, Java, Perl). Is it "egoboo" or career networking that really motivates open source project programmers? (The lead programmers often go on to big jobs?) Why do some companies get into it but those like Microsoft resist it? (Other companies are trying to build a base for other programs and services from which to challenge the likes of Microsoft?)

The article is posted on the National Bureau of Economic Reasearch web site but is free on the author's site. So here's the author's link. (you need Adobe Acrobat Reader)

The economic categories seem to be conventional (when he says, "from the point of view of an economist," he probably means, "from the point of view of a business economist"). So I'd watch out for that. Issues NOT covered well are the kinds that interest programmers and throw others for a loop sometimes: the importance, say, of STANDARDS (like the HTTP protocol itself, or the rudiments of the C++ language) in the whole computer field, and the need for nonprofit CONSORTIA that establish and develop them. Much of this kind of activity is associated with universities. Without it things don't even work together!

For that matter, if you look into many open source projects, they tend to begin in places like universities, where the need to make a living selling unreadable "binaries" isn't an issue. Or again, they tend to develop in the sysadmin circuit, like Samba, the protocol for getting Unix to communicate with Windows, which, needless to say, Microsoft doesn't much like, since it potentially cuts into the NT server market.

And advances in the software field often depend on high quality nonproprietary open standards vs. proprietary standards (which Microsoft is always pushing -- often called the "standards war" when private companies get into it and try to push their own). Open source contributes to the quality of programs, if organized well (people can't just be flying off in their own directions). But who pays and who does it and doesn't it benefit? (Hint: If you contribute to a project thinking you'll become the next Linus Tsorvald, that's like moving to Hollywood and expecting to become a $30 million-a-gig movie star--so forget it.) How does one account for public standards (public goods) in the "standard" economic model of each against all?

Note that all of the projects are MAJOR. That is to say, they would be useful to MANY people (especially sysadmin types who deal with INTERMEDIATE server software), who then signed on to contribute to the projects. Open Source on a smaller scale and oriented toward desktop programs may have quite different features and may not be so successful (when the two guys get a real paying job, they quit supporting the application).

Programmers, of course, have always traded ideas, but my only close encounter with an ongoing open source project (and I was not a code contributor but more of a scripting tester) was the web database mini-SQL put out by Hughes Technologies of Australia. David Hughes was the lead. The project was of interest to many web administrator/programmers who wanted a web database, that had good performance (a million records), that didn't cost an arm and a leg and that they could augment with their own stuff. So, the contributors to the project no doubt were being paid for other work while they were contributing to mini-SQL. Their contributions benefitted their company's other work. Hughes Technologies was probably not big enough to complete the entire range of features (ODBC, JDBC, Perl Modules) by itself, and I am sure that the bug hunting was very useful to them. They still SELL the program, but at a cost that does not compare at all to, say, Oracle or SQL Server.

Okay, so Kelley will call me a "geekazoid" (actually, I am a former English grad student who taught himself how to program, but I have no interest in software as an ultimate "ding an sich," so to speak). 8-:) I'll admit that all of this still doesn't answer my nagging questions after I got into the field: How is software supposed to benefit people rather than Wall Street and venture capitalists (the FIRE sector has one of the biggest components of software use)?

Peter Kosenko

For people interested in the issue:

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