Subject: Re: a model of competition between free and proprietary software
From: "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp>
Date: Wed, 23 May 2001 09:49:34 +0900

>>>>> "rn" == Russell Nelson <nelson@crynwr.com> writes:

    rn> Economics tries to answer the question "What are you gonna
    rn> give up to get something else?"  If you don't have to give up
    rn> anything, then economics really has nothing to say about it.

Well put.  However, there is a theorem of economic logic that may be
interpreted as saying that "assuming nonsatiation is enough to do
economic analysis."  That is, if there's always _something_ you want
more of, effectively everything becomes scarce.

Here, if _copies_ of software sources are free, we leave them alone,
and concentrate on _originals_.[1]

    >> Bob Young says:

    >> But the main reason economic analysis is seldom a sufficient
    >> predictor of outcomes is because it does not factor in human
    >> reactions to non-quantifiable factors like marketing.

Sure it can.  But models that do so are rarely as precise, let alone
as accurate, as an expert's judgement.  They are most useful in post-
mortems, to help you understand and refine your intuition.

    rn> You mean: the main reason bad economic analysis is seldom a
    rn> sufficient predictor of outcomes ....

No.  The limitation of economics is not that it doesn't take those
factors into account (admittedly simple/popular models don't), nor is
it the skill of the practioner (sad to say, there are many rich but
intellectually dishonest consultants).

Rather, economics is by design a _social_ science, predicated on (a)
interaction and (b) average tendencies of individuals.  Economics is
useful to individual ex ante decision-making primarily to air-check
your expectations about the behavior of your environment -- which is
other, very smart and self-interested, decision makers.  It is rarely,
no matter how well done, a _sufficient_ _predictor_.

Economics is _the_ right (I believe) way to answer the questions that
Richard Stallman is interested in.  (He disagrees, absolutely.)  It's
a shame he attempts to discourage real economic analysis.  It's a
crucial tool for policy (eg, software patents).  But it's only one of
many tools for the businessman.  Use it if you're good at it and it
gives you good results.


Footnotes: 
[1]  I'm aware there's a big gap between the theoremoid and the
conclusion.  I think the conclusion is generally accepted, and I can
fill the gap.  In private ;-)  The point is that the logic of economic
analysis itself points to the conclusion that development is the
interesting aspect of free software, not distribution.

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