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

>>>>> "rn" == Russell Nelson <> 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.

[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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