Subject: Re: Opportunity lost? Challenge declined!?
From: "Frank BENNETT (フランク ベネット )" <bennett@nomolog.nagoya-u.ac.jp>
Date: Mon, 14 May 2001 15:30:33 +0900

On Mon, May 14, 2001 at 12:15:57PM +0900, Stephen J. Turnbull wrote:
> >>>>> "Edward" == Edward J Huff <edward.huff@acm.org> writes:
> 
>     Edward> One possible approach which hasn't been mentioned is "The
>     Edward> Street Performer Protocol."  See
> 
> It's been discussed on FSB, but not in detail.  sourceXchange and
> CoSource.com were/are real-world implementations.  Both were impure in
> the sense that they were more customer-driven than developer-driven.
> 
> SPP suffers from the free rider problem.  Standard economic analysis
> goes back, oh, to the English enclosure movement (1600s) or so.  There
> are standard solutions (Groves mechanism, Vickrey auction) all of
> which depend on (oops) government provision or intellectual property.
> 
> Underprovision from a social point of view doesn't mean you can't make
> a profit.  However, in practice, SPP looks to be less effective than
> seeking a product niche where price discrimination can work.  ...
[snip]

(This post takes Steve Turnbull up on a couple of points.  I am not an
economist, so it's not aimed at economists.  But if you're not interested,
stop reading _here_.  And if you consider this off-topic, write to me
privately and I'll take the hint.)

I won't say that this is wrong, and I am not familiar with the SPP or
discussions of it here; but my caution lights flare up with the analogy
between a physical commons and information markets.  Information is not
property.  Lessig has pointed out that the US Constitution does not promise a
"property right" in information, but the distinction is deeper. Information
really is different, and legal regulation can't make it the same.

Permitting unrestricted public consumption of a finite resource is definitely
a bad economic choice, because the poverty that results could be avoided by
controlling selfish consumption in the public interest.  Give individual
fishermen the freedom to do what they like, and pretty soon there won't be any
fish left for them to freely consume.

Information differs. In the absence of artificial restrictions, information is
non-rivalrous, and may be subject to network effects (that is, the value of
information to me does not decrease when you "consume" it, and its value may
actually increase if we share).  My commonsense desire for freedom means that
I want a physical commons to be regulated.  But the same logic does not compel
me to be a fan of government imposition of IP rights.  I can consistently
accept one and oppose the other.

I did some poking around, and discovered that the Groves-Ledyard mechanism for
solving the public goods problem through government intervention was invented
in 1977, and at least as of 1994, it was recognized as a method with
potential, but existing "only on the pages of a journal".  Unless I am
mistaken, it seems to be aimed at allocation problems, not information
markets. See http://www.econ.ucsb.edu/~tedb/ChenPlott.pdf.

Vickrey auctions, or "second-price auctions", were described in 1961 by
William Vickrey (a Columbia U economist who was awarded the Nobel Prize. on
other grounds, on 8 October 1996, and died two days later).  They are
conducted by taking sealed bids for an asset, and awarding it to the highest
bidder, who pays the price of the second-highest bid.  Under appropriate
conditions, these rules overcome strategic bidding problems that afflict
ordinary auctions. Vickrey auctions have been used to sell off licenses to
work slices of broadcast bandwidth (a rivalrous resource), and in sales by
mail of collectible postage stamps (also a rivalrous resource). Again, this
device seems to be aimed at a problem different by nature from software
development.  See http://www.columbia.edu/cu/record/23/06/14.html;
http://netec.wustl.edu/BibEc/data/Papers/fthvander99-W02.html.

Cheers,
Frank B