Subject: Re: crux of the essence
From: Stephen J.Turnbull <stephen@xemacs.org>
Date: 16 Oct 2001 15:12:25 +0900

>>>>> "Tom" == Tom Lord <lord@regexps.com> writes:

    Tom> For example, in the software world, we rely heavily on
    Tom> contentiously constructed property rights

I don't understand what you mean by "contentiously constructed".

There is a regular process for constructing these property rights, for
copyright it is totally automatic and nonadversarial, and with a few
cranky exceptions people pretty much universally accept it.  The
principle of patent is contested by a few, mostly free software types,
but I think most people who object to it "in principle" really mean
they don't see how it can be efficiently and equitably implemented.

Dealing with violations is contentious, but that's because of the
ambiguities involved, and the difficulty of detection, which implies
very unequal enforcement.

    Tom> -- and Coase offers a theory relating property rights to
    Tom> economic efficiency.  Do you have a specific application of
    Tom> Coase's theory in mind regarding Free Software?

Yes.  A world with only Free Software is necessarily poorer than that
of some mixed regime.  Weakened property rights (1) somewhat reduce
incentives to develop, and enormously reduce incentives to market and
maintain, software, and---at least as important---(2) completely
obscure the price signals that inform developers of what people want
most.  It turns out that measuring quantities is not very useful; what
people want most is not at all correlated with what people want most
of.  It is also true that a world with only proprietary software will
be poorer than one with some free software, but that cannot be deduced
from Coase.  That requires Williamson.

As for "Williamsonian analysis," that's what the Kevin Burton
micropayments thread was doing, although the participants are unlikely
to be aware that they were "speaking prose."  :-)

Here's another example.  "Ransom" software is an _incredibly_
inefficient way to distribute software.  Copyright assigns the right
to copy, a property right, to the developer, who is easy to identify.
Organizing a market in the right to copy and/or acquire executables of
the software is a no-brainer.  The businessmen spend all effort on
strategic thinking about how to target likely customers with
information of the product's existence, and which product to produce.
The customers will come to them.  Again, and again.  They have no
choice.

Ransom software effectively[1] assigns the property right in copying to
everyone.  In order to make any money, you have to find a sufficiently
large bunch of people who are willing to sell part of that property
right.  Not an easy task in itself.  Remember how people react to
being asked for email addresses?  That's not just spam avoidance, it's
also preserving their option to free ride anonymously!  When you go
'round asking for contributions, they don't want you to know their
names.  That is, this market is not merely not self-organizing, it's
self-dispersing!

Then you have to negotiate with your targets over the price.  That's
going to be _really_ hard because they have the extremely plausible
threat of free riding even once you have their names.  Getting
substantial amounts of money from them is going to be like pulling
teeth.  What a waste of time!  After getting into that, who has time
or emotional energy to think about strategy?

Yikes!  Scary stuff, this Williamsonian analysis.  :-)


Footnotes: 
[1]  I'm cheating here in order to remove Coase from the analysis,
which would bias the argument in favor of proprietary software.

-- 
Institute of Policy and Planning Sciences     http://turnbull.sk.tsukuba.ac.jp
University of Tsukuba                    Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
              Don't ask how you can "do" free software business;
              ask what your business can "do for" free software.