Subject: [not part of the spew!] Re: A few here may have an opinion on this
From: "Stephen J. Turnbull" <>
Date: Sat, 26 Oct 2002 19:50:56 +0900

>>>>> "L" == L Jean Camp <L> writes:

    L> The [MSFT financial results as a measure of success of a
    L> business model] are flawed because they are dominated by the
    L> returns of investment made by a monpoly.

Jean, you know better than that.  As a business model, monopoly is the
best way to achieve high profits.  The whole point of IP is to create
monopolies.  But your point is at least partly correct, if instead of
monopolization you point to the illegal practices.

    L> That customer surplus does not disappear

Nor does it (all) disappear in the monopoly case.  Much of it is
captured by the monopoly, which according to surplus accounting nets
to zero.  Of course there are distributional consequences which most
of us do not like (the rich, including those of us who own MSFT stock,
get richer substantially faster than the poor do), and there is
"excess burden."

    L> in the open source case, but instead is captured by the customer.

Given that it is ever created.  The expectation that rates of surplus
creation will be enough higher in regimes with IP to offset the excess
burden is the only reason given in the Constitution for allowing
Congress to create such monopolies.

    L> Try environmental economics.  There is the destruction of a
    L> good with many benefits that appears to be only wonderful in
    L> GDP.

Yeah, and you know something, Jean?  The means that all Western
societies have adopted to deal with this is _enclosure_, which is the
real estate equivalent of IP.  (Of course in the U.S. at least we
proceed to screw that up by nationalizing the capital loss through
depletion allowances and the like, leaving the profits to the oil
companies. :-( )  Be careful what analogies you choose!

    L> Open source creates value that is hard to measure: innovation,
    L> human capacity, and frankly, human autonomy.

Closed source is more conducive to innovation (ie, productization, at
least the "last 20%": docs, UI glitch-smoothing, etc).  Open source is
likely more supportive of invention, especially among "hobbyists" (who
can have "macro" effects, cf Linux, just that they aren't paid for
their labor).

But the reason I'm here, even though I believe the second-to-last
sentence, is precisely that you're absolutely right about human
capacity and autonomy.  Well said, Jean.

    L> If you want to quantify open source you need to credit open
    L> source and interoperabilty with any gains created by the
    L> Internet, given its fundamental dependence on open source.

Be careful.  Exactly the same argument applies to closed source.  Eg,
as far as I know there are very few hosts on the Internet that will
boot without a proprietary BIOS.  Allocating the value of the Internet
between open and closed source is going to be a hard call.

Although Ruben was right to query the excessive simplicity of the
regression of TFP on open source, I don't think accounting from ground
up as you (implicitly) propose has a prayer of being accurate.  It
will just be too hard to avoid double counting and missing values.
The macro productivity regression is likely to give orders of
magnitude better accuracy.

    L> If you want to prove closed source is better you need to be
    L> able to prove that what is seen is actual created value not
    L> extracted consumer surplus.

Ie, you have to use GDP-style accounting (aka NIPA), which is
precisely designed to be the sum of the value-added in the whole

Then you need to quantify the hidden costs and benefits that never
"break out" into market transactions.

Institute of Policy and Planning Sciences
University of Tsukuba                    Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
 My nostalgia for Icon makes me forget about any of the bad things.  I don't
have much nostalgia for Perl, so its faults I remember.  Scott Gilbert