Subject: Re: economic efficiency of free software
From: "Benjamin J. Tilly " <ben_tilly@operamail.com>
Date: Wed, 14 Jan 2004 00:57:14 +0800

Kragen Sitaker <kragen@pobox.com> wrote:
> Here's a naive economic argument that spending money on free software
> is more efficient than spending it on proprietary software.  Perhaps
> there are some good ideas in here, but I don't know enough about
> economics to be able to judge.
> 
> 90% profit margins induced by copyright-based monopoly ultimately mean
> that less than the ideal amount of effort goes into improving software,
> and less than the ideal number of users benefit from the software.  

Any solution results in less than ideal investment.

[...]
> So, while there is a free-rider problem, in many markets, it turns
> out not to cost as much as the alternative frictions imposed by a
> government-granted monopoly on a particular piece of software.

This is an empirical claim.  And the outcome isn't entirely obvious.

Pick up "The Logic of Collective Action" for a readable treatment of
the economics of providing public goods.  There is no upper limit to
how poorly provided public goods can become with rational players.
Free software falls in that category, and I think that a major reason
that it is provided as well as it is is that people find other
incentives (fun, resume building, etc) to do it.  Certainly the dream
of a million happy people each donating a dollar or three to the cause
doesn't seem to be materializing...

[... many details snipped ...]

Cheers,
Ben