Re: economic efficiency of free software

Stephen J. Turnbull wrote:
> What goes wrong _with the economic analysis_ in the open source model?
> Very simply, there is no constraint to pay market price, and most
> buyers don't.  This means that the buyer who actually pays market
> price is randomly selected, and I can think of no reason why market
> price will be pushed to marginal value.[3]

and:
> ... This is the $64 billion question.  In the proprietary model,
> there's no problem.  You ask for the money, and when it comes, you
> count it and divide by price.  That's "demand."  With free software,
> though, you ask for the money, and it comes---but if your price is
> substantially higher than reproduction cost, demand -> 1.  Joe
> First-User makes copies for all his friends, and _all the other
> "demanders" are not counted._  This is a problem only for economic
> statisticians: it's exactly what _we_, as free software advocates,
> want!  Right?  Except that it makes it really hard to accurately
> assess, even ex post, what the "bigger wins" were.

Don't make the mistake of assuming proprietary software development's
price model leads to an accurate assessment of "social value" either.

We have all heard stories which indicate that the most successful
software companies and their products _may_ not be the best choices
from a social/moral point of view.  If you follow some open source
arguments, they may not be best from a technical point of view either.
I'm not saying one way or another, but I don't think it's a valid
assumption to make.

Also, one of the problems with any proprietary product (not just
software) is that some "demanders" are refused access to the product
simply because the economic process requires that refusal, not because
there is any real cost to the business in those demanders having the
product.  Copying music is a fine example.

I think it is a much bigger issue than free software: a good many of
those people attending WTO, FTAA, G8 etc. protests are there as a
result of being refused access to resources (such as land, food,
freedom) despite those resources being physically readily available.

The refused access is purely so that the economic process functions.
In extreme cases, this leads to death and/or severe deprivation.  It's
a big deal.

As we grapple with the problem of economic viability of free software,
without discarding the principles of free software, I think we are
searching for a solution to a relatively tractable aspect of that
bigger issue.

-- Jamie