MICE Economic Research Studies

[Mark Ferguson]

Having read the abstract of "Open-Source Software: An Economic
Assessment", I have to take the authors to task on some of their initial
assumptions, such as:
"...the main purpose of making the source code freely available is to
prevent a price-controlled market from evolving in the first place." - I
can think of many reasons why source code is made freely available but
this is surely not the main reason.

"Their motivation stems from an individual interest in solving a
problem, the technological challenge or the hope of establishing a
reputation. However, software supply should be determined by users'
actual wants." - This seems to mean that the authors are in favour of a
Soviet style demand economy. If ever there was an industry that has
shown how supply can stimulate demand it must surely be the software
industry! 

"The open-source model is poorly suited to be the only alternative form
of software development." - An obvious straw man. I know that a few OSS
advocates would like to see OSS as the only form of software development
but the majority accept the diversity of development models in current
use. I don't know anyone that advocates a single OSS/commercial software
split.

"If software is available free of charge, its development does not
generate proceeds, income,
jobs or taxes. This inability to add value cannot be compensated for by
using complementary strategies." - Surely it is a mistake to imply that
added costs means added value. This is clearly the sales pitch of a
software vendor. What they are missing is that there is a huge amount of
software developed by organisations, who are not software vendors, for
their own needs. These organisations, both commercial and
non-commercial, can see the many non-tangible benefits of sharing their
code with the wider community. A illustrative example that comes to mind
is the waste heat produced by power stations. Pumped straight into
rivers and lakes it can be a form of pollution. Electricity generators
are happy to 'give away' the heat to market gardeners who use it to heat
greenhouses and grow products that would otherwise be uneconomic if they
were to pay for the heating. This is exactly the situation that the
paper's authors claim does not exist: proceeds, income, jobs and taxes
from something 'free'. In the same way organisations, from charities to
banks, generate software as a by-product of their normal activities. As
by-products are not the principal economic activity of the organisations
that produce them, the concept of added-value is not relevant. This is
precisely why software vendors 'don't get' OSS. Their principal economic
activity is selling software licences. If there were companies that
existed to make profits from the sale of hot water, they would be just
as pissed off at electricity companies 'giving away' their excess heat
in the form of hot water!

Mark.

On Wed, 2004-01-07 at 05:38, Wouter Vanden Hove wrote:

> Just noticed 2 recent "academic" papers at
> http://mice.uni-muenster.de/mers/index.htm
> 
> Open-Source Software: An Economic Assessment
> Open Source-Software: Eine volkswirtschaftliche Bewertung
> 
> The Impact of Microsoft Deutschland GmbH on the German IT Sector
> Die Bedeutung der Microsoft Deutschland GmbH für den deutschen IT-Sektor
> 
> 
> Their conclusion in short: Microsoft good, Free Software Bad.
> Does anyone know something about the authors?
> 
> 
> w.
> 
> 
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