[Reader-list] essay on open source

[Monica Narula]

Might be an interesting read:


Ganesh Prasad: Open Source-onomics: Examining some pseudo-economic arguments
about Open Source By Ganesh Prasad


Synopsis:
While the technical arguments against Linux and Open Source are being 
gradually silenced, several unrefuted myths about the economics of 
Open Source continue to float about, confusing and scaring off people 
considering these alternative products. Worse, the Open Source 
community is itself divided on such issues, and is unable to provide 
a cogent rebuttal. This article is an attempt to set the record 
straight.


Contents


"The poor performance of Linux stocks proves that Linux is a failure"
"Open Source is not economically viable"
"Not paying for software will ultimately kill the industry"
"Why will programmers continue to contribute code if they can't make 
money from it?"
"Even Open Source development involves effort, so there has to be 
payment for that effort"
"Are Open Source programmers writing themselves out of their jobs?"
"But free isn't natural. There's no such thing as a free lunch."
"Is software a commodity?"
"Who will invest in software development if it doesn't yield a return?"
"Open Source may have a niche, but proprietary commercial products 
will continue to rule"
"Customers will never trust something that is free"
"Open Source may release value, but it doesn't create value"
God, Government, Market and Community
Conclusion
References
About the Author



"The poor performance of Linux stocks proves that Linux is a failure"

What's the relationship between the performance of Linux stocks and 
Linux's own prospects of success? When stocks of companies like Red 
Hat and VA Linux Systems skyrocketed in the wake of their IPOs, that 
was taken as an indication that Linux had arrived, and Linux 
advocates said nothing to counter the impression. Indeed, many 
gleefully used the stockmarket to show their peers that Linux was to 
be taken seriously. So now that the same stocks are trading far below
those prices, doesn't it indicate that the Linux shine has worn off? 
Look at the number of Linux companies in the doldrums, that have laid 
off employees or closed down. That certainly seems to indicate the 
end of Linux. It was a great idea that failed to deliver on its 
promises, and we should now go back to software and companies that 
are more firmly grounded in economic realities, right?


Well, first of all, Linux is quite independent of Linux companies in 
a way that the market has never seen before. Windows means Microsoft, 
Netware means Novell, OS/390 means IBM. The fortunes of operating 
system and company are usually heavily intertwined. That's simply not 
the case with Linux. If Novell closes down, that pretty much means 
the end of Netware, unless another company
sees fit to buy the product and keep it alive (On the other hand, 
Microsoft may simply choose to buy Netware and kill it!). Such things 
can't happen to Linux. As an Open Source operating system, Linux is 
teflon-coated against the commercial failures of the companies that 
try to build business models around it. Commercial entities are 
Johnnies-come-lately to Linux anyway. Linux managed
without them for years, and will continue to exist even if they 
should all disappear.


In fact, companies that claim to support Linux are wrong -- Linux 
supports them!

"Open Source is not economically viable"


OK, so Linux as a technical product may continue to exist, but if 
companies cannot make money from it (as is seemingly evidenced by the 
woes of the Linux companies today), then it's another great technical 
success that is a commercial failure. History is littered with such 
examples. Linux will never go anywhere unless people can make money 
off it.


Now here's an argument even Open Source sympathisers have trouble 
with, -- the assumption that money must be made for Open Source to 
succeed. However, the argument is incomplete because it chooses to 
concentrate on the supply side alone, without regard to the demand 
side.


While it may well be true that no one can make money from Open 
Source, that should only serve to discourage suppliers of software. 
On the demand side, however, consumers are saving tons of money by 
using Open Source. Since a penny saved is a penny earned, there is a 
strong economic basis for the success of Open Source after all. 
Someone is saving money, and they will fight to keep those savings.


The demand side is the one that should drag the rest of the market, 
kicking and screaming, to a regime of drastically lower prices. 
Vendors will see their margins shrink, many will close down, newer, 
leaner ones will spring up, vendors in other market segments will 
provide software, and eventually, the market will adjust itself to 
the new reality. Dollar volumes will go down even as unit volumes go 
up. The transition could be quite painful for suppliers of software, 
but no law of economics says it cannot happen. It is not a law of 
nature that vendors must continue to make the revenues and profits 
they are used to.


"Not paying for software will ultimately kill the industry"

There are the long-term worriers who don't like this scenario at all, 
even as they accept that it may happen. Yes, they say, customers will 
save money in the short term, but they're eating their seed corn. 
Customers need financially healthy vendors to be around to support 
them and continually improve their offerings. A herd of gnu may be 
happy at the disappearance of the local lion
population, but the herd needs predators to cull its ranks of the 
weak and the sick, and to keep its gene pool healthy. Saving money by 
starving your suppliers is not in your own long-term self-interest.


This is a strange suggestion from people who probably describe 
themselves as market capitalists. When customers make a purchase, 
should they think about their own savings or should they worry about 
the supplier or the economy? Is it reasonable to ask them to choose 
costlier products because that will ultimately and indirectly serve 
their own interests? The argument smacks more of Marx
than Adam Smith, -- The State above the individual.


This was the convenient argument of horse-buggy manufacturers when 
the locomotive arrived, and of the railroad companies when the 
aeroplane appeared. We've seen this dozens of times in our history. A 
generation of suppliers is threatened, and they try to convince the 
rest that society as a whole
is threatened. If history is any guide, consumers will make the 
decisions that suit their immediate interests, and vendors will have 
no choice but to adapt as best as they can. Those decisions may 
decimate them, but civilisation will survive, as it always has. 
L'Etat, c'est moi.


"Why will programmers continue to contribute code if they can't make 
money from it?"

Right. Given a choice between a free software product and a 
competitor with a price tag, it is understandable if customers choose 
the free one. But why should anyone write it for free in the first 
place? What would they gain?


The assumption behind this question is that there are only three 
types of transactions between parties: win-win, win-lose and 
lose-lose (Lose-lose transactions should never occur under conditions 
of rational decision-making). Win-lose transactions occur when the 
winning party is stronger than the other and can force a transaction 
through. All other transactions are willingly entered into by two 
parties and are win-win.


In the case of Open Source, the recipients of the software are 
obviously winners, but the writers of the software don't seem to be 
winning anything because the recipients don't have to pay them for 
it. Therefore, our assumption tells us that this not a win-win 
situation, and that there is no economic incentive for a programmer 
to write Open Source software.


For the moment, let us go along with the assumption that the only 
motivation for writing software is economic (which is not true). Even 
with such an assumption, the reasoning is flawed because there are 
other types of transactions which are not so obvious and which have 
not been considered: win-neutral, lose-neutral and neutral-neutral.


Under conditions of rational decision-making, lose-neutral and 
neutral-neutral transactions have no incentive to occur, but 
win-neutral transactions can and do occur quite frequently. Everyday 
examples include someone asking for directions, or asking for change. 
Here, the person asking certainly gains something from the 
transaction, but the other party neither gains nor loses from it. 
Therefore, the transaction can still take place.


Most Open Source programmers would probably not write software and 
give it away if it cost them something to do so. However, they don't 
perceive the effort of writing it to be a cost. Most of them write 
software to solve a specific problem that they happen to be facing, 
or to "scratch their personal itch", as Eric Raymond points out. The 
process of developing such software is actually quite pleasurable and 
energising to most good programmers. Once the software has been 
written, giving away copies of it does not deprive the programmer of 
the
ability to continue to use it, and it costs them nothing extra to do 
so. It is a win-neutral transaction, and therefore there is no 
economic reason to prevent it from taking place.


(Economics purists would point out that there is indeed a cost to 
giving away the software -- the opportunity cost of not selling the 
software instead. However, for many programmers, the process of 
selling their software is more trouble than it is worth, so the 
effective opportunity cost is actually zero, and it is a win-neutral 
situation after all.)


If that was not sufficient reason, Open Source programmers also tend 
to work with others who share their interest and contribute code. 
They enjoy a multiplier effect from such cooperation. Metaphorically 
speaking, each programmer contributes a brick and each gets back a 
complete house in return. In software, unlike with physical goods, 
one person's gain does not come at the expense of another because a 
copy does not deplete the original in any way. Sharing software is 
not a zero-sum game, and there are tremendous efficiencies
from participating in such a cooperative endeavour.


No, the absence of direct monetary reward does not really constitute 
a disincentive to writing Open Source software.


"Even Open Source development involves effort, so there has to be 
payment for that effort"

OK, Open Source programmers lose nothing by giving away the software 
that they have already written (and they may even gain in 
non-monetary terms). But some effort has gone into their products. 
Shouldn't such effort be compensated in cash as well? Programmers 
have families to support, and they need to put bread on the table. 
They can't live on software and satisfaction alone. To be viable in 
the long term, Open Source needs to evolve a mechanism to support its 
contributors financially. Without remuneration, over time, most of 
these
volunteer programmers will simply wander away in search of food.


This argument appeals to equity as well as economic commonsense, and 
finds sympathisers even in the Open Source community. Certainly, we 
would all like to see programmers being compensated for their 
contributions. There are several business models that are being 
attempted. The SourceForge and Collab.Net method of raising 
contributions from users to pay developers is an innovative
one, but its success is as yet unproven. Programmers could also try 
and make money by supporting their creations, maybe selling copies of 
it as well, providing consultancy and professional services, etc. But 
we still don't know of a foolproof business model for this sort of 
thing. There may not even be one. In the absence of a good system 
coming along pretty soon, Open Source will perhaps continue to be 
written by volunteer programmers who have day jobs writing commercial 
software. It could also expect contributions from hardware or 
services companies with a stake in its success.


But even in this worst case, does it mean that Open Source will stop 
being written? As long as Open Source programmers have alternative 
sources of income (i.e. day jobs), they lose nothing by working on 
Open Source projects in their spare time (a win-neutral transaction). 
With the increasing number of people being exposed to Open Source, 
the pool of contributors is in fact growing larger by the day.


"Are Open Source programmers writing themselves out of their jobs?"

But that leads to what may seem the ultimate argument against the 
economics of Open Source: How long can programmers work day jobs at 
commercial software companies and write software at night that puts 
those same companies out of business? Writing Open Source software is 
not just irrational, it is positively suicidal. 'Tis an ill bird that 
fouls its own nest, not to mention an extremely foolish one.


Indeed, this appears to be a very powerful argument. However, Eric 
Raymond comes to our rescue with this statistical nugget: Only 5% of 
all programmers are actually engaged in writing "for sale" commercial 
software. The other 95% actually write and maintain custom-built 
software for in-house use. Open Source doesn't threaten custom-built 
software at all. It only competes with packaged software that is sold 
as a product. And so, in the worst case, Open Source programmers are 
only going to put 5% of their own kind out of work. That's an 
acceptable level of collateral damage, as the generals might say.


"But free isn't natural. There's no such thing as a free lunch."

But this entire idea is crazy, somewhat like producing something out 
of nothing! How can one seriously expect an entire economy to be 
based on something that is absolutely free? Doesn't it violate some 
fundamental economic law, just as producing something out of nothing 
violates the Law of Conservation of Mass in physics?


Let's examine whether it does.


We realise it is not possible for any supplier to charge less for a 
product than it cost them to produce it. That would mean a loss. At 
the same time, if all products in a category are roughly alike in 
function, and there are plenty of suppliers for those products, it is 
not possible for any of them to charge significantly more than their 
competitors without pricing themselves out of the
market. So they should all end up charging just slightly more than it 
cost them to make the product, making only modest profits in the 
process. The underlying assumption here, though, is that we have 
"pure competition".


"Pure competition" in economics means a buyers' market. Consumers 
love it and suppliers hate it (though, curiously, all suppliers claim 
to welcome it). A competitive market means that consumers can easily 
find any number of alternative suppliers for a product. It also means 
the product is a commodity.


A "commodity" product means that there is very little differentiation 
between the various versions of a product. They all do the same 
thing, with only minor, insignificant differences. Consumers don't 
bother about brands when buying commodities. Suppliers hate 
commoditisation for the same reason and try their best to create 
artificial differentiation. (The best example is the Vodka
Paradox: Vodka, by definition, is a colourless, odourless and 
flavourless drink of a specific composition, so all vodkas should be 
the same! But we know of both premium and downmarket brands of vodka, 
so at least some of them are, by definition, not vodka at all!)


Look at the software market from these angles. Is it competitive? Is 
it a commodity market? Think about whether it would be easy for you 
to replace Windows on your PC with another operating system. Think 
about whether such a system would work the same way. Such an analysis 
may suggest that this
is neither a competitive nor a commodity market. However, these 
aren't very straightforward questions to answer because some recent 
developments have impacted the market a great deal, but we'll come 
back to them a bit later.


The important point to note is, if the software market becomes a 
competitive commodity market, the price of software should be close 
to the cost of producing it. That's what economic commonsense says 
should happen.


How about the marginal cost of production of software? It's fairly 
well known that the cost of producing the second copy of a piece of 
software is so low as to be virtually zero. How much effort and cost 
is involved in burning a CD, anyway? That's the marginal cost of 
software, i.e. virtually zero.


"Marginal cost of production" refers to the cost of producing the nth 
unit of a product. It may cost a lot of money to set up the 
facilities to produce the very first unit of a product, but it costs 
much less to produce the second (because those facilities are already 
in place), and probably even less to produce the third (due to 
continuing efficiencies of production). The marginal cost of 
production generally declines until it reaches some steady level.

--

"Is software a commodity?"

But why would the software market suddenly turn competitive and into 
a commodity market? The answers are standards, the Internet, and Open 
Source software itself.


The correct way to build an application using 1990s thinking is to 
grab a copy of Visual Basic or PowerBuilder, develop a Windows 
executable and install it on every user's PC. The larger the number 
of PCs to install the software on, the more you walk around. When you 
need to upgrade the software, you put on your sneakers again and take 
another walk.


Now fast-forward to today. The correct way to build an application 
using millennial thinking is to put the application on a website and 
get users to point their browsers at it. When you need to upgrade the 
software, you modify it once on the server and your users hit the 
Refresh button on their browsers.


Web technology, if you stop to think about it, is a predominantly 
server-side technology. True, there's the Java applet, but hardly 
anyone uses it. There's Javascript, but ever since the browser wars, 
when you couldn't be sure which browser would break your code, 
developers have been wary of coding a lot of Javascript. That leaves 
virtually all development on the server side. All that the user needs 
is a lowly browser.


At one stroke, the web has commoditised the server, because all a 
server needs to do is talk some standard "protocols". If it knows 
HTTP (HyperText Transfer Protocol), it can talk to a browser. If it 
spits out some HTML (HyperText Markup Language), the browser can 
actually render it for the user to read. Whither brand? Neither the 
browser nor the user sees the brand of the server software. The same 
goes for other Internet standards such as SMTP (Simple Mail
Transfer Protocol) and LDAP (Lightweight Directory Access Protocol). 
They have completely commoditised the servers that implement them. 
Suddenly, standards are king, and anyone can play.


The favourite vendor tactic, -- differentiation, -- doesn't work very 
well in this situation. Differentiation breaks standards. More is 
less. A product that fails to comply with a standard is automatically 
incapable of surviving in the Internet ecosystem. Any superfluous 
features it boasts simply wither away through disuse. It's a 
self-perpetuating discipline. Internet protocols and standards rule 
with an iron fist. So it looks as if commoditisation is here to stay, 
however much vendors may hate it.


What's more, every such standard and protocol is faithfully 
implemented in at least one Open Source product. That keeps 
commercial implementers honest, too. No oligopoly is possible in the 
Internet-era software market, because any Open Source implementation 
pre-emptively breaks the cartel! (As an example, the nascent 
oligopoly among web application server vendors is coming under severe 
pressure from the Open Source JBoss and Enhydra. Expect to see prices 
tumble in this market).


And so, here we are, in a competitive and commodity market after all. 
We know that in such a market, the price of software will be close to 
the cost of producing it. So if we can show that the cost of 
producing software is zero, then the price tag of zero is justified.


"Who will invest in software development if it doesn't yield a return?"

It sounds a preposterous argument on the face of it. How can the cost 
of software ever be zero? Doesn't it take significant effort to 
develop software? Even Open Source software is not miraculously 
produced. Programmers spend many man-months of effort on it. So how 
can the price of software ever be zero?


Selling below cost is considered predatory pricing in many countries. 
In international trade, it's called "dumping". Is Open Source guilty 
of "dumping" or predatory pricing? If unchecked, this could destroy 
the commercial software industry. Who will invest in developing 
software if they cannot recoup their development costs?


The answer to this question may be surprising, because it overturns many of our
fundamental assumptions about the way the world is run.


Let's start by observing that if Linux had been developed by a 
commercial organisation, it could never have been free. Commercial 
organisations, whether funded by debt or by equity, need to show a 
return on their investment. They cannot waste that investment by 
giving away their products. Therefore, even if it costs nothing to 
create additional copies of software (what's called the "marginal 
cost" of software), the initial costs of development must be spread 
over many copies, they must be priced in such a way that those costs 
can be recouped, and a positive return must be shown on the initial 
investment.


Of course, for this to work, software must be shoehorned into the 
mould of a physical product. Copying of software by anyone other than 
the producer must be made a crime. The infinite replicability 
inherent in software must be artificially curtailed through 
legislation. Only then can the model work. This is precisely what we 
have with commercial software today. It is important to understand 
that the commercial model works by imposing a system of artificial 
scarcity. It is physically possible and economically feasible to 
produce as many copies of software as the world needs, but that is 
however, legally punishable. That means that many people who need 
software but cannot pay the asking price must go without it. That is 
the only possible (legal) outcome. There are people who need a 
software product, and the product can be replicated at little cost, 
yet the transaction cannot take place. From society's viewpoint, this 
inefficiency is the price it pays for choosing a commercial vehicle 
for software development.


But now, consider an alternative to the investment model. If the cost 
of software development can somehow be treated as an expense, and 
simply written off, then the software is freed from the requirement 
to show a return on investment. There will be no need to artificially 
constrain its natural replicability. The world can have as many 
copies of it as it needs. There will be no need for restrictive 
legislation. From society's point of view, what could be more 
efficient?


Large expenses, however, cannot readily be written off. They need to 
be "amortised" over a sufficiently large number of units. This is 
where another property of software becomes invaluable. Software can 
quite practicably be developed by hundreds, even thousands of 
programmers. Other intellectual works, such as books, music or 
movies, while sharing software's trait of infinite replicability, 
cannot be produced by a cast of thousands. Of all the works of 
mankind, physical and intellectual, software stands alone in its twin 
characteristics of infinite replicability and amortisability of 
effort.


Looked at this way, Open Source seems the more natural and efficient 
way to build software. Get a large number of interested developers to 
work on a piece of software. Most of them spend less than a couple of 
hours a day on it, so they don't mind "writing off" the effort in 
terms of expecting a monetary return. That is why Open Source 
operating systems and associated software are free for every man, 
woman and child on earth to copy. By keeping important software like 
Linux out of the ambit of commercial interests, society has 
benefitted handsomely.


Software, like wealth itself, is potentially limitless. Capitalism 
correctly views wealth as potentially infinite, and fuels global 
growth to increase the overall size of the economic pie. However, the 
current structure of the commercial software market is not 
capitalistic at all, but mercantile. It sees software as a limited 
good that needs to be hoarded and released sparingly. It is therefore 
incapable of being an engine of growth.


Lest our current "capitalistic" mileu should give anyone the wrong 
idea, it must be noted as a matter of sociological interest that 
commercial organisations do not have a divine right to exist. They 
exist at society's pleasure, because they have hitherto been the most 
efficient known means of producing quality goods and
services at reasonable prices. However, it appears that the 
investment model that underlies all commercial activity is a grossly 
inefficient vehicle to deliver to society the levels of software that 
it needs.


So here's a really subversive thought: Perhaps corporations shouldn't 
develop software
at all! Just as free market advocates call for governments to get out 
of the business of
running industries, perhaps we should call for corporations to get out of the
business of writing software. They are applying the wrong economic 
model to software,
and it is proving too costly and inefficient for society to bear. We 
need a model
that takes a capitalistic view of software, not a mercantile one.


What we see today with the gradual success of Open Source is perhaps society's
"invisible hand" turning over software development to the more 
efficient (from its
viewpoint) Open Source vehicle, and gradually relegating commercial software to
the fringes of economic activity. Adam Smith would have approved.


(Along the way, notice that we have also shown how the cost of software can be
effectively reduced to zero, thereby justifying its zero price-tag.)


"Open Source may have a niche, but proprietary commercial products 
will continue to rule"

We may have shown that Open Source is viable and will most likely 
continue to survive,
maybe even thrive. But isn't it too much to suggest that proprietary, 
commercial software
will go the way of the dodo? Is this really a commodity market? 
Aren't most leading
commercial software products ahead of their Open Source equivalents, 
anyway? How can
Open Source hope to beat commercial software in features? For 
example, can the Open
Source database package PostgreSQL ever hope to match Oracle? 
Customers won't use inferior
products just because they're free! They'd prefer to pay for better products.


This situation is similar to the story of the two men who come upon a 
tiger in the jungle.
One of them starts putting on his running shoes. "Are you crazy?" 
whispers the other,
"You can't hope to outrun a tiger!" "I don't have to outrun the 
tiger," explains the first,
"I only have to outrun you!"


Open Source products don't have to become better than their 
commercial equivalents. They
just have to become good enough to meet user requirements. Why would 
users pay for features
they don't need? Do you really need a webserver inside your database? 
A Java Virtual Machine,
perhaps? Or a whole host of features you're never going to use? No? 
Then why pay for Oracle
9i? PostgreSQL lets you create tables, fill them with data, fire SQL 
queries at them, and
gives you reasonable performance. Isn't that good enough for you, and 
for 90% of the market?
So PostgreSQL didn't have to outrun the tiger, did it?


Notice that this is an economic argument. It is not a technological 
argument along the lines
of "Open Source products evolve faster and fix bugs quicker, so 
they'll get better than
their commercial rivals one day". Actually, we couldn't care less. At 
a certain point in
time, commercial vendors may be reduced to selling differentiated 
features that 90% of
the market doesn't need, while the most commonly-required features 
will be available to all,
free of charge. Those common features will conform to standards, 
while proprietary,
differentiating features will remain exactly that, -- proprietary and 
non-standard.


It is such commoditisation of the market that could slaughter 
proprietary commercial
software, driving it into niches and ensuring that the mainstream 
goes Open Source.


"Customers will never trust something that is free"

All of this sounds pretty convincing in theory, but Open Source 
should have been growing
like gangbusters if all of this is true. But we see very gradual 
adoption of Open Source
in the market. Is it perhaps because people will never respect and 
trust something that
is free...?


In economics, we have two concepts, -- competing products and substitutes.
Competing products are other brands in the same category. Substitutes 
are products in
another category that perform much the same function. If I don't like 
Nescafe, I'll go
with Moccona (a competitor), but if I read a medical report finding 
that coffee is
extremely dangerous, I will drink tea rather than coffee when the 
urge hits me. It's
not the same thing, but I could bring myself to settle for tea. 
That's what a substitute
means.


It's more difficult to switch to a substitute than to a competing 
product, but it can be
done when there are compelling reasons. Open Source software is a 
substitute, not a
competitor, to the entire category of proprietary commercial 
software. It requires a
different mindset and a willingness to work with different 
development and support
mechanisms. That's what makes its uptake less than straightforward.


With both substitutes and competitors, "good enough" is a great 
reason to switch when
the price is far lower, and that is what Open Source offers. But with 
substitutes,
there is an extra mental adjustment process that consumers need to go 
through before
full acceptance happens. That takes time. Consumers need time to gain 
confidence from
the positive examples of early adopters. The current situation with 
Open Source in
the marketplace reflects exactly this stage of the proceedings. 
Potential savings and
a greater degree of control over one's destiny are the compelling 
arguments that will
encourage the switch. When the mental adjustment process is complete, 
the downfall of
proprietary software could be swift (put options on Oracle, anyone?).


"Open Source may release value, but it doesn't create value"

New thinking among financial analysts has discovered that most firms 
reporting improved
earnings year after year are doing so by cutting costs rather than by 
increasing revenue.
By reducing waste and improving productivity, companies are 
"releasing" value that was
hitherto "locked up" in inefficient processes. But they aren't 
creating new value.
They're not innovating. True wealth comes from new ideas, and there 
don't seem to be
too many of them. So there are natural limits to how far these 
companies can go before
they hit a plateau.


Isn't Open Source something similar? Sure, it'll help us reduce 
costs, but is it helping
us create anything? It's nothing more than a cheaper substitute for 
our existing
software, so its long-term impact will probably be marginal, not revolutionary.


Well asked, and therein lies the difference between a market and a 
community. To play in
a market, you need to have money. That automatically excludes all the 
people who can't
pay. It's a shame that in a world of over 6 billion people, about 
half are just bystanders
watching the global marketplace in action. There are brains ticking 
away in that half-world
of market outcasts that could contribute to making the world better 
in a myriad little
ways that we fortunate few don't bother to think about. There are 
problems to be solved,
living standards to be raised, yes, value to be created, and the 
"market" isn't doing
it fast enough.


God, Government, Market and Community

There are millions who have been waiting for generations for their 
lot to improve. Religion
has promised them a better afterlife, but no god has seen fit to 
improve their present one.
In a world where socialism has been humiliatingly defeated, 
governments seem ashamed to
spend money on development. Everyone now seems to believe that 
governments must be
self-effacingly small. The market is now the politically correct way 
to solve all problems.
But the market, as we have seen, doesn't recognise the existence of 
those who have nothing
to offer as suppliers and nothing to pay as consumers. They are 
invisible people.


Therefore it falls to the miserable to improve their lot themselves. 
Given the tools, they
can raise themselves out of their situation. They will then enter the 
market, which will
wholeheartedly welcome them (though it hadn't the foresight to help 
them enter it in the
first place).


Where will such tools come from? In a world where intellectual 
property has such vociferous
defenders that people must be forced to pay for software, information 
technology widens the
gap between the haves and the have-nots, a phenomenon known as the 
digital divide. If
producers of software deserve to be paid, then that means hundreds of 
thousands of people
will never have access to that software. That's a fair market, but a 
lousy community.


Open Source is doing what god, government and market have failed to 
do. It is putting
powerful technology within the reach of cash-poor but idea-rich 
people. Analysts could
quibble about whether that is creating or merely releasing value, but 
we could do with a
bit of either.


And yes, that is revolutionary.


Conclusion

Is it possible to make money off Open Source? In the light of all 
that we have discussed,
this now seems a rather petty and inconsequential question to ask. 
There is great wealth
that will be created through Open Source in the coming months and 
years, and very little of
that will have anything to do with money. A lot of it will have to do 
with people being
empowered to help themselves and raise their living standards. No 
saint, statesman or
scholar has ever done this for them, and certainly no merchant. If 
this increase in the
overall size of the economic pie results in proportionately more 
wealth for all, then that's
the grand answer to our petty question.


Economics is all about human achievement. It wasn't aliens from outer 
space who raised us
from our caves to where we are today. It was the way we organised 
ourselves to create our
wealth, rather like the donkey with a carrot dangling before it that 
pulls a cart a great
distance. Open Source gives means to human aspiration. It breaks the 
artificial mercantilist
limits of yesterday's software market and unleashes potentially 
limitless growth.


When the dust settles, and even the greatest industrial creations of 
today stand dwarfed
by the scale of development that Open Source will bring in its wake, 
the world will have
learnt a thing or two about economics.


References


"The Cathedral and the Bazaar" by Eric S. Raymond
( http://www.tuxedo.org/~esr/writings/cathedral-bazaar)
"The Magic Cauldron" by Eric S. Raymond
( http://www.tuxedo.org/~esr/writings/magic-cauldron)
"A-Level Economics" by Ray Powell, Letts Educational
"The Real Meaning of Money" by Dorothy Rowe, Harper-Collins, 1997



About the Author

Ganesh Prasad has been a Linux user since 1996, and his major 
fascination with Open Source
has been its social and economic impact, though the technical side 
has its appeal, too. He
has been troubled by much of the pseudo-economic bunkum around Open 
Source, and has
decided to shine the brilliant light of his logic to cut through the 
clutter, making up
for lack of rigour with stabs of attempted humour.


Copyright (c) 2001 Ganesh Prasad.
Permission is granted to copy, distribute and/or modify this document
under the terms of the GNU Free Documentation License, Version 1.1
or any later version published by the Free Software Foundation;
with no Invariant Sections, no Front-Cover Texts and no
Back-Cover Texts.
A copy of the license is at http://www.gnu.org/copyleft/fdl.html.

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