Open Source vs the Invisible Hand
17 points by Diana
17 points by Diana
The author is so close to realizing that economic assumptions are founded on the incorrect premise that humans are economically rational. This is the central reason why economists can't understand any externalizing market.
In economist jargon, information markets have negligible marginal cost; following a successful transaction, any buyer can become a seller in the same market, so the supply increases without bound, driving the effective price to zero. Nothing else is required to explain why Free Software is economically viable to produce and use. Frankly, we should instead be examining the distortions which enabled trusts like Wintel to operate for decades without proper regulation; at this point, only luxury goods like video games should naturally command non-zero price.
I think you've misunderstood the author's intent and the article. In the first paragraph:
... Open source breaks more or less the full set of market axioms at once.
I interpret the article more about showing what economic assumptions are being violated by Open Source without any real attempt at trying to explain it. The closest it gets is:
It looks more like several arrangements overlaid on each other, part gift economy, part shared infrastructure, part public archive, part reputation system, with no single mechanism carrying it.
Your theory is that FOSS is successful because distribution and replication costs are near zero. While I think this is a factor, it's not the only one and there are many other industries where it doesn't hold. You provide one, the game industry, only to dismiss it. There are others, such as image and video manipulation, sound editing, game development, 3d software, etc., to name a few.
In other words, near zero distribution and replication are necessary but insufficient to explain the success of FOSS. I suspect other conditions are that the target is "slow moving", allowing for incremental progress to be made over long time scales so that when a solution does arrive, it has staying power (operating systems, web servers, etc.). I also suspect that there's a large cultural component to it that might involve some combination of education, training and overly broad and restrictive copyright terms.