Open Source For Efficient Markets

Stacey Schneider studied work of this year’s winners of Nobel Prize for Economics and came to a conclusion that open source is software’s solution to create perfect efficient market (via Matt Assay). I know that this does not sound very convincing to the everyday PC user.

Why are efficient markets necessary? Efficient markets let the user choose and allow the vendor to earn money by serving better. They curb monopolies and exploitation by encouraging healthy competition. They make things abundant instead of scarce. It is a win-win situation.

How can open source enable them? Open source does more than a couple of things to enable this. Open source

  • provides the infrastructure through the community. It uses the power of aggregation. This arms the developer enough to build something, which can be used to break a monopoly or revolt against exploitation.
  • puts the product in the hands of the users directly, not only for usage but even for testing. This enables better testing, better feedback and a user who can choose with informed decisions.
  • encourages others to use the source code, to build on it, to innovate or to customzie. Source code is an artifact which is necessary to evolve software, but is not an idea by itself. Open source gives more importance to the idea itself, by making source code abundant. The abundance lets thounsands of other people, a lot of them with expertise, to review it and make it better.
  • reduces the cost of failure, which helps you experiment more.
  • uses the copyright to continue evolution, not to restrain it. I do not think open source is anti-copyright, credit should always ben given to the deserved. Open source discourages using copyrights and patents to exploit and manipulate the markets.

It is important to understand these benefits. Kim Brebach points to 13 reasons why Linux should be on desktops. I agree, but at the same time I feel that these are not the most important ones. Most of the benefits of Linux are because it is open source. Of course lower cost helps, but a free-of-charge Linux is still better than a free-of-charge Windows copy. Why? Because of the community. Why is the community effective? Becuause Linux has made its source code abundant, and thousands of people can now help in building on it, making it better and better for you. It is this inherently quality open source, that makes Linux a better choice.

The community also means that you are no longer dependent on a vendor who is trying to dominate the markets. Freedom from vendor lock-in is the true benefit of open source code. Vendor lock-in is not to be against the vendors, but to promote availability . As an example, there was no choice to Windows when hardware drivers were available only for its platform. Why did hardware companies provide drivers only for Windows? But now, with many working on it for other platforms, Windows cannot flaunt this uniqueness. The only way it can now compete with others is by being better. This is one of the classic examples of providing a common platform for all competitors and a step towards efficient markets.

Discussion [Participate or Link]

  1. Dave said:

    Interesting post, but I just can’t resolve in my mind the reasons you give for a free-of-charge copy of Linux being better than a free-of-charge copy of Windows… I don’t think you’re really taking into account the users of the software when you say that… possibly if you define who your subgroup of users are you could make a claim like that, but what makes software a better or best choice for someone is not that it’s open source–in fact I think that’s irrelevant to the majority of everyday PC users out there–it’s that the software does what the user wants and that they’re happy with it. I think you started out making the case that open source is better for the developers, and I won’t argue with that, but the jump to “a free copy of Linux is better than a free copy of Windows” because of the community, from a user’s perspective, doesn’t really seem to hold up. I don’t think most of us purchase anything based on the community it was created in–yes it does happen–and good examples are people’s name brand preferences. And the reason we choose specific brands over another is because over time they’ve proved that the product they sell “satisfies” some need we have in a better way than the other products. If the quality declines in a product line, we find something else… I’m not sure that the collective always knows best and that just because software was developed by thousands of people that it has any better measure of “quality” than something developed by a small shop (or behemoth company) with tightly guarded source code… I think ultimately, quality can only be determined by the user and how well the software meets their needs… anyways, I don’t mean to pick, I always enjoy reading your posts… it just seemed this claim was made with more bias than anything… and for the record, I’m not a Windows advocate… I enjoy using Linux far more often, and at home, more often than not, I’m using a MacBook Pro with OS X (Tiger)…

  2. Abhijit Nadgouda said:

    Dave, you almost made me rethink everything on open source :-) Thanks for your comment, it is quite valuable.

    I completely agree with you that only the user can suggest which is better. The reason I said this was was to highlight that Linux is not about being cheaper. In many places, cost of Linux being free is touted as the biggest advantage. Which I think overshadows bigger advantages like freedom from vendor lock-in.

    Regarding the community, I will stick to my thought that it makes a lot of difference to the user. Projects like Firefox, KDE, Gnome or OpenOffice benefit more from the community. The extensions, the bug fixes, the help and more importantly the community contributes to how it evolves. Even if I do not actively participate in the community, you benefit a lot of from it, and a lot of times without explicitly realising it. Open source, like efficient markets, is really beneficial to the end user, not just developers.

    Open source is not about collective intelligence, it is about taking feedback from many and availability of the code to many which increases probability of better quality. Everyone’s code might not be accepted, but many more good contributions get made because the code is widely available.

    I agree that which of the two is better is to be decided by the user. But if Linux is better than paid Windows for you, I will suggest that it is better than even that Windows copy was free.

  3. Greg M said:

    I do not think open source is anti-copyright, credit should always be given to the deserved. Open source discourages using copyrights and patents to exploit and manipulate the markets.

    A perfect market assumes perfect information, so correct attribution (crediting the author for his effort) is necessary. The other part of copyright/patents – the part that creates restrictions on what others can do with the _product_ of that effort – that goes completely against the principles of the free market, so the GPL for instance nullifies those kinds of restrictions.

  4. Abhijit Nadgouda said:

    Good point Greg.

  5. Ralph Hyre said:

    I prefer open source because of two factors

    experience: open source software has improved at a greater rate

    optimism: I believe open source will improve faster than closed source in the future.

    The software will get better not because of a promise of one company or copyright holder, it will get better because everyone has access to it.

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Abhijit Nadgouda
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