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Open Source-onomics: Examining some pseudo-economic arguments about Open Source

This was the convenient argument of horse-buggy manufacturers when the locomotive arrived, and of the railroad companies when the aeroplane appeared on the horizon. We've witnessed this a dozen 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 civilization 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, according to our assumption, this is not a win-win situation as 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. These include the 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.