The Economics of “Open Source”

From The Economist:

The characteristics of information—be it software, text or even biotech research—make it an economically obvious thing to share. It is a “non-rival” good: ie, your use of it does not interfere with my use. Better still, there are network effects: ie, the more people who use it, the more useful it is to any individual user. Best of all, the existence of the internet means that the costs of sharing are remarkably low. The cost of distribution is negligible, and co-ordination is easy because people can easily find others with similar goals and can contribute when convenient.

The question is, can sharing be used to supply more than just information? One of the most articulate proponents of the open-source approach, Yochai Benkler of Yale Law School, argues in a recent paper that sharing is emerging for certain physical, rivalrous goods and will probably increase due to advances in technology. Where open source was about sharing information by way of the internet, what is happening now, Mr Benkler notes, is the sharing of the tangible tools of technology themselves, like computing power and bandwidth. This is because they are widely distributed among individuals, and sold in such a way that there is inherent (and abundant) unused capacity.

More here.