I am gonna write some of my thoughts on OS over a series of blog posts starting today.
Definition: Code is said to be open source if that code is freely available and that code may be used to create follow up code, including for profit.
Entailments of the definition: A company that has a budget can spend that money on open source code OR proprietary code and have the same effect. There is no efficiency that comes COST wise from using proprietary code.
So the difference between properietary vs open source is simply blocking others from accessing the code. Is there any reason to think that propriatary code, with a fixed budget, will be of higher quality than open source? I don’t see any reason to think so, if you hire 3 programmers to work on some code, rendering that code open source can only increase the quality of the code since perhaps a hobbyist or somebody with tangential goals can join in.
It also seems intuitive that more open source packages will have an advantage in terms of development. In economics for around 30 years, STATA, a closed source programming language was the main program used. Most economists who developed new methods prepared packages so that those methods could be implemented by others and then these packages were approved by STATA teams. But is there any advantage in actually having an approval process? Why not just anybody make the packages and then let popularity dictate which ones are the most interesting? Indeed, this is what R has now achieved, since STATA was mainly being contributed to by economists, whilst R had statisticians, biologists, chemists,… and economists, it winded up having a much more diverse package database and now surpasses STATA in every domain.
This is usually how I imagine it all going:. Proprietary software starts strong but they can usually not keep up the momentum. Of course, this same thing is happening in slow motion with operating systems, windows and apple started strong, Linux seems to be getting about 0.3% market share a year. As security becomes more important an issue, I expect Linux to increase faster, but at this rate, won’t dominant for another 100 years.
One of the weirdest phenomena around libertarian circles that I have noticed is the equivocation between being for private property and being pro market.
The presence of private property entails that one has the right to exclude, to manage, to alienate and to use. This means that if Greg owns X he can: exclude others from using X; manage X; use X; and can decide who the next owner of X will be.
Being pro-market means that one wants to bring in competition. That is, when we say that we want there to be a market for something, we usually mean that we think more people should provide that good or that more people should be able to access that good.
It should then be clear that being private property is NOT being pro-market. Indeed, being for private property entails the freedom to be free FROM the market. Indeed, if somebody wants to be pro-market, they would not be a libertarian at all! They would be a Georgist, who thinks that no rent seeking should exist at all, especially for land, the only property that exists in a Georgist scheme is rented property. Where one does not have the right to alienate.
This confusion seems to also prevent alliances between the left and right from forming, see here for an example. Conservatives should also favor private property over the market. The one thing that keeps the sane from embracing the market as much as many want them to is marriage, which seems to show a similar pattern. Before marriage, one is on the market, there is competition of sorts, and after marriage, you are taken off the market, it is considered unethical to keep competing for you.
Imagine a farmer who is harvesting coffee beans like below, call him Joe. Joe harvests beans, puts them in his truck, then drives down to a coffee place by the beach, Beach Brew(BB), sells some of his beans there, then drives to the mountain which has another coffee place, Mountain Brew(MB). His sale price is 10 euros and It takes him the same amount of time/gasoline to drive to both places and the roads that were built to go to both places cost the same.
As it turns out, Beach Brew sells their coffee for 20 euros, but Mountain Brew sell it for 15. The differential in the price stems from the fact that the Beach has a nicer view. The mountain is not very nice to look at, so generally people prefer to sip coffee by the beach. What does this mean?
The question for the LTV theorist is simple: What is the value of those beans? We don’t need to talk about surplus value or profit rates or any of that. All we need to ask is, what is the value of those beans? The preparation of the coffee in both places takes the same amount of time. How will the LTV theorist claim that those beans have the same embedded labor time in them?
It seems like the answer would be that they DO have the same value but that the prices are different because the profit rates are different. One firm makes 100% profit, while the other makes 50%. But this actually fails to add any new information! Value has not been used at all! It isn’t at all clear what the theory is supposed to do here. If the facts we are looking at are that there are two prices for the same physical good and the price at which it was sold… what is the theory adding?
Let us ask this in another way: Is there any reason why an entrepreneur looking at the above, should prefer to open a coffee place at the beach rather than the mountain? LTV doesn’t really have an answer. If you cannot say WHY the beach is more profitable than the mountain, then the theory is useless. The only thing the LTV can say is repeat the same information back to you: The beach is more profitable because it has a higher profit rate.
The marginal productivity theory has an answer that the value depends on the final point of consumption and not on the inputs used to create something. That is, in this theory, we can say that the individual valuation of consumers at the beach(ceteris paribus) is higher than the consumer valuation at the mountain. This theory then gives us information of the form of consumer preferences, which can be used further on by an entrepreneur. The entrepreneur can reason in this way: ‘Oh I guess the beach bar makes more money because people prefer to consume at the beach, so maybe I should open at the beach’. Of course, the entrepreneur could be mistaken and there could be some other reason(perhaps there is a group of friends at the beach and they have a higher willingness to pay when they are together), but there is information in this nonetheless.
I just got back from the gym. Due to covid, everyone at the gym has adopted a habit where they clean the bench and barbell using alcoholic content that is provided. Today, I just want to frame this in game theoretic term: the goal is to have as many people working on a clean bench as possible. For the purposes of this discussion, let us assume that there is no point in cleaning a bench twice. I also assume that you cannot know who used the bench before you.
The gym bros have adopted four different habits:
Clean before you use
Clean after you use
Clean before AND after you use
The IDEAL scenario would be that everyone either adopt 1) OR everyone adopts 2). If they adopt a mix of 1 and 2, then you would have wasteful double cleaning: For example, if half clean the bench after and half clean the bench before, then this actually results in the same number of people working on a clean bench as half the population cleaning it after and the other half NOT cleaning it at all.
Of course, the presence of gym bros of type 4), can make gym bros of type 3) a net good. But if we can wipe out type 4, then type 3 is also wasteful. Alternatively, if there was value added in cleaning the bench twice, then type 3 would also be useful socially.
Now I just want to make the point that 1) is more stable than 2), even without 4. If everyone wants to use a clean bench, then you cannot know if the last person cleaned the bench before you. This is just another way of saying that players can verify the state of the bench by cleaning it before but they have to take it on faith if they only clean it afterward. In other words, once we take verifiability into account 1) is the best equilibrium because there is no deviation from it. Indeed, the ONLY case where 2 can give the same outcome is if it is common knowledge that everyone is doing 2, which is a very stringent informational requirement.
Even if one admits that a lack of copyright is a better outcome there remains a reason why the equilibrium is to copyright.
The situation is that if an author allows his work to be used and coppied, there could exist a deviation where somebody else uses the same material to make other content. A lawyer may retort that you cannot have a monopoly on something if it is already in the commons but this is just a nonsense story they tell themselves: Programming had numerous languages and numerous concepts developed decades before any patents were granted, yet somehow, when the same code started to be developed in other languages, the patents were granted. The right response if you are an author is not to put things into the commons because the commons has no principle of reciprocity. Instead, authors should simply put their works under copyleft.
I do believe that work under commons and copyleft would have a much larger influence than other works. The problem is that popularity is a very fat failed phenomenon. Only small percentage of stories will actually reach the limelight. So far, none of the stories that have reached it have been under either commons or copyleft. Once the popularity of the stories fades away, it would be too late. For example, Game of thrones had a period of 6 years where there was a large amount of interest, it is now probably too late. Something needs to capture the popular imagination, once it does many people can add their interpretations, but the double coincidence of commons/copyleft AND popularity has not happened in the last hundred or so years.
I am not really sure if Hayek defines competition as the process dynamic information discovery or if he thinks this is simply the an entailment of competition. Either way competition either IS the dynamic process of information discovery or it entails this process.
Competition entails information discovery
Perfect information implies all information is discovered
=>Perfect information entails no competition.
It’s something you kind of have to agree with once it’s presented to you.
Academic: We should make wearing masks on public transport mandatory. Butcher: What? No way, I hate wearing masks! A: But that would reduce covid spread! B: Oh yeah? Well maybe we should ban flying for 5 years, that should reduce the spread. A: That is insane! I need to fly to go places? B: No you don’t just chill where you live. A: I take holidays in Italy though… and I have conferences in other countries. B: Don’t take holidays in Italy and only zoom into conferences. A: All of this is silly, if we just force people to wear masks then there would be less covid. B: Look, I would rather ban flying and NOT wear masks on public transport, and you would rather NOT ban flying and force mask wearing on public transport. It seems to me that both of these are effective, why should your preference get imposed over mine? A: At the end of the day, I have the ear of policy makers, you are just a trash simpleton, so I don’t really care what you think. We will not ban flying and simply apply mask mandates.
Seller: I am willing to sell this wallet to you for 100 euros. Buyer: Hm… it looks like the wallet itself is worthless, is there money in it? Seller: Why yes, the wallet itself is worthless but there is money in it! So how about it, buy it for 100 euros? Buyer: Su…wait just a minute, why would I accept to buy it for 100? There could be 10 euros in it? Seller: Sure, but maybe there is a 300 euros in it too? Buyer: Do you know how much money there is in it? Seller: Does it matter? Buyer: Of course it fucking matters! If you know how much money there is the wallet, then it means it must be less than 100, so you are ripping me off. Seller: And if I don’t? Buyer: Well if you don’t maybe it could be worth it. Maybe you would rather have some money for sure and have some probability of losing money. Seller: In that case, I don’t know. Buyer: ?? Why would I trust what you say though? Buzz off, I am not trading with you when you might know more than me.
There is this famous principle in auction theory called the linkage principle. The idea is as follows: The auctioneer who is presumably going to give away an item by a bidding auction, has an incentive to increase the common knowledge of all players. For example, the auctioneer wants A to be maximally informed, as long as it is known to B that A is maximally informed.
Suppose that values are drawn from a uniform distribution and A draws a 8 and B draws a 6. Without information on the other’s bid, in a first price auction both players will bid half their valuation(risk neutrality and all that). So A bids 4 and B bids 3. So the auctioneer will gain 4(the highest bid).
But now suppose that the auctioneer somehow investigates both players and finds out their valuations, and announces it everybody. In this case, the result will be that B will attempt to increase his bid to beat A, A will have a profitable deviation until B does not want to go higher, so the revenue is now 6.
The auctioneer could also choose to reveal just one persons valuation, so if he reveals that A has a value of 8, then B will have an incentive to raise his own bid resulting in a higher equilibrium.
The result exists even if the auctioneer reveals the lower end of the value scale but here it is a bit weaker. The auctioneer wants to reveal the lower end value only in expectation. It may result for instance that revealing that the lower value is a 1 when the higher value is a 9, will result in the auctioneer losing money because before the higher end would have bid 4.5, and now will bid 1 or below 1. But on average the auctioneer wants to reveal information.
Note that the players will only choose to be more informed, if the result of their exploration does not give everyone new knowledge. This is a rather underrated result. It implies that the attempt to give everyone a common backing, can actually result in more surplus extraction for the central planner.