Readings on Open Source

Posted on February 1, 2019

While I have not officially started the course yet, at the end of last year I decided to begin doing research on my undergraduate economics thesis. The topic of my thesis being as my title states, on open source technology.

While not too much has been done specifically on the economics of open source at the moment, there has been a lot of writing that has proven useful from related subjects. Below are a couple of sources that I found especially useful.

Why Valve?

By Yanis Varoufakis: Valve Economics Blog

Back when Yanis Varoufakis was a video game economist at Valve, he wrote several blog posts on how Valve is organized due to their unique governance style. This post specifically on how Valve is run proved to be a good resource.

The argument made in the post is that Valve is organized via spontaneous order, an idea from David Hume that in the absence of a centralized system, eventually patterns appear that organize activities, including the production of goods. Hayek coined the term, but his argument was based on price signals. The argument made by Hayek is via the movement of prices, society will change the level of production for goods. This was his argument against forms of state control, as he thought only uncontrolled prices could effectively allocate supply and demand.

Varoufakis argues that Valve has a system of spontaneous order similar to the Hume’s conception which has a moral component to it. This is because unlike many companies, workers at Valve can choose the team they want to work on. This means that Valve is a marketplace in that people are constantly making teams and coming up with new projects. Contrast this with regular corporations, many of who have hierarchical cultures which despite free market rhetoric are often organized by central planning.

The majority of open source work is organized more like Valve then like a traditional corporation. People are free to join and leave whatever open source projects they like, meaning there is a great diversity of work being done. Additionally, as seen with events like Hacktoberfest, people tend to allocate themselves to open source projects which they are interested in. Unfortunately, the unorganized nature of open source means that certain things, such as long-term maintenance, or how should maintainers receive compensation, becomes a thorny issue, because of the ad-hoc organization of many open-source projects.

Public Goods and Private Gifts

By Hal R. Varian: Information School Berkeley

Hal R. Varian is an economist as UC Berkeley whose main work is on information economics. In this article, he notes that people who raise funds for public goods often provide private bonuses to people who contribute to pay for these public goods. Examples of this include an invitation to an event due to donations, or crowdfunding subscriber as seen with Patreon. The main framework tying these models together is that while the good is nominally a public good, contributors receive a private good in exchange for their contributions.

To give an example with crowdfunding, many podcasts have Patreon accounts where while it’s optional to donate money, people who donate money receive benefits such as swag or private episodes.

The public good - private good funding relationship is seen in certain aspects of open source. For example, while Babel.js is an open source JavaScript program that is free to use, people receive some benefits from sponsoring Babel. This includes being listed in the README at lower tiers, to at higher levels of sponsorship have one’s corporate logo being prominently displayed on the main page.

Individual contributors in open source also do this type of exchange. Evan You, creator of JavaScript framework Vue.js, has a personal Patreon page which while also having a similar incentive scheme to Babel.js, instead of the project directly being funded in this case, he himself is being funded to maintain the project.

Instead of subscription funding, other methods of funding include how Damian Dulisz uses Buy Me a Coffee as a method of funding. Instead of being tied to a certain level of contributions per month, one can simply send the equivalent coffee money his way to help support him maintain various Vue.js libraries.

Distributed Innovation and Creativity, Peer Production, and Commons in Networked Economy

By Yochai Benkler: OpenMind

Yochai Benkler is a law professor at Harvard Law School who’s focus is on information technology law and networks. His research looks at how resources are managed in networked environments, examples being Wikipedia or the Apache Foundation.

His article notes the fact that open source contributors built a good portion of internet infrastructures that the modern internet is based on, and corporations trailed distantly behind open source workers. He states that about 80% of all scripting languages are FOSS, along with the fact that open source Linux dominates in important applications such as supercomputing or the OS in Android phones.

There are two main reasons this is possible. Firstly, due to the networked nature of computing, it is very easy for information production to be symmetrical, so everyone can benefit from it instead of innovations being private. With complex tools such as TenserFlow being hosted on public GitHub repositories, in the technical sphere, it is easy to take a look and perhaps work on very cutting-edge work that not only benefits many people, but costs nothing to use or copy.

Like Varoufakis’ article, Benkler notes that open source projects are easier to manage because people are more able to sort themselves instead of being mandated to work on a certain project. Instead of a centralized managerial system, people due to the lack of authority are able to match themselves to projects that interest them and fit their skill set.

Distributed Innovation and Creativity, Peer Production, and Commons in Networked Economy

By Josh Lerner and Jean Tirole: NBER

From 2004, the paper is fascinating as it is one of the few papers I found that directly talks about open source and how it is organized.

A theme similar to Varian’s work comes up in that they mention some of the intangible benefits open source contributors receive. For example, they note that people who rank high in the Apache foundation enjoy wages 14% -29% higher compared to the average software engineer in the same role. Additionally, other benefits for worker on open source projects include peer recognition, future access to certain goods (venture capital), or pure pleasure.

Unlike the other articles, Lerner and Tirole do go into some of the flaws of open source technology. They were that due to code being public, it could mean that hackers would have an easier time subverting the software. The counterargument being that because the software is open, it is easier for many people to look at the code to find potential bugs.

Their worry about open source technology and bugs is valid, especially considering the recently controversy other event-stream. In this case, the hack was inserted because the maintainer handed over the package because not only was his work unpaid, but he was overworked. This ties into one of the problems around open source is how should maintainers be funded.

A strange argument mentioned is they mention a paper from Saint-Paul that argues that open source is bad because it reduces profits and as such lowers the need to innovate according to a Romer-style growth model. This argument seems to be invalid, considering the existence of companies that make money off of open source, from Red Hat to MongoDB, to Cloudera, Confluent, or Docker.

These are only a few of the articles I found interesting out of a rather large markdown file which I been adding and jotting down notes about articles related to the economics of open source and adjacent fields. I have to thank Nadia Eghbal for responding to an email I sent a few months ago, who helped point me into this direction.

I am excited to continue going down this path of inquiry. I do know so far that research has been fruitful, but I as usual, more work needs to be done.

I am planning to interview people about their experience with open source technology, 
so if you are a maintainer or major monetary contributor to open source, 
it would be great if we could talk.