Some simple economics of open source

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Citation: Josh Lerner, Jean Tirole (2002) Some simple economics of open source. Journal of Industrial Economics (RSS)

doi: 10.1111/1467-6451.00174


Tagged: Economics (RSS) FLOSS (RSS), open source (RSS), economics (RSS)


Summary:

Lerner and Tirole (2002) was a seminal article on free software and open source more generally and perhaps the seminal article on open source economics. The paper offers some initial observations from academic research but mostly describes the economic puzzles presented by FLOSS and explores some of the possible areas for future research.

The paper frames its questions with the idea (or at least the popular observation) that economics has trouble explaining FLOSS because it involves so many people giving away their code in ways that seem to go against a strict utility-maximizing strategy.

The paper offers a series of different explanations for how FLOSS works, perhaps reputation being the foremost, and explains that through benefits to reputation and status, intrinsic motivations, and more, FLOSS practice can be explained in purely economics terms. In other words, there are non-monetary forms of compensation that drive the success of FLOSS and can, from an economic perspective, explain how it works.

Although the paper is focused on issues of motivation from an economic perspective, the paper acts also as a broad introduction to FLOSS practice more generally and tocuhes a number other areas including modularity, forking, congruence of motivations, leadership, and more.

Theoretical and practical relevance:

The paper remains one of the most highly cited papers in the literature on FLOSS. The paper is largely speculative and theoretical and a number of the propositions offered in the paper have been to be false or more nuanced in the paper. That said, the paper remains a go-to citation for FLOSS more generally and a rich source for a variety of research on different FLOSS topics.