Are the economics of open source so simple?
In their oft-cited paper “Some Simple Economics of Open Source” (2002), Josh Lerner and Jean Tirole make the case that standard economic incentives, such as reputational concerns, can explain the behavior of those that freely contribute to open source projects. They don’t take seriously the idea that altruism might play a major role:
Why should thousands of top-notch programmers contribute freely to the provision of a public good? Any explanation based on altruism only goes so far. While users in less developed countries undoubtedly benefit from access to free software, many beneficiaries are well-to-do individuals or Fortune 500 companies. Futhermore, altruism has not played a major role in other industries, so it would have to be explained why individuals in the software industry are more altruistic in others.
I don’t agree that such explanation is necessary. It might be the case that hackers are no more altruistic than other people, but altruistic hackers have a better chance than, say, altruistic auto manufacturers. If Henry Ford had not been interested in turning a profit, he would have had trouble raising funds, and GM would have quickly overwhelmed his company. But Linus Torvalds had little to lose if Linux didn’t work out. Moreover, Torvalds’ selflessness may have given his collaborators confidence that their contributions would not be in vain.
Altruism is a competitive disadvantage in most industries but might be just the opposite in the software industry. Thus, altruism may play a more important role in OSS development than in other industries not because hackers are more altruistic, but because altruistic hackers are more successful.
