The Simple Economics of Open Source

Raffael Cavallaro raffael at
Thu Apr 27 02:57:57 CEST 2000

In article <390534BB.3D6CEBDF at>, Bill Anderson <bill at> 

>Unless you are redefining
>'commodity' (possibly by your 'known to many' remark) to fit whatever is
>provided as counter evidence.

A commodity is that which is available in large quantities, from many 
vendors offering essentially interchangeable product. This makes 
commodities inexpensive, hence the term "at commodity prices" meaning, 

In intellectual property then, a commodity is that which is known to 
many and not under copyright or patent. Because of the near zero cost of 
copying, the large quantity availability is a non-issue with software. 
What matters is whether or not it is known to many, because you then 
have many potential suppliers. If it is only known to a few, then the 
number of potential suppliers is few, and prices are not like those of a 
commodity market.

Examples: The JPEG standard is known to many, and not under copyright or 
patent. Therfore, software that compresses/decompresses JPEGs is 
available from many suppliers (again, the ease of copying electronic 
media moots the quantity issue). Because of the fact that JPEG 
compression/decompression is known to many, software to perform these 
functions is plentiful and cheap (i.e., often free).

The Microsoft Word (.doc) format is not known to many (really, only to 
MS programmers) and binaries to read/display/edit data in this format 
are under copyright. Although others have tried to reverse engineer this 
ever changing format, they have not been 100% successful. The result is 
that if you want to be certain that you can read/display/edit a document 
in this format, you have only one supplier, namely, Microsoft. Because 
of this, software to perform these functions is not a commodity item, 
and is quite expensive.

In short, I'm not "redifining" the word "commodity." I'm using it as it 
has always been used. I think that many open source advocates have 
failed to apply simple logic to the economics of open source, believing 
that somehow, the internet, or software, is immune from simple laws of 
supply and demand. They are not.



Raffael Cavallaro, Ph.D.
raffael at

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