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New FUD: Open Source Is "Economically Dangerous"
Friday, January 16 2004 @ 05:26 PM EST

Dr. Stefan Kooths, with the Department of Economics, the University of Muenster, Germany, argues that open source software is economically dangerous and governments shouldn't use it. He just gave a lecture on it yesterday, hosted by Microsoft Research in Cambridge, UK.


This is close enough to Darl's FUD that it just might be worth paying attention to this new argument. This likely represents the next FUD front in their war against Linux and particularly the GPL.

Here's the info on the talk, first, and then an email that brought it to my attention and which rebuts Kooths' concepts.

You can see the presentation, as PDF or Powerpoint, by going to the University of Muenster's web site to get the slides of yesterday'slecture (section "Presentations"). Dr. Kooths tells me that you can get the whole study itself from a link on the welcome page, but it doesn't work for me. Perhaps I am not using the "right" browser, but I don't see any such link.

UPDATE: Finally, the link to the study itself, thanks to Dirk.

Here is the info on the talk:

TITLE: The Economics of Open Source Software - Prospects, Pitfalls and Politics
SPEAKER: Dr Stefan Kooths
INSTITUTION: University of Muenster
HOST: Alexander Braendle, University Relations
DATE: 15 January 2004
TIME: 13:30 - 14:30
MEETING ROOM: Lecture Theatre
ADDRESS: Microsoft Research Ltd, 7 J J Thomson Avenue (Off Madingley Road), Cambridge

Open Source Software does not represent a suitable alternative to the commercial software market from an economic point of view, neither in terms of creating value-added nor in terms of economic efficiency. OSS does not create any new value-added potential, and offers only a fraction of the opportunities of the commercial market. The impact of OSS on sales and employment are therefore less than the effects of commercial software. Furthermore the de facto free availability of GPL-licensed software, and hence the lack of a market price, have far-reaching economic consequences that are elaborated in the presentation. As far as packaged software is concerned its free availability very much limits the creation of profits, income, jobs or taxes. The loss of turnover in the area of software sales cannot be fully recovered with services linked to the software. So-called complementary OSS-business models work in the smaller customized software sector only. The incomes earned there are substitutive and not additional to those created in the commercial software sector. The lack of cost-reflecting prices for GPL-licensed standard software also hasconsequences for the market process as the pricing mechanism is associated with an important information and coordination function in a market economy. If there is no price, and hence no decisive guide figure for a market, it is, for example, more difficult to identify customerrequirements. Further problems can be identified when it comes to the allocation of resources, productivity-oriented factor compensation and incentives for innovations. The lower value-added potential and the reduced efficiency of coordination are weighty economic arguments. Theydemonstrate quite clearly that the promotion of open-source software cannot be an economically justifiable role for the state.

Here's the email I received bringing the lecture to my attention:

Hi PJ,

According to the abstract, Dr. Kooths will argue that promotion of open source software is economically dangerous, and "not economically justifiable for the state". The danger of Kooths'argument, in my view, is that not only does it suggest that governments should not actively promote the use of open source software, it suggests that they should go much further and oppose it and avoid using it, because of its *alleged* economic hazards. (Although Kooths does not draw this conclusion explicitly in his abstract, his ambiguous "the state should not promote OSS" conclusion sits oddly with his idea that OSS is some kind of economic cancer - to borrow thephrase of a certain Microsoft executive a few years ago.)

Secondly, this conclusion talks about "the state" as if _all_ states - irrespective of their circumstances and level of development - would overall benefit by supporting proprietary software (which quite often means supporting Microsoft, directly or indirectly).

Arguably, his logic is at its weakest when applied to nations for whom the largest long-term effect of excessive use of proprietary software on the national economy could be the diversion of large amounts of money offshore into the coffers of US companies such as Microsoft! It seems to bean all-too common weakness of a number of macro-economists (not all, of course, but quite a few) to draw conclusions based on abstract economic models without adequately considering the specific circumstances of a country - as, in another context, the former World Bank Chief Economist Joseph Stiglitz has cogently documented, in his book "Globalization and its Discontents" [1].

But even for countries that reap significant benefits - in at least a crude sense, in terms of jobs created, tax paid and such things - from having a large proprietary software industry, I don't think the argument is quite as one-sided as Dr. Kooths makes out.

Actually, at this juncture it should be pointed out that Microsoft paid no tax at all in 1999, despite reporting $12.3 *billion* in profits, and apparently this was all quite legal [2]. And as for jobs, the open source community has long argued that a vibrant IT economy can be sustainedaround open source, in terms of training, technical support, custom development, and other such services.

Dr. Kooths seems to be aware of this argument, because he refers to "packaged software" in his abstract - presumably meaning shrinkwrapped software such as Microsoft Office that you can buy in a store, as distinct from software developed from scratch or customised for a particularorganisation or group of organisations. But brittle, packaged, closed-source software has formed the minority in the world of software since the early days. The great majority of programmers in the world are employed maintaining or developing custom code, not writing code for Microsoft Office or the like. This would continue in a world with a healthier balance of open source and proprietary software.

Likewise, for the vast majority of companies and organisations - and governments - out there, software is predominantly a cost centre, not a profit centre. It is therefore a powerful argument that the overall economic effect of more use of open source code could be the freeingup of cash previously spent on proprietary software licenses (and the time and money frustratingly wasted on trying to cope with the hideous bug and interoperability problems of many commonproprietary apps) into lowering costs and increasing productivity elsewhere in the economy. Actual productivity, that is - rather than paying Microsoft for the ephemeral activity of issuingyou one more license.

Dr. Kooths' insinuation that open source software is by its nature as a development model, unresponsive to user requirements because of the "lack of a market price", is simply silly. There is no other word for it. Firstly, to the extent that developers are also users - which they are in cases like gcc - it works really quite well. Secondly, the responsiveness of developers to user requests is variable, and in many projects can be quite good - better even than paid commercial support from certain companies! Thirdly, as two counterexamples, I put forward:

- the Kroupware project - originally commissioned by a branch of the German government to build upon existing open source software to produce a groupware system to meet their precise needs;- and, also concerning groupware, the Open Source Application Foundation's recent announcement that it had obtained $2.75m additional funding from a consortium of US universities and a non-profit foundation to extend the OSAF's Chandler groupware project to meet the needs of large organisations like universities [3]. This is a promising and interesting model for funding (and thus speeding up) large and complex open source project developments where individual users or organisations might be unable to fund/create a project - but putting their heads together, they can co-fund it and all win. It reminds me of the scientists who've decided they don't like journal publishers charging monopoly rents for the privilege of being published in a journal, and then charging again for copies of the journal, and have decided to set up their own online journals. It's quite a similar case in some ways.

Granted, there are many cases where open source projects have not yet got around to meeting the needs of absolutely _all_ users - but this also holds true with Microsoft applications and special needs.

The difference, which favours open source, is that not-for-profit organisations, generous individuals etc. can fund or give their time to alteration projects which would otherwise be almost or completely uneconomic (especially to a company like Microsoft, for whom even amillion dollars is less than 0.1% of its bank balance, let alone its total assets) due to their smaller market size.

Finally, whether as *many* programmer jobs will be needed in future as open source software improves and matures is a debatable point, and I personally think it is a point that could be conceded. Certainly programmers will be needed for the forseeable future, but perhaps notso many.

But even if were conceded, it does not really make sense to ask all the other sectors of a national economy - and the government itself - to somehow forgoe the huge benefits of open source software - just to protect programmer jobs[4] (and, incidentally, the profits of companies likeMicrosoft, who would be the biggest beneficiaries of such an implausible move, let's not forget). It seems to me that Microsoft, and their old-guard supporters such as Forbes and Dr. Kooths, are playing King Canute.

Robin Green

[4] The tendency of technology to shrink employment in one sector - and often create employment in another, but not always - is a whole 'nother issue that I'm not going to get into here.


New FUD: Open Source Is "Economically Dangerous" | 323 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Link to drivel
Authored by: bstadil on Friday, January 16 2004 @ 06:04 PM EST
The browser does not need to be IE to get this drivel, Just go here

[ Reply to This | # ]

  • Link to drivel - Authored by: PJ on Friday, January 16 2004 @ 09:10 PM EST
  • Link to drivel - Authored by: Anonymous on Friday, January 16 2004 @ 09:14 PM EST
  • Link to drivel - Authored by: Anonymous on Monday, January 19 2004 @ 05:25 PM EST
New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:04 PM EST
Open Source is only economically dangerous to criminal monopolies like
Microsoft. Everyone else will evolve, but Microsoft cannot, because forcing us
to buy their new operating system with every new computer is how they manage to
float a company which has largely never been an innovator.

[ Reply to This | # ]

It would seem his argument is ....
Authored by: Anonymous on Friday, January 16 2004 @ 06:05 PM EST
If you give stuff away people wont pay money to buy it.
Which is pretty self evident, probably not worth a
scientific paper

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: nvanevski on Friday, January 16 2004 @ 06:11 PM EST
This is getting way out of line. The price is not always the _real_ issue when
Open Source software is considered for deployment (although it does play a fair
part, especially within government agencies and alike).

Just wondering - is there any way that OSDL (and companies gathered around it)
can fund some IDC or Gartner research on the "famous" topic of TOC
for the open source? Here's also a call for RMS : FSF can join such funding -
after all, respected sources like Gartner and IDC (at least within the corporate
world) are taken much more seriosly then any comment or press release on GNU
sites, Slashdot etc....

[ Reply to This | # ]

Authored by: whoever57 on Friday, January 16 2004 @ 06:13 PM EST
Isn't the basic thrust of his argument the same as was used by the Luddites?
Jobs will be lost and not replaced?

Doesn't economic advancement happen when people figure out how to do a job, or
create a product more cheaply (ie. with less effort, less jobs)?

For a few laughs, see "Simon's Comic Online Source" at

[ Reply to This | # ]

  • Luddite! - Authored by: Anonymous on Friday, January 16 2004 @ 06:42 PM EST
    • Luddite! - Authored by: rgmoore on Friday, January 16 2004 @ 07:28 PM EST
    • Luddite! - Authored by: Anonymous on Friday, January 16 2004 @ 09:46 PM EST
  • Luddite! - Authored by: Anonymous on Friday, January 16 2004 @ 08:48 PM EST
    • Luddite! - Authored by: Anonymous on Friday, January 16 2004 @ 09:28 PM EST
  • Flawed Economics - Authored by: Anonymous on Friday, January 16 2004 @ 09:19 PM EST
Looks like old FUD to me...
Authored by: Jude on Friday, January 16 2004 @ 06:16 PM EST
I could swear I've seen this variety of FUD before. What the "learned
man" overlooks is that there's plenty of opportunity for commercial
software running on top of open-source OS.

There's a zillion things that businesses want that are mostly huge piles of
boring detail work, and are unlikely to attract the kind of open-source effort
that more interesting work (like creating an OS) has.

I'd like to also point out that the arrival of the cheap commodity PC's years
ago did *not* destroy the computer hardware industry, in fact it stimulated it
by allowing the creation of applications that would previously have been
impractical. I think the same logic applies to the introduction of less
expensive alternatives to proprietrary OS's.

[ Reply to This | # ]

OT: I am not sure if this is real.
Authored by: Sunny Penguin on Friday, January 16 2004 @ 06:18 PM EST
There is a link a Yahoo to this: Russia LIKES SCO ?

SCO directly to jail, do not collect two hundred dollars.
BTW - I never have been mistaken for a Lawyer.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: PJP on Friday, January 16 2004 @ 06:19 PM EST
This appears to be based upon the theory that every action of every individual
should generate profit for someone (this actually sounds much more like an
American point of view than a European one), and hence generate income for the
state via taxes on that profit.

I don't know where this guy went to school, but I know of no economic theory
(Disclamier: IANAEconomist - but I did study it at University - longer ago than
I like to think about) which requires this.

This is the sort of hair-brained theory which at the limit requires a license to
breath fresh air, and the abolition of charities because they give away
something that someone could charge for.

This should reflect very negatively on Microsoft for encouraging such wild,
extremist economic theories.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:19 PM EST
More programmers are always needed. In every project be it
closed or open, the single biggest problem has been lack
of programmers. Even if it was that management didn't want
to pay for more staff ( A chronic problem ).

In Open Source this is even more acute. Most software
disappears due to lack of developers.

In the future, I see the need for more programmers, as OSS
expands the market places it penetrates. Think of
everthing that had software 5 years ago and where we are
now. Embedded systems are opening up to OSS and someone
needs to code for it.

[ Reply to This | # ]

Seen the new S3?
Authored by: hhind on Friday, January 16 2004 @ 06:20 PM EST htm
Here are some interesting paragraphs:
As a further response to our SCOsource initiatives and claim that our UNIX source code has inappropriately been included in Linux, Novell has publicly asserted its belief that it owns certain copyrights in our UNIX System V source code, and it has filed 15 copyright applications with the United States Copyright Office related to UNIX System V. Novell also claims that it has a license to UNIX from us and the right to authorize its customers to use UNIX technology in their internal business operations. Specifically, Novell has also claimed to have retained rights related to legacy UNIX SVRX licenses, including the license with IBM. Novell asserts it has the right to take action on behalf of SCO in connection with such licenses, including termination rights. We have repeatedly asserted that we obtained the UNIX business, source code, claims and copyrights when we acquired the operations of Tarantella (formerly, The Santa Cruz Operation, Inc.) in May 2001, which had previously acquired all such assets and rights from Novell in September 1995 pursuant to an asset purchase agreement, as amended.
Notwithstanding our assertions of full ownership of UNIX-related intellectual property rights, as set forth above, including copyrights, the efforts of Novell and the other Linux proponents described above may cause Linux end users to be less willing to purchase from us our SCO Intellectual Property Licenses authorizing their use of our intellectual property contained in the Linux operating system, which may adversely affect our revenue from our SCOsource initiatives. In addition, these efforts may increase the negative view some participants in our market place have regarding our legal action against IBM and our SCOsource initiatives and may contribute to creating confusion in the marketplace about the validity of our claim that the unauthorized use of our UNIX System V source
It looks like Grocklaw had some impact...

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: PM on Friday, January 16 2004 @ 06:21 PM EST
It seems interesting that with the two foremost UK universities, Cambridge is
apparently a Microsoft shop whereas Oxford apparently is not. It would be
interesting to see the response of Cambridge Economics Department academics to

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: bstadil on Friday, January 16 2004 @ 06:22 PM EST
Below is a summary of this. It is based on classical economics that does not pertain to the Software industry. He is even using old linear Supply / demand curves to make his erroneus points.

Example: Allocation of resources is a problem according to this "study". What resources? And why do we need a moneytary allocation mechanism. The scratch an itch system articulated by Eric Raymond. Has resulted in world class OS like Linux and Apache Web server has a 65% market share. More importantly this is only seen from the producer of software. Nothing is mentioned of the competitive advantages anyone gets by having a significant lower cost of SW/solution.

No Market at the Core

Efficiency deficits:

Without prices no workable coordination of prodcution based on division of labor

Imperfect satisfaction of customer needs

Misallocation of scarce ressources

Reduced incentives to innovate

Decline of value-added

Complementary strategies cannot compensate for the reduction of value-added in the IT-sector due to the nonmarket OSS-core

Policy implications

Stimulation of OSS is economically not justifiable

Public neutrality: TCO should rule government procurements

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:23 PM EST
There was a movie, which I can't remember at the moment, where one of the
characters, in a moment of self-loathing, leans out a window and yells
"I'm a whore!" I wonder if any of these sellouts to Microsoft have
similar pangs of conscience.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: sbbeebe on Friday, January 16 2004 @ 06:23 PM EST
There are some very basic economic fallacies in Dr. Kooths analysis. However,
as with all efective misleading communications, there is an element of truth.

Let's explore his objections using a neutral analogy. Let's image that a
producer of heavy machinery has decided to sell wheat harvesting machinery for
$1. The previous market value was 10 of thousands of dollars. What is the
macro economic impact?

Farmers now product wheat at a lower cost. Packaged food providers produce food
products at a lower cost, and due to market pressures, the retail prices of
these products fall.

Have we decimated the economy at this point? Since the food products have the
same utility they did before, but now cost less, as a consumer I am now more
affluent. That is, I can obtain more utility with the same income. The same
effect as if prices had stayed the same and my income rose.

So as an individual, I am economically better off. But what about the overall
economy? The question will come down to what as a consumer I do with the
'extra' money I now have. I may save some, but typical spending patterns
indicate tha I will most likely spend the vast majority of this money. On what?
Well that's a personal utility question, but the effect on the economy is
increased spending on non-wheat items. This will have a positive growth impact
on the rest of the economy.

So now the objection is... But what about the other manufacturers of wheat
harvesting machinery? Well, there will be some structural changes in the
economy. Jobs will move away from the manufacture of wheat harvesting machinery
to the industries that are the beneficiaries of the increased consumer spending.
Where those would be can't be predicted.

Is the economy better off or worse off overall. Absolutely better off. More
economic value is being produced. Has there been some pain in the transition.

What Dr. Kooths is focusing on is the potential loss of jobs in the proprietary
software industry. It is rather myopic and shows quite a lack of sophistication
in his reasoning. What he fails to account for is that the typical business
that can cut it's software budget by 70% has other productive uses for that
money that will have a beneficial impact on the overall economy. Some change?
Some pain? Yes. But detrimental? How can getting the same value for less
money be bad?

<sarcasm> I guess we should stop paying less money each year for better
computers. We'll probably kill the PC business and the world economy at the
same time. </sarcasm>

Steve Beebe
BA Economics
MBA Finance / Accounting

Happily developing software today.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:29 PM EST
This guy clearly does not know the difference between reporting a new bug to
Apple, and reporting a new bug to Ooo.

If he claims that proprietary software pays more attention to the user, my
experience is the absolute contrary. Traditional proprietary software pays
attention _only_ to your license fee if you are an enduser. If you are big
enough, they will take notice, but if you are an enduser, you are free to wait
and buy the next version, to see whether that critical bug has been fixed.

I have had two (for me) critical bugs in file exporting lately, one in Apple's
keynote, and one in Ooo. From Apple, I never heard a thing back. There is no new
version, I have no idea when there will be one, and I am sure they have no
testcase to figure out my very specific, and highly annoying problem.

In Ooo, my bug has also not been fixed. However, I do know that at least three
developers have seen it, and are "taking a look." I have some hope
that the thing will actually work the next time around.

Why do people that pay for buggy software smugly tell me that Open Source
Software cannot work because they did not pay? In my experience, the service
received with open Source Software is lightyears ahead of proprietary software -
if you know how to use it.

On a lighter note: Who, does he think, employs all those software engineers in
Nuremberg, Frankonia? Should they maybe move to Redmond because there is no one
in Germany that wants their skills? But then, hey, they could all be customer
support people for M$'s payphone line in Munich, right?

End rant.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:29 PM EST
As a German citizen I feel the urge to apologize for this rubbish. Sure, one
might argue that if a government uses proprietary software, the software maker
receives payment thus being able to employ workers that would otherwise possibly
be unemployed (unemployment is a big issue over here). But this is a somewhat
misinterpreted view of the undisputable fact that the German government needs to
take care of our unemployment rates. Political measures have to be decided upon,
which are appropriate to help the economy as a whole. Just buying software from
vendors instead of using OSS IMHO wouldn't suffice to reach that goal.
Also the statement that "The impact of OSS on sales and employment are
therefore less than the effects of commercial software", again, doesn't
seem to reveal an understanding of the GPL by implying that, if OSS is
concerned, no-one can any longer make a profit by selling software (SAP which we
are running on linux is among the more prominent examples - SAP R3 is all but
'free'), and even if that *were* the case, doesn't seem to take into account
the benefit of cost reduction by using OSS in almost any branches of the
industry, not only in the IT sector. Companies embracing OSS tend to save money
;-) which, in extreme cases, can be the key reason for them to survive at all -
there are employees all over the industry, not only in IT companies getting
their revenues from selling proprietary software - IMHO they are a minority.
Really, I'd like to take a look at this guy's numbers...

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:30 PM EST
Especially to poor people and businesses in developing countries who can't
afford proprietary software. Let 'em eat cake.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:31 PM EST
The only case in which any argument for or against the use of one type of
software over another, by a government, as it effects the economy, is if the
study presupposes that a proper job of government is to *directly* create jobs
through its actions.

IMHO, with respect to government use of services and products, the primary
consideration should be to choose the services and products which are of the
most use and value for the citizens in their intended use; that is they should
not be selected for their estimated spinoff values.


[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:31 PM EST

You know, if one of my undergrads in Intermediate Microeconomics wrote this,
I'd fail them.

For those of you who're wondering, I checked out his CV... I wasn't impressed.
This guy ain't exactly, say, Tirole, who's written a couple pretty decent
papers on OSS.

TAMU economics

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: sef on Friday, January 16 2004 @ 06:34 PM EST

How does the danger compare to that of a monopoly?

[ Reply to This | # ]

Authored by: overshoot on Friday, January 16 2004 @ 06:36 PM EST
Kooths is pronounced the same as the English, "coots."

[ Reply to This | # ]

Netcraft results for
Authored by: Utah on Friday, January 16 2004 @ 06:36 PM EST
The site is running Apache/1.3.29 (Win32) PHP/4.3.4 on
Windows 2000. Thanks to Apache, everyone can read about how terrible free
software is.

Next time you hear somebody dissing free software, ask them when was the last
time they paid for a web browser.

[ Reply to This | # ]

Oh Dear! Lost Tax Revenue!!
Authored by: freeio on Friday, January 16 2004 @ 06:36 PM EST
As I read this work, one argument I see is that governments should oppose free
software because it is not producing tax revenue for the state. Or perhaps it
would be better for the state if the state could figure out how to tax free
software somehow. For the true statists, this is a real issue

On the other hand, I see the argument that governments should oppose free
software because it displaces expensive software, and that is bad from an
economist's viewpoint. The matter of freedom is lost to the mere economic
threat to established business models. The economic cost of expensive software
is widespread, but the benefit of expensive software is localized in far fewer

We can then say that the fine economist is saying essentially that free software
is bad for those companies and countries which currently rely on collecting
their income from all over the world, and concentrating that in their own
compaines and governments. Sigh...

No wonder they call economics the dismal science.


[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: svyerkgeniiy on Friday, January 16 2004 @ 06:38 PM EST
Has there ever, in the entire history of then Open Software vs. Proprietary
Software brainwar, been a learned person or group who claimed that the
proprietary software model was preferrable, who was not paid or supported by
Microsoft? I can't remember a single one. This sounds merely like the latest
in a parade of "studies" and "grassroots campaigns"
funded and motivated by that non-creative company. For Microsoft, it's all
about spin and none about truth; facts are a man-behind-the-curtain that can be
shouted down.


[ Reply to This | # ]

Horse manure
Authored by: blang on Friday, January 16 2004 @ 06:38 PM EST
This argument is at least 150 years old.

When they introduced the railroad, the horse carriage drivers were up in arms
about the devastating effect it would have on the horse business.

In Dicken's time, a whole city section was dedicated to the horse transport
business, and Londoners were wading in horse manure. Every days, several tons of
horse manure was dropped in the streets of London. It was especially bad when
raining, as all the dirt and dust dripped off walls and collected in cess

The people of London were very happy to escape the smell and health hazards of
horse manure in the 1800's.

Herr Doktor from Muenster is nothing but a 21st Century horse driver. The taxes
and expenses saved by using free software is a business accelerator, and
benefits all of mankind, by providing more services at a lower cost, increasing
the productivity.

The purpose of software is not the software itself, or software or hardware
related services. The purpose of software is to help people perform tasks, such
as writing documents, finding information, building things, automating boring

When an automaking company such as Daimler Chrysler can save millions by using
more efficient and less expensive software, that is reflected in lower
production costs or better quality of these cars. Paying 30% in taxes for
unneccesary useless software, and sending 70% to Redmond, Washinton, does not
help the manufacturer.

Doing the job faster, better, cheaper increases profits and investments, and
leads to new, better products and jobs.

Der Herr Doktor is nothing but a 21st century horse manure apologist.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 06:43 PM EST
'Ya know, this guy might have it right!
Just think of all those horse stable operators that suffered so when them
horseless carriages took over transportation! ;-)

[ Reply to This | # ]

Link to presentation text
Authored by: Anonymous on Friday, January 16 2004 @ 06:43 PM EST
You can get the complete text here:

[ Reply to This | # ]

The real issue...
Authored by: Nick_UK on Friday, January 16 2004 @ 06:50 PM EST
... is not OSS. (well it is, really)

The issue is 'control'.

An open source code base to give to who... or whatever Joe Bloggs wants, upsets
the G's.

All of a sudden, thanks to SCO, OSS is a product that is free and underminds the
'power' to control it... i.e. money.

OSS is free. Bean counters don't have 'free' in their Excel spreadsheets.


[ Reply to This | # ]

Transaction costs
Authored by: overshoot on Friday, January 16 2004 @ 06:50 PM EST
The Professor conveniently ignores significant factors, such as transaction costs attendant to commercial software. Limited access to markets and transaction costs are the main reason that there's no market any more for once-thriving software products such as text editors: it's simply impossible to sell them.

In addition, his argument applies as readily to any other public good such as local roads, police services, and street lighting. It seems especially quaint that he should be making this argument in the midst of Europe, where the public financing of goods has gone much further than in the United States or indeed most of the world.

These objections would apply even if software were a rival rather than a nonrival good; I am certain that assuming that he performed any quantitative analysis at all he applied the analysis for rival rather than nonrival goods.

Anyone care to expand the list of economic fallacies he's committed?

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: rgmoore on Friday, January 16 2004 @ 06:55 PM EST

Reading the associated PowerPoint slides really reminds me of Edward Tufte's outstanding essay The Cognitive Style of Powerpoint. The presentation definitely fits many of the general complaints that Professor Tufte has made about Powerpoint, especially about the way that it's ridiculous to convert Powerpoint slides directly into web information. It's almost impossible to understand the meaning of many of the slides, and it's clear that all of the meaning of the presentation could be compacted into no more than 1/4 the space if it were rewritten as a regular web page instead.

Behind every sleazy lawyer, there's a sleazy client.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 07:02 PM EST
Then the internet must be economically dangerous?

I mean Apache has 70% of the web server market, non-departmental mail servers
are nearly always F/OSS, OpenSSL powers what percentage of ecommerce and banking
sites (???) to say nothing of DNS servers.

Is this man an total idiot, or is it just a professional service he offers?

[ Reply to This | # ]

Who is Kooths ?
Authored by: PJP on Friday, January 16 2004 @ 07:07 PM EST
Well, he has his own page, complete with a photo, and on that page links to other information about himself.

According to his resume, his actually an assistant professor, and has written on such weighty topics as "The Economics of Mixed Soccer Teams".

As a member of "Young Libertarians since 1996" his pronouncements about everything needing to generate profit seem a little at odds.

He is interested in software, and one of his declared research topics is "is dedicated to developing CAL-, CAR- and CAS-software". It might be interesting to know if Microsoft are in any way involved in this software development effort, but that is not mentioned on this website.

I do think Microsoft could have bought themselves a more impressive person to lead this charge -- but then thats just my opinion.

[ Reply to This | # ]

The *REAL* economic danger
Authored by: Anonymous on Friday, January 16 2004 @ 07:12 PM EST
The real economic dangers associated with software selection are shown here:

Sadly, this is only the tip of the iceberg. As MS continues to lose market
share to Linux, this kind of drivel will become even more common. MS can no
longer compete on technical merit, so it's fighting back the only way ot can.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: RealProgrammer on Friday, January 16 2004 @ 07:18 PM EST

Another fellow who says the plane can't possibly fly.

His economic argument is basically that change is bad.

He fails to account for the notion that users in an open source environment are
more apt to see themselves as part of the development process.

The reason is that they *are* part of the development process: the one who
identifies the need for a new product or feature, the one who spots the bug, and
the one duplicates it, all are an essential part of the development team.

(I'm not a lawyer, but I know right from wrong)

[ Reply to This | # ]

Keynesian economics strikes again
Authored by: Anonymous on Friday, January 16 2004 @ 07:21 PM EST
This is the "broken window fallacy" again that we always see from
modern economists. They confuse money with value, and believe that the economy
is driven by demand and the "flow" of money.

The broken window fallacy is this:

If you break out a shopkeeper's window, isn't this good for the economy? It
creates jobs for the window repairman, creates taxes, and creates "cash

This fallacy is often used to justify aggressive war. It is also used in a
slightly different form to justify debt-driven economics and excess government
spending. Here we see a version of it being used to attack open source.

He's arguing it helps the economy for people to pay too much for software, that
commercial software creates cash flow, jobs, etc.... broken window fallacy.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 07:36 PM EST
Just remember that economists are the same people who say that giving gists at
Christmas is inefficent and that everone should just by their own gift.

In other words, they don't get the idea of a gift culture.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 07:38 PM EST
Since Microsoft is paying is any of this a surprise ?

[ Reply to This | # ]

Open Source Is "Economically Efficient"
Authored by: Anonymous on Friday, January 16 2004 @ 07:42 PM EST
In simplest terms open source creates software for less money. Therefore it is
more efficient.

Does this model work. Yes open source software is created, enhanced and people
use it.

A large efficiency gain with open source software is that he cost of new
features frequenly becomes the the cost of the enhancment, not the cost of
another implementation. There is no cost of convincing a vendor the enhancement
is worthwhile.

How does this compete with packaged software? Most commercial propriatary
software comes bundled with a computer it is not bought on store shelves. So
comparisons of software bundled for stores shelves is not an especially good

Does a more efficent economic process cause economic disruption? Yes.

Eric Biederman

[ Reply to This | # ]

New FUD: Open Source IS Economically Dangerous...
Authored by: Anonymous on Friday, January 16 2004 @ 07:46 PM EST companies that fail to adapt to market demands (the increased desire to
use Open Source alternatives). If Open Source is not "Economically
Viable," why do large companies, such as IBM, SUN, Dell, H-P, SGI, etc.,
offer a product that competes directly with their own product? Why would H-P
and IBM donate billions of dollars to further the efforts, and support the legal
defense of their competitors?

Forget about IBM. Forget about H-P. Let's talk about the real danger to a
company that was only able to claim $8.07 BILLION dollars in fourth-quarter
estimates on June 30, 2003 (That's right, $8 billion dollars in one quarter
alone.) We ALL know how big a threat small consulting and programmming
companies are to large, multi-billion dollar corporations. How could any
locally owned and operated firms know better than Microsoft what the community
wants or needs?

Let's not forget those dastardly communities that promote or even mention the
dreaded words: Open Source. I really do not understand why communities, many
which are now in budget crunches, are finding it hard to swallow the bitter pill
of huge annual licensing bills for concrete code. Why would they want to look
at another alternative that is not only flexible, but has little to almost no
cost associated with adoption, and no recurring annual license fees. What
community in their right mind wants to employ local programmers, who generally
spend their money at local vendors, pay local taxes, buy or rent local property;
to possibly displace corporate programmers that live outside the local community
and said economy.

The good professor is correct in assuming that Open Source is bad for the
economy... He simply forgot to state whose economy would suffer.

[ Reply to This | # ]

Seeds of Destruction
Authored by: perlguy on Friday, January 16 2004 @ 07:53 PM EST
I didn't see this posted yet, but it is VERY relevant to this article... 9_3-5140971.html

It is well worth a read, basically it states how dangerous a MONO-culture is in the software world... MONO = MONOpoly = Micro$oft.

The article backs it up with facts, such as the MSBlast worm that caused millions, if not billions, in lost work and extra work to businesses around the world...

[ Reply to This | # ]

  • Well, - Authored by: Anonymous on Friday, January 16 2004 @ 08:36 PM EST
    • Some more. - Authored by: Anonymous on Saturday, January 17 2004 @ 09:07 AM EST
    • Well, - Authored by: Anonymous on Saturday, January 17 2004 @ 01:59 PM EST
      • Well, - Authored by: Wol on Monday, January 19 2004 @ 08:21 AM EST
  • Seeds of Destruction - Authored by: _Arthur on Friday, January 16 2004 @ 08:36 PM EST
  • Seeds of Destruction - Authored by: vonbrand on Friday, January 16 2004 @ 10:15 PM EST
New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 07:57 PM EST
"If there is no price, and hence no decisive guide figure for a market, it
is, for example, more difficult to identify customer requirements. Further
problems can be identified when it comes to the allocation of resources,
productivity-oriented factor compensation and incentives for

How is it then that the innovative commercial closed source Microsoft has lagged
so far behind open initiatives in identifying and innovating for very OBVIOUS
needs and technology trends? Let's look at what many people consider to have
been the big revolution: the Information Age. M$ attempted to ignore the
Internet as a fad for many years, having to appropriate the BSD TCP/IP network
layer. Waiting for NCSA to develop a browser. Totally ignoring webserver market
for many years. etc etc.

Just how many of the Internet standards are actually developed by M$ again? Not
one from a whole long list like Gopher, FTP, SMTP, NNTP, TCP/IP, HTTP, ARP, DNS
... the list goes on and on and on.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 08:00 PM EST
I find these sociological arguments to be principally a European form of
masturbation. Open Software should succeed or fail based upon the merits of the
technology. For 20 years it has done quite well, and I suspect that it will
fair pretty nicely in the pragmatics of the US and Asian markets where Adam
Smith's hand is unladen with the circle jerks of the governmental committees.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Alastair on Friday, January 16 2004 @ 08:27 PM EST

I'm rather disappointed in the standard of the assessment that most of Groklaw's readers (and I'm sorry, but I'm including PJ here) have shown when dismissing Dr. Kooths work as FUD. It seems to me that many people have jumped to the conclusion largely on the basis that the lecture was hosted by Microsoft Research in Cambridge and perhaps because they don't like what Dr. Kooths was saying (although I doubt that many have actually read his study).

Firstly, let's remember that Dr. Kooths is an academic, and is, therefore, largely immune to having his opinion written for him by someone at Microsoft. Secondly, we should realise that he is an economist, and, from what he wrote, a supporter of the capitalist free market economy. He has also supported his work with many references, which is another clue that this is not really FUD.

Now, I'm sure this post is going to attract lots of “you're wrong, it's FUD” responses, but consider what Dr. Kooths is saying for a moment:

  1. FOSS developers work on projects they want to work on, regardless of whether there are customers for those products.

    This is certainly true. Dr. Kooths argues that, in economic terms, this is a waste of resources compared to proprietary software development, because developers will be working on projects that the market does not want, and may not, as a result, create products that the market does want.

    In simple terms, there is a certain total “development capacity”, and his argument is that FOSS will result in a sub-optimal allocation of that resource.

  2. Commercial Open-Source business models generate less revenue overall than proprietary business models, and must fund FOSS development by increasing the price of complementary non-FOSS services and products.

    Basically, he is saying that people like IBM must charge more for their services and products in order to fund development of Linux. Now, because Microsoft are a monopolist and have pushed prices to monopoly levels, this may not currently be a problem… but, in the long term, he has a point.

    Obviously there are hobbyists that work on FOSS, and this argument doesn't really apply to them, but Dr. Kooths' report is not talking about hobbyists here; he's talking about the economic impact of FOSS.

  3. FOSS is dependent on the commercial software market.

    Basically, Dr. Kooths is saying that a lot of people that work on FOSS are employed by the commercial software sector (one way or another). Whether or not their employer directly sanctions their work on FOSS matters very little… they can only afford to work on FOSS because they have a stable job and for many, that means in the software industry.

    Some FOSS developers work in other sectors, and since many are highly intelligent, it is likely that almost all could find other ways to support themselves, but the basic point is that FOSS cannot, by itself, support all of the people currently working on it.

    There are other ways to support FOSS development (for example, state funding, which is how UN*X, BSD and TCP/IP came about), but the vast majority done today is supported either directly or indirectly by the commercial software industry (or the software services industry, which encompasses additional entities like Red Hat).

Also, far from stating that states should not support FOSS, Dr. Kooths ends with a question—whether state support for FOSS is appropriate. And, given his arguments, it is indeed a question that deserves an answer… if we are to accept that a free market economy is the way that we want to run our planet, then, we should be prepared to consider that perhaps there are things about FOSS that cause some sections of the economy to operate less efficiently than might be desirable, and, if that is the case, then it is certainly appropriate to consider whether the state should directly support FOSS.

Of course, there are plenty of non-economic arguments for support for FOSS, and they are not considered by Dr. Kooths' report. But his report never set-out to consider them. It is an assessment by an economist of the economic impact of (GPL) Open Source, and not, I judge, an unfair one. To dismiss it as FUD is grossly unfair to its authors, who have clearly considered the issues in depth and can hardly be accused of being Microsoft lap-dogs solely on the basis that they gave a lecture on Microsoft premises.

The third slide of the presentation is very clear about the scope of his work; he says it provides a “strictly economic perspective” on a comparison between “GPL-based Open Source vs. Proprietary Software”, and specifically says it does not include any consideration of technological, legal or sociological aspects. The major advantage of (particularly GPL'd) Open Source (and I think RMS would agree here) is sociological, and Dr. Kooths states clearly, up-front, that he is not considering sociological aspects. Probably the second largest advantage of Open Source is technological, and that, too, is not under consideration in Dr. Kooths' work, as he also states clearly, up-front.

And it is entirely different from Darl's fatuous rubbish about the GPL being counter to copyright law and the constitution, un- American, communist and whatever else he said (I can't even be bothered to dredge it up). Dr. Kooths' argument is based on economics and facts. Darl's argument was not.

Anyway, in summary, most of the criticism of his work that I see on Groklaw is poorly reasoned, and in some cases downright wrong. Some of the commentators do not appear to have taken enough time over reading Dr. Kooths' work.

[ Reply to This | # ]

Tell HP that
Authored by: Anonymous on Friday, January 16 2004 @ 08:39 PM EST
I guess they forgot to tell HP that, since they just reported $2.5 Billion in Linux Revenue in '03.

[ Reply to This | # ]

Commercial Software Developer's Perspective
Authored by: Anonymous on Friday, January 16 2004 @ 08:49 PM EST
Because of the company for whom I work (and, no, it is not M$ or $C0) and the
product we produce, I have to post this anonymously because it could be seen by
my employer (and not that the company would get too upset... if at all).

Kooths model is incorrect.

I know this from real-world experience. The product I work on as a software
developer is a niche market product, and yet in demand by large markets. What we
discovered was that proprietary software was so messy in most cases that both
systems and applications were begging to be monitored on a regular basis to
catch application, network and system problems before the became a crisis. We
make a lot of money off of this. We have Microsoft to thank for their sometimes
defective products.

With the advent of OpenSource software, we discovering an interesting facet.
First, we have run our company in, more or less, an Open Source model.
Developers are not pigeonholed into a specific area. We cross boundaries all the
time. Our company president, who is an excellent programmer in serveral
languages, encourages us to look at one another's work with a critical eye
toward customer ease-of-use and expanded value-added functionality. The value is
not in terms of being able to tack on more cost to the product, but for the
customer... which then drives our revenue stream. We have actually managed into
increase our sales because of this method. Moreover, we have lowered teh cost to
meet the demand. Funny how that works, isn't it? Hence, proprietary software
manufacturers can learm quite a bit from the Open Source model.

Second, the increase in Open Source servers and workstations is driving us to
hire more programmers to begin development of an OSS-based model. Will it be
free? No, probably not. However, as one of the lead investigators into Open
Source applications, we are seeing how the model truly works, how to adjust our
thinking and development plans, and how to capitalize on this expanding market.
We are also keeping an eye on the possibility that we can contribute to the OSS
movement by putting some portions of our work under the GPL. We do not see this
as a threat, but rather an opportunity to provide a quality product at a
reasonable price that lends true value to the customer as well as to ourselves.
Hence, the bottom line is that more people are being hired; we are diversifying
our development plans; we are generating a broader revenue stream for the
company, the employees and for the customer. Yes! The customer benefits greatly
from this. We serve both the private and public sector, and they are *excited*
to see this new trend. Yes! EXCITED!

My company had deduced that Open Source and proprietary can exist side-by-side
in a harmonious environment. We will add to the future development of OSS
applications under the GPL without threatening our existence or our bottom line.
By giving to the Open Source community, we are ensuring our future as it begins
to take predominence in the computer world. We saw early on that our biggest
obstacle was avoiding "fear of the unknown". We educated ourselves
about what all of the Open Source and GPL business was about. The more we looked
into it, the more we saw opportunity. This education is also providing a
fundamental shift in how we operate as developers. Gone are the days when
someone sits on a piece of code as a form of job security. Bugs are rooted at
five times the pace (we measured) than before. This reduced our development
costs, and allowed us to hire two new programmers and one new support person...
and all this during the tail end of the tech industry down turn.

Wait! Did I just say we hired more people because of OSS? Yes, I did. Did I just
say that our revenue stream is broadening because we are venturing into OSS
co-development? Yes, I did. Did I just say that we will be adding parts of our
code to the OSS and GPL community? Yes, I did. Did I just say that we are not
threatened by this entire process? Yes, I did. Did I just say that we see
greater potential because of OSS that will benefit ourselves, our customers, and
the OSS movement in general? Yes, I did. Does this fly in the face of what
Kooths (and MS and SOO) say about the dangers of OSS and GPL? Yes, it does.

The true danger of changing times is when you try to stop the change. The object
should be to change with the times. For every door that closes, at least two
more open. It is those people and organisations that stand and stare stupidily
at the closed door with fear that loose out. I work for a proprietary software
development company that forced itself to turn around and look at the open
doors. What we saw got us so energized that it transformed our our entire
development philosophy. We see nothing but a bright, and profitible, future
working with Open Source while still living up to the goals of the Open Source
and GPL community.

So, I say in conclusion, that Kooths and M$ and $CO can stuff this in their
pipes and smoke it. The new model works... and it works very well.

Again, had to post anonymously, but wait for the time when we can declare this
very openly.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 09:14 PM EST
I wonder how much Micro$oft paid him to write that little spill?

[ Reply to This | # ]

Contradiction Alert!
Authored by: pbarritt on Friday, January 16 2004 @ 09:22 PM EST
Microsoft funded reports have now shown that:

1. OSS software is damaging to the economy in that it does
not produce income/wages for taxes.

2. OSS software has a higher TCO.

So if it costs more to own and use, where does the extra
cost go? I guess it couldn't be to pay wages or purchase

Oh well, never mind. I'm still trying to figure out why
SCO will declare a million in income for ever dollar the
stock price falls. Fun with numbers...

just an idiot looking for a village...

[ Reply to This | # ]

Now and Then!
Authored by: Anonymous on Friday, January 16 2004 @ 09:47 PM EST
The abstract starts out in a very reasonable way!

Furthermore the de facto free availability of GPL-licensed software, and hence the lack of a market price, have far-reaching economic consequences that are elaborated in the presentation.

Imagine a world where 90% percent of desktop machines ran your favorite OSS OS rather than your a flavor of Windows. Imagine that the most software was available with your OS distribution, or a cost-free download. Nobody can deny that this would result in significant changes in the economy.

This change would obviously be a redistrubution of power and control of the world's computing resources. A shift from great power wielded by a few to more reasonable helpings of power wielded by many. I don't necessarily see this as a bad thing, but I can see how it would be very uncomfortable for many.

Microsoft could not exist as it does today. At least some of the money that currently goes to large software companies would most likely be diverted to open source foundations to support future development and compensate developers for their time.

Of course many other possibilities exist. I would have liked to have seen an acknowledgement of the uncertainty. The open source phenomena is a very powerful thing, and if used properly, could bring about significant social change!

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: phrostie on Friday, January 16 2004 @ 10:02 PM EST
Perhaps the good doctor should consider the economics of sendsing 98% of your
budget for software to a single country/state verses spending 100% on local
venders to support an opensource operating system plus what ever 3rd party
tools are needed.

Oh I have slipped the surly bonds of DOS
and danced the skies on Linux silvered wings.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 10:04 PM EST

Interesting article on proprietary software, especially the "Unknown
Protocol" used in win2k and WinXP.
Here is the link

I gurss there maybe other stuff M$ used to spy on it's user.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 10:35 PM EST
I agree with much of what Dr. Kooths says. There are ways in which FOSS software
is worse than commercial software and vice-versa both as products and as
business models. My own opinion is that they will both find their own ecological
niches, but it is a perfectly valid area for academic research and debate, and I
am frankly somewhat taken aback by the groklaw postings many of which seem
somewhat "mob-like" and not what I am used to seeing and admiring in
groklaw topics.

The problem with SCO is not that they disagree with FOSS (after all, they are a
commercial software company). The problem with SCO is that they are trying to
illegalize FOSS. Like Dr. Kooths, I have some problems with FOSS and the GPL,
but I would never in a million years say that they should be illegal. It's
another competing business models that should be free to compete and
flourish/fail based on its own merits and not what I/Kooths/MacBride/rms think
about it.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 10:44 PM EST
Wouldn't the same logic give a conclusion that marriage is bad for society
because it drives down the economic incentives that keep prostitutes working
their wares. And that then the product being underpriced will become a commodity
without value. Also then the prostitutes will be forced to find other less
'productive' services to sell. Hope I don't offend anyone.

[ Reply to This | # ]

Authored by: jdg on Friday, January 16 2004 @ 10:52 PM EST
Dumping is a construct (primarily, but see below) of International Trade
agreements (a topic much too broad to tackle here). Competitors in some
countries have lobbied their representatives to diminish the competition that
that they face with "anti-dumping" laws. These typically restrict
selling internationally at prices that are less than the average cost of the
product, rather than at the incremental cost of the product. As you are well
aware, the incremental cost of software is quite low (especially if it is
unsupported --- or has no flaws!!!!).

[I apologize before hand if later posts on this list cover some this; I have not
read of the many posts on this thread.]

I am not aware of very many "anti-dumping" laws within a country
although there are some (especially in such things as gasoline retailing). A
key reason is that the parties that are hurt by these rules also have a voice in
the making of the rules (in contrast to the foreign interests which do not have
much voice). However, you will often see locals trying to keep Wal-Mart out
through some of these parochial rules (I do not mean for parochial to be used in
a pejorative sense here, which is more of a value judgment than I want to attach
to an explanation).

SCO is trying to appropriate the "commons"; don't let them

[ Reply to This | # ]

  • Dumping - Authored by: jdg on Friday, January 16 2004 @ 11:12 PM EST
New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Friday, January 16 2004 @ 10:54 PM EST
This is just insane. I won't even dignify this with a

[ Reply to This | # ]

It's elementary DR. Watson
Authored by: Anonymous on Friday, January 16 2004 @ 11:04 PM EST
"Furthermore the de facto free availability of GPL-licensed
software, and hence the lack of a market price, have
far-reaching economic consequences that are elaborated in
the presentation"

Ever heard of professors who commit fraud? A few prominent
names come to my mind. So anyways, Microsoft buys off a
PHD name to pitch their FUD. The issue here is not about
lack of market price. It is about lack of Microsoft's
monopoly. Microsoft is scared to death Linux will soon be
adopted across all Government agencies. This in turn will
open the gateways to major corporate institutions. Highly
profitable and successful companies like IBM, Novell, HP,
Intel, Cisco and other big league players are on Linux's
side. More importantly they are pushing Linux into the
main streat as fast as possible. In summary, in all
probability the professor has harmed his credibility beyond
repair. But we see the connection back to a very desperate
Microsoft PR machinery. Be afraid, very afraid...Linux
will smash the desktop monopoly before Longhorn will make
it into beta!

[ Reply to This | # ]

  • Hypocracy - Authored by: Anonymous on Saturday, January 17 2004 @ 12:57 AM EST
Left me ROTF!
Authored by: swengr on Friday, January 16 2004 @ 11:49 PM EST

And this clown has a PhD in what? Please tell me it's not Economics! I started laughing on the first sentence.

In summary, If he is right, then OSS products are not succeeding, and they can't. Okaaaaay...

Open-source software is developed outside of market mechanisms, as the main purpose of making the source code freely available is to prevent a price-controlled market from evolving in the first place.

The main purpose of making OSS is to answer a market demand. This market demand is for software that provides an available, affordable, best-fit solution, to an existing or perceived problem.

I am the market, and I demand my Emacs! Thank you Richard!

However, when software is distributed free of consideration, it lacks a key coordination component - the information medium of price - and, as a result, suffers from economic and functional deficits.

The information medium of non-OSS products is not "price", it is "demand". Is warm stale bottled water "better" than cold fresh water from a drinking fountain?

If there is no market, then there is no mechanism to steer the interests of developers towards the wants of customers, either.

Rest easy, Bill! No worries, Darl! If the interests of customers are not met because of the (purported) lack of market-direction, customers of proprietary "market-driven" products will not be drawn to become users of open source solutions.

Question: Are developers of OSS currently answering the needs of customers?

Thank you Eric, Linus, Kirk, Jordan, Theo... Thank you all! Every last dirty, heathen, deadbeat, commie, hippy, god-less, anarchist, one of you!

Gratis is nice, Libre is an inalienable right.

[ Reply to This | # ]

Software and Economics
Authored by: jdg on Saturday, January 17 2004 @ 12:18 AM EST
This topic is way, way, way too large to be tackled in several meals, but I will
try to bite off a bit of what I have been thinking of lately. I am an
ex-academic, Ph.D. economist and this is not and never was my area of research.
However, there are elements of this topic that are similar to one of my fields
-- natural resource economics and the "problem of the commons" (see
my tag line).

The nature of the costs of software and computers and how these costs change
have major implications and the potential interactions are quite complex. Key
factors include:

1) The cost of hardware is dominated by Moore's Law.
2) The incremental cost of software is close to zero, although the cost of
support is not.
3) There are unusual industry dynamics due to the advantages of standards and
interoperability on many levels. (One example is that when MS was trying to get
into an area dominated by others -- Word Processing with the lead being
WordPerfect -- they made an effort to be compatible. When the situation is
reversed, it is advantageous for them to make it difficult for others to be
4) The changes in relative costs of labor and capital/hardware cause solutions
that are optimal at one point in time to be far from optimal at earlier or later
times. (Remember the efforts to save on spaces in dates and the havoc this
caused in 2000?)

These factors result in difficulties in reaching market arrangements that are
economically efficient. A key issue for the purposes of this audience is that
proprietary software vendors charge prices that are vastly higher than marginal
cost. The loss of economic efficiency that results is similar to the economic
losses imposed on society by the exercise of monopoly power except often the
relative markup from market power in most situations is nowhere near that seen
in this industry. Furthermore, support, which is costly, tends to be
under-provided and of inferior quality (I think that this is the opinion of
many, although I am not certain that this is correct because I do not know
enough about the cost structures). There are potentially advantages to having a
monopoly provider having to do with interoperability (including backward
compatibility). An alternative way to capture some of these benefits is to have
“standards”. Many of you know more about this than I but clear that there are
“rents” that firms try to appropriate through the standards process (and SCOG
seems to be trying to capture some wrt to header files etc., but again, I do not
know enough here).

Open software has a very different set of dynamics, with very low marginal
prices for the product but margins are captured via support and bundling
solutions that have value for the customer because the supplier does their thing
all of the time and the customer can avoid a lot of learning costs by buying the
package. In this world, an unusual aspect is the “gifting” of coding effort,
exemplified in Linux. I think that this process works in a world where the open
software is non-dominant. If it were dominate, many would think that they can
shirk the “responsibility” that they currently feel in the current environment
and the cost advantage of the product would shift as more direct costs would
have to be borne by the open source, possibly by extra costs to make it work
At this point I will note that I have not read the professor’s paper. However,
I suspect that this market “equilibrium” would not be one where open software is
dominant in the sense of MS in operating systems and related (e.g., Office)
software. However, the equilibrium might well be one where the scale of the
products are large enough to under-cut the monopoly position of dominate firms.
When it does, the price/marginal cost ratio of the proprietary provider will
diminish substantially and, even with some significant advantages of open
software, the proprietary offerings become competitive so that open source
software does not grow to dominate the market. (One possibility is that if it
has a significant market share, open source software might provide many of the
industry “standards”). How quickly open source can evolve will have an
important impact on where the equilibrium between proprietary and open software
There are so many more things that can/should be considered (including things
like security, national sovereignty, political preferences, market dynamics, and
the economics of being first). I hope this sparks some useful thinking.

SCO is trying to appropriate the "commons"; don't let them

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New FUD: Open Source Is "Economically Dangerous"
Authored by: blacklight on Saturday, January 17 2004 @ 12:28 AM EST
I will make three counterpoints to the German professor's paper:

(1) Free and Open Source software is developed to meet needs that are not being
met by purveyors of commercial software: one of the best examples is the Apache
web server, whose source code is the parent of several commercial web servers
such as IBM's Websense.

(2) Free and Open Source software is not only about the software products, but
process: the process of community involvement in improving, customizing,
adapting the product. Opening up access to the source code is the key to the
process because the community is thus empowered adapt, customize, experiment,
troubleshoot - and all these lead to improvement. The success of free and Open
Source software is the clearest indication that the process works. Mere
economics only partially explains why the process works, just as it only
partially explains why civilization works. Civilization is not merely a product
(comfortable modern living) but a process - and a collaborative process at

(3) Most of the key free and open Source software are tools rather than end
products. Apache may be a great web server and either mySQL or POSTGRES might be
great RDBMS but the burden on building e-commerce sites still falls on software
developers. The mere fact that a free or Open Source RDBMS tool is available in
no way diminishes a business's need to construct databases that meet its own
individualized requirements - The tool helps meet the need only if it actually
used used to build something that meets the needs. In summary, the availability
of free and Open Source tools in no way diminishes the need for commercial
software development attuned to meet the customized requirements of individual
businesses. In other words, there is very much a place for in-house and
consulting software development even in a world ruled by free and Open Source
software. That much of this software development could be done in India is a
different issue.

I could think of a couple more counterpoints, but I'll lay off for the time

[ Reply to This | # ]

No one is going to buy that.
Authored by: penguin_roar on Saturday, January 17 2004 @ 12:29 AM EST
Its evident that the only danger of open source is making software cheaper.
Companies can still make a bucketload out of services. The only thing thats
getting harder is selling the same codebase over and over but with some new
nifty clothes.

The notion that the lack of money should make the softeware less adaptive to
customer demands is appaling. Who did ever demand MS to make expensive, buggy
and non standards compliant software?

Theese kinds of "research" only makes MS look bad as they are to far
from the truth. Lets hope for many more ramblings like this.

A computer is much more.

[ Reply to This | # ]

  • Who is "No one"? - Authored by: Anonymous on Saturday, January 17 2004 @ 04:59 AM EST
New FUD: Open Source Is "Economically Dangerous"
Authored by: blacklight on Saturday, January 17 2004 @ 12:48 AM EST
Two more counterpoints:

(4) Two years ago, IBM reported making $0.5 bil in profits from $1.5 bils in
Linux-related sales. HP just reported making $2.5 bils in Linux-related sales
for FY 2003. These figures would not reasonably fit with any assessment that
free and Open Source software is bad for the economy. In fact, ten years ago BSD
made possible the creation of the multi-billion workstation market and was
instrumental in Sun Microsystems' swift rise to Fortune 500 status.

(5) I believe that Microsoft's Windows 2000 and 2003 owes much of the stability
of its TCP/IP stack and the improved robustness of its utilities to wholesale
inclusion of BSD code. Not only is free and Open Source software good for the
economy, it is also good for individual purveyors of commercial software within
that economy.

I am not done yet ...

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New FUD: Open Source Is "Economically Dangerous"
Authored by: blacklight on Saturday, January 17 2004 @ 01:01 AM EST
(7) Microsoft claims that the price of its NOS software accouns for only 8% of
the TCO: if Microsoft's claim is correct It is ridiculous to think that Linux
is popular merely because it is free of charge - the 8% factor. By the same
token, it is ridiculous to think that Open Source software tools are popular
merely because they are free: if someone's commercial software tools will cost
me $100,0000 but save me say $200,000 in time and materials expenses compared to
using the free and Open Source tools, is there any reason why I should not use
the commercial software tools?

[ Reply to This | # ]

MS and University Funding
Authored by: RedBarchetta on Saturday, January 17 2004 @ 01:24 AM EST
Quoting from this web page.

"Universities in Germany are currently under heavy pressure to finance themselves. At the same time there is a pressure from the scientific community to allow peer review, i.e. open source development. Some of the researchers who are caught in the middle between these two demands may tend to react nervously or to see monetary reward as the only valid incentive for science, just as for software."

Well, here lies the motivation for this article, right? If Universities are under pressure financially, when wouldn't it seem plausible that Microsoft is offering "research" funding in exchange for a favorable opinion? What is one of the biggest obstacles for research? Funding? With MS millions, just a "small" donation is enough to fund years worth of research. How convenient: write favorable opinion, regardless of the non-sensical tone, and get millions in funding!

While I have no evidence to support this view, I can offer Microsoft's history as a convicted monopolist, their latest "Get The Facts" flatulence on the web site, and the historically negative statements from various executives (Balmer, Kateeb, etc.) regarding OSS. That's aside from how ridiculous the conclusion is from this professor.

[ Reply to This | # ]

If You Use Linux You Support COMMUNISM!
Authored by: johan on Saturday, January 17 2004 @ 02:15 AM EST
Poste r of Linus as a Soviet leader

I found it on Originally it appears to have been from, but that link is dead.

[ Reply to This | # ]

  • Yuri's revenge - Authored by: Anonymous on Saturday, January 17 2004 @ 02:36 AM EST
New FUD: Open Source Is "Economically Dangerous"
Authored by: davcefai on Saturday, January 17 2004 @ 03:08 AM EST
Quite possibly Herr Professor can also be hired to say that exporting jobs like
telephone support to India is very good for the economy.

Ultimately the free market will decide the issue. As others here have pointed
out there are many situations where it is preferable to use proprietary
software...... or it seems to be.

Any halfway decent company is able to make an informed decision as to what
software it can most effectively use. Effective means "bang for the
buck". The money saved can then be used elsewhere to expand and improve
the business. (Which means that the money is STILL circulating in the economy)

Similarly, home users can make their own decisions. The money I save by using
Linux instead of Windows is going to go somewhere else - Home Improvement,
Booze, Gadgets etc. On the other hand my neighbour may prefer the sense of
security he gets by paying the Miscrosoft tax.

The transition from Proprietary lockin to FOSS is not going to be an overnight
phenomenon. It is a drift towards FOSS. The economy in general and the
proprietary software industry will easily be able to drift towards a new

It seems to me that MS and others a claiming a God-given right to my money. On
the other hand I claim a right to my freedom to choose - even proprietary
software where necessary.

[ Reply to This | # ]

Authored by: RSC on Saturday, January 17 2004 @ 03:52 AM EST
I don't get this ludite attitude from a "scientist".

Time and time again markets change, and in most cases the economic landscape
changes at the same time. Most companies adapt and so does the economy. Some
companies fight tooth and nail to stop the change. Most that do fight usually
end up dead.

I find it sickening to see this type of pure greed. I am embarased to admit I
belong to a race of beings that put money in front community.

I honestly couldn't give a dingos testicle if MS dies tomorrow. But what would
the rest of the world do if it did vanish tomorrow?

Think about what would happen to the economy with MS packed it in tomorrow. How
would the world and the global economy cope with the fact that the majority of
the world computers run software that could no longer be supported?

There is a reason why monopolies are *BAD*, and why they sould be fought at all
levels. You would expect an "expert" in economics to understand
this. The suden death of a large monopoly always creates a sh*t load of trouble
for the economy.

So does the doc. think it is economically sound to support MS type of closed
model where monopoly is the norm? If he does, I find it hard to beleive he is an


An Australian who IS interested.

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Software should be like mathematics
Authored by: RedBarchetta on Saturday, January 17 2004 @ 03:56 AM EST
The wheat machine example is unlike free software in that it requires an entire organization with major, costly infrastructure to produce something tangible. It would be hard to convince all those factory-line workers, engineers, executives, etc. to come in and work for free for an extended period, months, say. It requires vertical, special knowledge (read: expensive) to manufacture a machine of this type, not to mention raw material cost.

Now, for $500, or about 1 week pay for an US average worker, I can buy a PC, a copy of a major Linux distribution, and perhaps an internet connection for 1 year. Multiply this by tens of millions people worldwide. The learning and productivity unleashed far surpasses that of any proprietary software company. The secret is out: programming isn't rocket science anymore. It's almost routine for many, being the result of knowledge proliferation. Monopolies fall apart, and thier henchmen scramble for cover.

But wait. Isn't this starting to sound like learning mathematics? The sharing of knowledge, and the resulting advances/productivity benefit everyone! Is that why Universities world-wide teach mathematics and aren't trying to profit from tan0=sin0/cos0?

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New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Saturday, January 17 2004 @ 04:14 AM EST
No one person, government, or group of people on this planet has the right to
tell me that I cannot "give" something away, either in the spirit of
benevolence or philanthropy.

[ Reply to This | # ]

New FUD: The man is mathematically challenged
Authored by: Anonymous on Saturday, January 17 2004 @ 04:14 AM EST

According to:

his consultation _hour_ is Wednesday 10.00 to 11.30.

It is nit-picky, but this sort of imprecision does not
inspire confidence

[ Reply to This | # ]

New FUD: Let's look at this in the proper context!
Authored by: TobiasBXL on Saturday, January 17 2004 @ 04:57 AM EST
Heise puplished an article not too long ago about this same department at the
University of Münster. Microsoft paid the department to produce and publish a
study with the main message that Microsoft in Germany is responsible for a vast
majority of jobs in the IT sector.

This "new" paper is just the follow up.

Everything should be looked at in the context of what happened.

This study is NOT an independant work as Microsoft somehow sponsered this. This
is not scientific work and people know that.

This Dr. Kooths is candidating for membership in the NRW Landtag, the parliament
of Nordrhein-Westfalen. He is with the FDP, a liberal party representing the
interests of big business mostly. It is not surprisable that he has taken side
for Microsoft or propriety in general regarding his political orientation.
Again, this makes his "study" less scientific and more political.
People know that too.

There is enough independant scientific research at German universities that
states the exact opposite of Kooths messages. In contrast, nobody was paying for
those independant studies. Guess who gets the most trust in his work?

It must embarissing for the University of Münster to live with such
circumstances in this department. The big hammer for propriety is yet to fall
down on them. Until now, only an increasing number of companies like IBM and
Novell at the head of the movement have taken up Open Source into their
strategies. This year has been predicted by many as the year when Linux comes to
the desktop, thus making a large part of consumers enjoying Open Source
products. But the main grassroots movement is yet to come.

The real grassroots movement

Millions of students from the departments of computer science, physics and
mathematics at countless universities are in the process of being
"assimilated" by Open Source. They are learning with and through
open source software. Computer Science students and software engineers are using
Linux/Unix to grasp such concepts as scheduling, low level drivers, memory
management and network layers. They don't use Visual Basic to learn the
concepts of object orientation. They are using C++, Scheme, Java, maybe even

When those people are leaving university and enter the business world, then the
sword of Damokles will drop down on propriety swift and heavy.

Open Source allows educational institutions to use the code without limitations
for education. Students don't have to forget what they have seen as this is the
case when a propriety vendor lets people take a look at their code at
universities. Students may even share what they have written without limitations
and improve the development of other students and share on.

It is a rather sad irony that such cheap FUD is originating from a university
when it's the universities which actually will bring about the downfall of the
propriety monopoly.


[ Reply to This | # ]

MICE - re: mers4-OpenSource-Abstract-en.pdf - my reply
Authored by: Wesley_Parish on Saturday, January 17 2004 @ 05:03 AM EST

I sent them an email after downloading their pdf, and here it is:

Just a few corrective comments.

1. No Market at the Core
I'm sorry to say, this looks like a neo-liberal slur on volunteer participation in the economy. It also fails to address the serious problems caused by market failure, such as monopolistic rent, which effectively annuls the information medium of price.

2. Developer Orientation is not Customer Orientation
I presume this implies that there can be no correlation between a developer's wants and that of a customer? If so, that also implies that commercial software is developed under duress. And furthermore, is amply refuted by the Koha Library Automation System. Check it out.

3. Weak Commercial Software Does Not Mean Strong Open Source Software
That goes without saying. There is very little automatic correlation in a complex system, which is the everyday world. However, please explain the following sentence: "Open source software requires a strong commercial software market." In the light of gcc and emacs. And Linux taking over the Unix ecosystem and moving into the embedded software system. Prior to Linux's advent, the Unix ecosystem was rapidly turning into a niche market. Not to forget, Microsoft's survival is rapidly coming to rely on the DOT NET development environment, and the Mono clone is assurance for competitors that Microsoft will be restrained by market forces from crushing their efforts. Otherwise, the DOT NET effort would fail for the same reason that Java failed - companies don't wish to put their futures in the hands of competitors. Clear enough?

I suppose the IT sector does not include network technology? If it does, please explain your position in the light of the TCP/IP suite, http and apache, ftp and its competitors, the countless firewalls, etc. That is in the purely abstract sense that it is part of the background, the infrastructure that is now essential. Or is the Muenster Institute for Computational Economics (MICE) using the OSI/ISO networking suite? Or SNA and some other proprietary software suite to display its message?

And if this open source software upon which the MICE is relying to disseminate its message, does not offer all the ISPs between - where I am reading and downloading your message, employment, please inform them ASAP.

5. As you might be aware, the state - whether local or national - has primary responsibility to its citizens. This includes accurate data storage and recovery. It is of prime economic importance that the data can be maintained accurately, because citizens don't like their representatives and government stealing from them. I refer to you a relatively recent case in New Zealand concerning the Inland Revenue Department, and

And a monopoly that insists on changing its file formats on a regular basis, puts that at risk, I'm afraid. It isn't so much a competition-policy strategy, it is a damage-control strategy for the state not to be reliant on any one provider, and to do that, the file formats must be absolutely transparent - even if in actual practice they are encrypted.

In short, the abstract was even worse than usual in providing assertions and no examples. I have given you a few examples to make up for this - I expect you will make use of them and improve your theses.

Wesley Parish

Of course, I neglected to quote Linux Torvalds' comment on Darl McBride outlawing marriage because free sex detracts from the commercial value of prostitution. I wonder what the estimable doctors would've had to say about that! (Considering that the major biological purpose of the social act of marriage, is to provide a safe environment for the raising of children who will not mature in less than fifteen years, who thus need a major investment of time and energy. Thus "free" doesn't actually come into the question.)

finagement: The Vampire's veins and Pacific torturers stretching back through his own season. Well, cutting like a child on one of these states of view, I duck

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: neilplatform1 on Saturday, January 17 2004 @ 05:10 AM EST
His analysis is frankly laughable.

On the point of 'incentives for innovations' there as been shown to be an
inverted U curve, so that the incentive is maximised when there is
healthy competition and the second company in a market has a chance
of overtaking the first getting enough incremental profit to justify further
innovation. This situation gives both companies an incentive to
innovate. The two ends of the curve where innovation is disincentivised
are where there is a *cough* monopoly, or where a market is so
competitive innoation is uneconomic.

The incentivves to innovate need not be directly economic, of course. In
the open source model it is often traditionally uneconomic projects that
start off well because they provide significant use value for their
developers. This can lead to a situation where uneconomic software
reaches critical mass and becomes economically valuable. I can't think of
a better definition of innovation!

Of course, OSS is itself a form of innovation that the kind Professor is
trying to stomp out. Another supposed libertarian who badly needs an
hour locked in a room with ESR. He's either totally blinkered or looking
for some cushy grants from you-know-who...

[ Reply to This | # ]

Open Source: not for everything
Authored by: Anonymous on Saturday, January 17 2004 @ 05:16 AM EST
Heh - he states that OSS can't be used for profiteering. That's true, it just solves problems :)

Of course, OSS isn't appropriate for everything. Best areas are commodity applications like operating systems and office programs. Also publicly funded projects should (IMO) be Open Source, that the general public can benefit and improve on the software.

Everything else can be closed source just fine. Until a good OSS alternative becomes available, of course...

[ Reply to This | # ]

Economically damaging?
Authored by: Anonymous on Saturday, January 17 2004 @ 05:40 AM EST
I'll give you <a
ot;>economically damaging</a>.

[ Reply to This | # ]

"Happy Engineering" - Developer Orientation instead of Cutomer Orientation
Authored by: Sesostris III on Saturday, January 17 2004 @ 06:21 AM EST
leaving aside the contention that FOSS Software cannot be commercially developed (it can), one of the arguments against FOSS by the good doctor seems to be that FOSS developers, unlike commercial developers, will not respone to customer wants.

Well, given that the best way to disprove an argumet is to find a counter example, I know (from personal experience) of at least one case where this is not true.

I am a UK citizen. The main lanugage in the UK (like the US) is English. However, there are spelling differences for some words. These include colour/colour, behavior/behaviour and favorite/favourite. Now, my PC is dual boot, with Windows XP (commercial, meant to respond to me, the customer), and SuSE 9 Pro, with the KDE desktop (FOSS, written for the happy FOSS developers, rather than for me). Now, guess which one I can get to spell the UK way rather than the US way. Correct, it's FOSS (well, this is Groklaw!)

Actually, I believe that FOSS is being used in some places (Wales? Iceland? Norway?) because Microsoft refuse to provide local language variants. It would seem that in some cases FOSS can be more responsive to user needs that commercial software. Ultimately, commercial software will provide what the user wants only if it is profitable to do so.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: geoff lane on Saturday, January 17 2004 @ 08:57 AM EST
Professional economists always have problems coping with goods that have zero
cost - it messes up their ideas about value.

Most commentators about free/open software forget that the vast majority of
software is NOT written for sale. It's written for internal or temporary
purposes. Subsequently
releasing the s/w under a GPL license has the huge benefit to the authors of
continuing free support and development. This reduces internal costs for the
company. So zero cost software generates a cost benefit to the company and
maybe many others.

[ Reply to This | # ]

It's irrelvant
Authored by: Anonymous on Saturday, January 17 2004 @ 09:08 AM EST
It's quite simple. It's an economic advantage for corporations to use free
OSS, and an economic disadvantage for them to purchase similar programs from

Nothing else matters. It all boils down to benefit/cost for a product. The
higher that ratio is, the more likely there is an economic incentive to use the
product. Since the cost of most OSS is nearly 0 there will be steady pressure
to adopt it, irrespective of what anybody says regardless of whether it's
"dangerous" or not.

Proprietary SW is nothing more than a feudal system for SW. It should be
plainly obvious that many powerful landords will lose their comfy positions, but
it increases opportunities for the serfs under the system although manyof them
lose some of their security as well.

We've already reached critical mass, I don't think anything can derail it.

[ Reply to This | # ]

Author forgets economic benefit to remainder of the system
Authored by: Anonymous on Saturday, January 17 2004 @ 09:47 AM EST
Contrary to the author's belief, the economic benefit of lower cost (i.e.
higher efficiency) open source alternatives to all other software using
industries is far greater than the economic loss to (parasitic) commercial
software producers using IP monopoly protection to produced overpriced
(economically inefficient) software. If one follows the author's conclusions
to the area of free trade, one would believe that tariffs which create
inefficiency in free trade are a benefit to the combined economies of the two

The author's study is a type of propaganda.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Saturday, January 17 2004 @ 10:25 AM EST
But of course it is not the purchase price of the
software, but the total cost of ownership that counts.

And as has been "shown" the total cost of ownership of MS
OS is lower than free software, hence economically dangerous.

MS are just preparing the ground for when TCO of Linux
is seen to be lower than MS offerings;)

[ Reply to This | # ]

Profit motive is "economically dangerous"
Authored by: Jude on Saturday, January 17 2004 @ 11:43 AM EST
There are many economic problems that desperately need the attention of talented

We live on a finite planet, but we have a consumption-oriented economy that
demands accellerating depletion of irreplaceable resources. How are we going to
make the transition to a sustainable economy?

The rich have always gotten richer, but for a long time the poor were getting
richer even faster. This trend reversed sometime toward the end of the 20th
century, and we are now seeing an increasing concentration of wealth in the
hands of a few hyper-wealthy people, while much of the rest of the world is

I could go on, but I think you see my point.

A disturbing trend of late has been the diversion of economic talent away from
the solution of these pressing problems: Economists are instead wasting their
talents contriving pointless rationalizations to justify the ill behaviour of
their wealthy business patrons. I hold up Dr. Kooths' recent
Microsoft-sponsored lecture as an example.

[ Reply to This | # ]

New FUD: Open Source Is "Economically Dangerous"
Authored by: PeteS on Saturday, January 17 2004 @ 11:53 AM EST
(IANAE - I am not an economist, but I studied it in college when I did my Bus. Admin degree - a dark period in my engineering life).

I agree with your analogy in principle (some disagree because of the specific industry, but the industry is immaterial).

What is needed, however, is a more detailed look at the impact of competition.

The wheat harvester from Cheap Harvesters, Inc., now costs $1 to the end user.

From the basis that (in general) for a given utility, the price and demand for an object are initally inversely related (lower price = higher demand), and a dual closed loop (i.e. a demand change can vary the price of something, and a price change can vary the demand) then Cheap Harvesters, Inc., will be swamped with orders, thus raising the price slightly (or perhaps a lot, depending on overdemand).

Assuming that the technology to make this $1 harvester is generally known (very important point I will return to), then as demand rises (and prices with them, tending to diminish demand), more manufacturers will get in on the act; but that will put competition in the way of Cheap Harvesters, Inc.

Only those companies that can compete against each other value wise will remain, ultimately; and that, of course, is the principle of specialization. Wherever (whoever) can produce an object for the lowest cost is it's natural producer. They specialize in producing this product.

Now to the technology being widely known.

For widely known technology, the only competitive advantage is the cost of producing (and therefore the cost to the consumer) whatever object is being produced. From basic economic theory, then, open source is the natural producer of the type of software it produces.

As to what happens to the industry at large; it has to change.

Such changes have happened before (the industrial revolution springs to mind) where economies were completely disrupted by a new model; yet no-one argues that moving through the industrial revolution was a bad thing, in toto, although it caused a great deal of consternation because of the required retraining of people to meet the demands of this new economy.

So is Open Source harmful? Only to those who can not change to the demands of the new economic realities being forced on them due to natural market changes.

A number of industries come to mind:

1. Proprietary software (although not all - it depends on whether what is being written would be a commodity)

2. The Entertainment industry (really, the cartels that control the distribution of entertainment products).

3. The printer industry (although it has successfully moved through much of it's travails).

Just a little food for thought.

Artificial Intelligence is no match for natural stupidity

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New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Saturday, January 17 2004 @ 12:36 PM EST
I believe this is in line with another study by MICE (Muenster Institute for
Computational Economics) estimating the number of jobs in other areas each
Microsoft employee allegedly generates. Link:
If you read german, Heise has some info at

One of the gems in this study is that it could be efficient, if only one
platform prevails on the market....

So the study could be read as indicating "well, our economic theory shows
the benefits of proprietary software. Open source software is not shown to offer
those very same benefits according to our theory, hence we advise against

One may very well argue that there is no commonly accapted theory governing the
economics of free software. The "Why does Linux seem to attract much more
people and attention than BSD does?" type of question should also be
adressed by any such theory.

However, it is fairly obvious that producers of embedded devices similar to IBM
for their mainframe business use Linux since it reduces their development cost.
Others deploy it to reduce dependency from a monopolist, even if that comes at a
short term extra cost. Eric Raymond has suggested
that the massive advantage open source has over closed source when it comes to
debugging the code could explain some of the cost saving potential.

[ Reply to This | # ]

MSFT's goal is not converts, but slowing the inevitable?
Authored by: Anonymous on Saturday, January 17 2004 @ 12:48 PM EST

I just realized MSFT's goal with all the SCO FUD and these supposedly
scientific studies is not a serious attempt at converting knowledgable people
away from FLOSS. They are just trying to maintain the status quo among the
unknowledgable/misguided. FUDed the most are those that consistently attend
these MSFT sponsored conferences. MSFT actually gave up trying to seriously
convert people with the "GPL is cancer" position a few years ago.

MSFT's goal is simply to slow down the acceptance of FLOSS as much as possible,
save up enough billions to hopefully have enough in reserve to switch to either
1) a DRM based MSFT super software lock in model or much less desirable for them
2) a services based software model (and weather the severe pain politically or
financially respectively during transition). Even MSFT, as the biggest
convicted monopolistic software company, is smart enough to see the future
comming, if not then they will most certainly die. MSFT has been saving for a
rainy day for at least the last 2 years.

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IBM gives market proof this *is* FUD
Authored by: PeteS on Saturday, January 17 2004 @ 02:24 PM EST
IBM Raises Number of New Hires for 2004

From the article:

IBM will hire 15,000 new employees -- twice as many as originally planned -- in areas like software and services because of a rebound in the economy, a top executive said on Saturday.

This from a company that makes a lot of money from Open Source. Gotta love the irony.

Artificial Intelligence is no match for natural stupidity

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New FUD: Open Source Is "Economically Dangerous"
Authored by: a.spengler on Saturday, January 17 2004 @ 02:39 PM EST
This is the same Dr. Kooths who some weeks ago released a Microsoft-funded study
stating, that for each € revenue at M$ (Germany) there are revenues of 50€ at
Microsoft's "partners"...
Together (pure coincidence of course) with this study they released one
basically stating that the use of free software destroys value, is responsible
for increased unemployment and the like.

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New FUD: Open Source Is "Economically Dangerous"
Authored by: sphealey on Saturday, January 17 2004 @ 04:21 PM EST
Everyone loves Schumpeterian "creative destruction" until it invades
their own personal pea patch. I think Kenneth Olson, founder of Digital
Equipment Corporation, is still around - you might ask him how he felt about
what the PC market and Microsoft did to his profit margins!


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New FUD: Open Source Is "Economically Dangerous"
Authored by: Taran on Saturday, January 17 2004 @ 05:02 PM EST
These people don't know the first thing about Software Development Life Cycles, which is common in such FUD. My comments on the Management Summary are here, for those interested.

I needed some fertilizer for the Jamaican plumb tree in front. Thanks ;-)

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Propriety Software Destroys Jobs!
Authored by: s_PeePs on Sunday, January 18 2004 @ 07:58 AM EST
What do you think the Republicans in Congress and in the white house would do if
someone-- say, Howard Dean, were to propose a new tax that an employer would
have to pay of 1000 dollars for every new office worker they hired? They would
have a field day. They would call it "an assault on jobs"-- and
they would be right.

Well, that's what we have now under Microsoft-- except that the money goes to
Redmond, Washington instead of Washington D.C. When you charge a hefty
licenscing fee for each and every machine, you create a disincentive to hire the
people who work the machines. Simple, no?

Proprietary software is good for the economy of Microsoft-- bad for the economy
of office workers, manufacurers, publishers, merchants, farmers, those who work
in the film, television and music industries, and entrepreneurs in general.

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New FUD: Open Source Is "Economically Dangerous"
Authored by: tanstaafl on Sunday, January 18 2004 @ 04:00 PM EST
Hot _DAWG_! I especially like the comment about needing fewer programmers. I
am a professional programmer, but I would do it even if it paid less, because I
love it. Even if I had to take a different type of job, I would still write
code. The bottom line is that it is morally wrong for one group of people -
programmers, in this case - to hold up all of society so that they can maintain
their higher incomes. If Herr Dr. Kooth thinks that this is better for society,
perhaps he would like the economic model of the mobster who takes money from
businessmen to _not_ kill them or their customers (it's call the 'protection'
racket). Other than the physical threat, it's the same business model, and so
long as the other business folk pay up, it has the same consequence - the
enrichment of the thug.

This is not to say that I believe that proprietary-source code is morally wrong,
as some people seem to think. If I need to perform some task with computers,
and it would pay me to use a closed-source package rather than open-source one,
I would be foolish to not use the proprietary code. As a rational person,
however, I have to take _all_ things into account when weighing the Total Cost
of Ownership. Not the least consideration is that since I neither own nor
control the proprietary code, it has far less chance of meeting _all_ tne needs
of my task, because I can either change the open-source code myself, or
(assuming that I were not a programmer) pay somebody else to do so.

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New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Sunday, January 18 2004 @ 04:10 PM EST

This is clearly just a "research paper" that Microsoft will try to use to attempt to "curb" initiatives in governments that advocate or mandate using Open Source Software (or data format standards) or moves to adopt Open Source Software.

Just more of the same from Microsoft, nothing to see here, move along, move along.

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New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Sunday, January 18 2004 @ 09:13 PM EST
I am not going to read Dr. Kooths's paper until I can understand the abstract.
I am not making any progress.


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Rather like the arguments of the Luddites
Authored by: Anonymous on Monday, January 19 2004 @ 02:13 AM EST
The same arguments could be used to oppose automation, robotics, streamlining
business processes etc...

If we are to believe this economist, governements should drop using cars for
doing their daily business and go back to horsedriven carts. It would employ
more people!

What horseshit!

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What they seem to forget is ...
Authored by: Anonymous on Monday, January 19 2004 @ 08:06 AM EST
Open Source is alive and doing extremely well. You can come up with all the
theories you like about what the problems with open source are but ultimately
you have to also be able to account for its success.
By far the biggest problem is the sheer number of people in the business world
who don't feel comfortable with open source and consequently aren't looking
very hard at how they can benefit from it. The talk is aimed squarely at these
Remember, most people are convinced they are right and really just want to see
things that confirm their established opinion. Even here a lot of the criticisms
of the article are pretty lame --sort of the "I know I'm right so how
dare these guys contradict me".
My take is some "experts" looked at open source and didn't see what
they expected. Their mistake is that they have applied a conventional analysis
(mostly supply and demand which is what most business people understand) to a
situation why is way more novel. The lack of a monetary market should have clued
them in right away that a more general framework like competetive game theory
would be required.

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Proprietary=per per use; OSS=pay per improvement
Authored by: Anonymous on Monday, January 19 2004 @ 08:57 AM EST
One of the key claims of the paper is that "Developer Orientation Is Not Customer Orientation". The problem is that the paper unjustifiably discounts the effect of having the user and developer be the same, and doesn't fully account for users paying developers for improvements.

Fundamentally, in proprietary software, customers pay per copy. In OSS, customers get copies free or nearly so, and pay for improvements (in time or money). It costs nearly nothing to make a copy, and potentially a lot of money to create an improvement. Thus, it can be argued that OSS moves the cost model closer to the actual costs than the proprietary model.

This is to be expected in a market once it matures. A mature market commoditizes products, so that the cost of the product is strongly correlated to the cost of making it. If OSS moves the costs closer to the actual costs of making it, there should be no surprise.

That doesn't mean that everything will necessarily become OSS. However, the arguments in this paper aren't persuasive at all. It intentionally ignores many of the most important aspects of OSS, and by ignoring key facts you can invent any conclusion.

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New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Monday, January 19 2004 @ 12:02 PM EST
Following this guys argument it must be logical that water is bad for the
ecomnomy. I mean, water falls from the sky and any pleb can get a bucket,
collect it and use in in any way they want.

For christ' sake you idiot has it not dawned on you that a whole global
industry surround providing water to the public? People could dig their own
well, put water catchers on their houses or walk to the nearest river with a
couple of buckets but instead they choose to pay the incredibly profitable water
company to do that for them because hell, it's easier that way.

The same thing will follow with Open Source software. The majority of users that
have paid Microsoft thousands for software and associated services will pay
people to set Open Source up for them and the money they save will be spent on
other aspects of the business with no damage to the economy whatsoever.

Just remember, because the guy has a Phd doesn't mean he has any sense. In the
mean time, if any students at his university see PC boxes being carried in with
"With Thanks, your friend Bill" written on them I think we should be

For me though, the fact that Cambridge should host this kind of crap just goes
to show what Microsoft's "financial investment" can buy.

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New FUD: Open Source Is "Economically Dangerous"
Authored by: Anonymous on Monday, January 19 2004 @ 03:08 PM EST
I have recently been doing research into economics. It is based on this
research, and in the interest of the global economy, I have started a new
program. Basically you send me money, and I spend it for you. It will be an
excellent stimulus for the economy, generating large amounts of taxes. This
program could be deployed alongside opensource, recovering the lost value. While
the closed source community is offering a relatively good price too worth ratio,
my proposal would be even better. The cost wouldn't be so great, but on the
other hand, it wouldn't actually be encumbered by anything of value. Please
send checks and credit cards to me at ********.

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Open Source shows that the market is FUBAR
Authored by: Anonymous on Monday, January 19 2004 @ 11:49 PM EST
however, in any economy based on the division of labor, the market fulfills important information, coordination and incentive functions: it creates an equilibrium between customer wants and product supply (customer sovereignty), steers scarce resources towards their best-possible use (optimum allocation of resources), generates income and distributes it as warranted by performance (productivity-oriented factor compensation) and provides innovation incentives (progressive function). In such a market, prices are the main information medium for suppliers and demanders; without prices, the markets are unable to fulfill the above functions. When software is distributed free of consideration (?free?), however, it lacks this key price component, which results in the substantial economic and functional deficits of the open-source model.

Let's finish the analysis, instead of jumping to an immediate conclusion that Open Source is evil.

If the Market is operating properly, prices (whether they be positive, zero, or negative) regulate their own existence, by sliding up and down in a continuous flow. The PC-software market has a two-tier pricing structure: MS prices (high) and Open-Source prices (zero).

If the economics says anything, it says that both tiers of prices are signalling something about the market. Since the two tiers are not moving to meet each other, the market is not a Free Market: it is arbitrarily constrained, by whichever tier has the clout to maintain the arbitrarty constraints.

Or, as the subject-line says, the MS-controlled market is FUBAR.

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All roads should be toll roads...
Authored by: Anonymous on Tuesday, January 20 2004 @ 11:27 AM EST
And all education should require tuition.

The idiot (or mercenary given the sponsor) can't conceive of fundamental
software as part of the infrastructure or as a public good which can be used by
everyone to go further.

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Interesting text, but flawed from start
Authored by: Anonymous on Wednesday, January 21 2004 @ 01:21 PM EST
The basic premise of the study appears to be that "free" software
eliminates the market incentives to "steer scarce resources" towards
the products the customers wants by breaking the feedback between customer and
developer (ie money). The premise the author misses on is the idea that
customers and developers are seperate entities.

In reality, I have noticed that the most ardent supporters of open source are
also the most prolific users. Presumably in thier dual roles of
customer/developer they are capable of rationally determining what they want and
then making it. As a result, the old market incentive (money) is replaced by a
new incentive (personal utility) that can be every bit as strong.

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New FUD: Darl spreads FUD all over Congress
Authored by: Anonymous on Wednesday, January 21 2004 @ 09:02 PM EST
Slashdot and Newsforge are reporting a letter Darl has
sent to congress, containing about all the FUD he has ever
spouted. One would laugh, except ........

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