The Simple Economics of Open Source

Intellectual Property and Open Source

Article Snapshot


Josh Lerner and Jean Tirole


HBS Finance Working Paper No. 00-059, 2000


This paper examines the history of open source software.

Policy Relevance

Open source fits within familiar labor economics. Policy should not be based on the assumption that it is superior to or outside of ordinary markets.

Main Points

  • Open source software lets users change the code to suit their own needs; open source code under the General Public License (GPL) must be distributed free.

  • Open source software is produced in part by unpaid hobbyists.

  • The willingness of unpaid hobbyists to contribute to open source is consistent with the expectation that they will earn more in the future by displaying their abilities to peers.

  • Low-visibility tasks are harder to support in an open source model.

  • Open source tends to be more useful to experts than to casual users.

  • Strong leadership helps keep open source software from "forking" into many incompatible projects.

  • Open source and more traditional commercial models are becoming mixed.

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