Don Marti

Mon 06 Aug 2012 07:00:52 AM PDT

Who's pocketing open source wealth?

Shane Greenstein asks, Does the clothesline paradox apply to IT? If you use the sun to dry your clothes instead of an electric dryer, your clothes are just as dry, but measured economic activity goes down. Same for open source software. Greenstein writes,

[W]hen a new technology (which uses the free inputs) substitutes for existing economic activity, on first glance it looks like the new technology brings about a decline in total economic activity. That appearance is misleading, of course, because the savings goes into other economic activity, but those gains are diffuse and difficult to identify.

Where do the gains go? Some of them must end up with open-source-using companies. Simon Phipps, citing a report from O'Reilly and Associates, calls this effect the stealth stimulus package. But gains are also ending up in paychecks. Software is really two complementary goods: the codebase and the maintenance programming. Push the price of one good to zero, and the price of the other goes up. For example, Steven J. Vaughan-Nichols reported on a survey done by and the Linux Foundation.

"While the average pay increase for tech professionals averaged just two percent in 2011...according to Dice's annual Salary Survey, in 2011, Linux professionals saw a five percent increase, year-over-year, in their pay as well as a 15 percent jump in bonus payouts."

And that's for "Linux professionals" in general. For authors of important code on which other code depends, the deal can be much sweeter. Joey Hess writes, in a blog comment on David N. Welton's "In Thrall to Scarcity," "I think that the scarcity I am taking advantage of is that of deep knowledge of infrastructure. The kind of knowledge that you get by writing pieces of code that become infrastructure."

Using open source in business is sort of like hiring an employee who owns his or her own tools. In the case of hiring an open source developer, though, the "ownership" of the tools is in the form of expertise, something that's personal and that can't be sold or securitized. (Put that in your pipe and smoke it, Karl Marx.)

So who else is profiting from open source? The tax man. A lot of corporate tax returns look something like this: "We actually didn't make any profit because we had to send all our money to Software Licensing Trust in Taxhavenistan, so we owe nothing." As open source tends to reduce easily relocatable licensing streams, and increase paychecks in Portland and Mountain View, the public sector is getting a piece of the open source gains as well.