erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

From the "Productivity Paradox" Towards a "Creativity Paradox": New Patterns in the Economics of Software

Elad Harison (Maastricht University, The Netherlands)

Abstract  

The term "productivity paradox", often used by scholars during the last decade, emphasized a lack of causality between high scales of investments in tangible computer hardware and their marginal contribution to productivity abilities and to economic growth. Parallel to this debate, and as the diffusion of open-source systems evolved, an opposite phenomenon, to be called "The Creativity Paradox", appeared in the sector of computer software. The rapid development of the Internet, highly accelerated in the 90's, confronted software users, developers and authorities with a wide variety of problems. The intangible characteristics of information and knowledge-based goods were argued to hinder innovative progress in the software field, as inappropriate intellectual property regimes grant an over-monopolistic power to inventors, due to their historical reliance on economic paradigms, which are adequate of physical products. The dynamic evolution of legal systems, due to changes in the necessities and to the nature of computer applications, is introduced in the beginning of the article. Yet, as may be expected, the current institutional framework would have accelerated the development of "closed" software platforms, offered to the market at a minimal technological disclosure. Alternatively, the use of software patenting, as a strategic means to preempt new entrants from the market, might have been furthermore widespread among firms. On the contrary, since the beginning of the 90's we witness a significant incline in development of open source systems, which are publicly offered for a free-use license (e.g. Linux, Apache and Sendmail). Why do software developers and software firms offer their creative vintage at a zero-price-tag, although current legalization allow software developers to compete in more advantageous conditions than in the past and to achieve economic rents for their work? Recent publications argue the existence of non-economic rents in the open source "business model", which are based on altruism, ego-satisfaction or the ability to achieve a state-of-the-art scope of work and interest. Hence, from an economic point of view we try to propose an alternative explanation for the decision to utter a source code to a public domain as an economically-rational decision, based on a formulation of dominant and increasingly-qualitative standards, among populations of software developers and software users.

Economic Research Center
Middle East Technical University
06531 Ankara Turkey
Phone: + 90 312 210 3044, 210 2003
Fax: +90 312 210 1244
e-mail: metuerc@metu.edu.tr