February 9th, 2009
Open source causes deflation
It is easy to tell the difference between a FOSS advocate and an advocate of open source, like our own Matt Asay (right).
Just bring up money.
FOSS advocates tend to be idealistic, open source advocates more practical. Open source advocates worry whether the business model works, and how money will flow out the bottom of it to them.
It’s a fair question. That open source is a “freebie” is thus seen by these folks as a bug.
It’s not. It’s a feature.
We all know that Moore’s Law is, by its nature, deflationary. Chip densities increase steadily, so you get more value for the money you paid in every generation of hardware.
What open source does, from an economic perspective, is bring some of this deflation to software. It’s not as smooth a curve as with hardware. It tends to be herky-jerky, accelerating when times are hard, decelerating when life is easy.
This deflationary effect is hitting everyone in the software business right now, whether or not they are open source, because the option of using open source becomes attractive when budgets shrink and disappear.
This worries folks like Matt, who have to make a living in this environment. But their perspective is too narrow.
Open source provides productivity, at little or no cost, to just about everyone. When times are flush we see it in lower inflation. But labor costs are actually going down now. Thus it becomes deflation.
Thanks to the deflationary impact of open source and Internet business models, prices and interest rates have held steady for a decade. Now with business declining, this deflation puts the economy at risk.
But it’s this deflation that will allow the current stimulus package to work. Deflation is fought through market demand, more buyers stepping up to the plate to soak up that increased productivity, those lower costs open source delivers. Whether it’s public or private demand matters very little, it’s demand that we need now.
And in a deflationary environment, caused by open source, we need more of it than ever before.
Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983. You can follow Dana on Twitter. See his full profile and disclosure of his industry affiliations.
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| 02/09/09
