Coase's University: Open Source, Economics, and Higher Education

Michael Feldstein, Terra Incognita, Oct 31, 2007
Commentary by Stephen Downes

Michael Feldstein interprets open source through the lens of economic theory. It's a nice paper, and this sentence caught my eye: "We typically reduce all of economics to supply and demand, but it could be equally well formulated in terms of cost and benefit. Every system of production, whether it is a company, a market, or an open source community, has its costs." That's a good point, and of ourse, the economic advantage of open source is that it lowers costs. But that got me thinking: supply-demand, cost-benefit... could there be other pairs of variables that explain economics equally well, if not better? Economics is, at heart, the science of the trade-off. How about, then, pairs like desire and dislike? Hope and fear? Because, after all, the driving force of the economy might not be money at all. It might be something more intangible, like love or fear. Indeed - when one views the irrationality of the stock market - it is rather more likely that markets are driven by psychological factors rather than financial factors. Which is why not only ruthlessly calculating people make money; passionate people do too. (I have no doubt the economists know all this, and scoff at people who trivialize economics as 'supply and demand').
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