IlliGAL Blogging

IFTF's Future Now has a link to Yochai Benkler's Yale Law School article, Coase's Penguin, or Linux and the Nature of the Firm. Since reading a little Coase in the early 90s, I've been a transaction cost economics fan. The full article is pretty hefty, but it is worth a scan or more leisurely read.

An easy way to motivate thinking about transaction costs institutions is the following. If free markets are so great, why don't we wake up every morning and sell our services to the highest bidder? Most of us don't do this. We work for some organization, a company, a university, a government agency, and we agree to work for that same organization, day in and day out, until we change jobs. The answer to the question from transaction cost economics is that there exist costs of using the market (using free markets is not free), transaction costs, that are related to arranging, vetting, and contracting for exchange. These costs are not insubstantial and their existence encourages the formation of the quasi-permanent arrangements (institutions) that we work im.

Coase's Penguin takes transaction cost thinking and applies it to open-source software. Specifically, the article gives a detailed transaction-cost argument for the motivation and emergence of open-source arrangements of creating software. It is well argued, beautifully researched, and nicely written. Give the full article a scan or a read here.