Tuesday, May 15, 2007

Software & Economics

It is good to see someone who has a relatively good understanding of Transaction Cost Economics write about the topic of open source software or software in general:

There was a time when a single determined individual could write the core of a single operating system for a primitive computer. But given the demands of computer applications and the capabilities of hardware technology at present, that is no longer conceivable. The task needs to be divided somehow. This immediately raises a ... core political economy question, about coordination of a division of labor within a centralized, hierarchical structure--that is, a firm. Within the firm an authority can make decisions about the division of labor and set up systems that transfer needed information back and forth between the individuals or teams that are working on particular chunks of the project. The boundaries of the firm are determined by make-or-buy decisions that follow from the logic of transaction cost economics. The system manages complexity through formal organization and explicit authority to make decisions within the firm as well as price coordination within markets between firms.

That's from Steven Weber's The Success of Open Source.

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