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The fact that replicating a piece of software or music digitally has near zero cost suggests that the fair price according to classic economic theory is zero (t

The fact that replicating a piece of software or music digitally has near zero cost suggests that the fair price according to classic economic theory is zero (the argument being, that the price in a competitive market should approach the limit price). Of course what we see instead is a lot of companies that are now rent seeking and that no longer sell a piece of software to you but rent it out for a fixed price (SaS, Adobe Creative Cloud, Jetbrains, season passes in games etc.), similarly with DRM and Music/Movies/eBooks Spotify/Netflix/Amazon. Uber also fits this pattern in that they rent out capital that other people provide to them for free (insane if you think about it). What hopefully will happen over time is that these rent seeking entities are squeezed out of the market over time, otherwise we are entering an area of corporate feudalism. This can be prevented as long as the assets needed for production are easily and cheaply available, which is the case thanks to the Free Software Movement.

bsbechtel 8y ago
I think you are confusing the definition of rent seeking, meaning achieving economic gains by means of regulation that is virtually risk free, with collecting rent as a form of payment for a service or product. These are two different concepts, despite the name they share.
- baq 8y ago
  Photoshop, being nearly a monopolist, seems to almost fit the definition. Regulation is the only thing here that doesn't match, but being a de facto industry standard would be close enough for me.
- syrrim 8y ago
  "rent seeking", in economics, is not limited to regulation. We would distinguish between those who earn money by creating new value - as the inventor makes some process more efficient, and so makes his living - and those who earn a living despite creating no value. The easiest example of this is the man who has inherited some plot of land, and rents out the plot to someone. He might earn a healthy living - but where has he created value? The strongest example of this is perhaps he who earns money by destroying value - say the window repairman who goes out at night and smashes windows - but this is not required to be classed as rent seeking.
maxerickson 8y ago
Software costing a few hundreds of dollars frequently provides tens of thousands of dollars of value. This is quite similar to "free" (as in beer, let us not go down that tedious path). Say it only provides thousands of dollars of value and it's still pretty similar.
simonh 8y ago
>that the fair price according to classic economic theory is zero I don't think any economic theory is that naive. It's actually the cost of production divided by the number of sales, where the cost of production can be many millions of dollars worth of development and testing and the size of the addressable market can in some cases be very few.
ehnto 8y ago
Adobe products are continually worked on. Most subscription software is. You get continued support and feature updates, and the subscription model makes more sense for that kind of development than the yearly waterfall version releases. JetBrains has the best of both worlds with a fallback license to let you keep using an old version, or a subscription to get continued updates. Games are becoming increasingly long lived pieces of software as well. With bugfixing and updates continuing for years. The industry is struggling to find novel ways to make money in that environment, which is why you get things like loot crates. I would prefer an honest subscription over that. What I see is a devaluing of software as a product. I should be able to spend a couple of hundred hours on a package for a framework and sell it, but there is always someone offering a free version and then using weird and sometimes shady ways to make money. I wish it were more common to just sell code for money, instead of people pretending they are altruistic and then selling your data, selling your eyeballs or locking you into their ecosystem. Subscriptions are at least an open and honest transaction.
nv-vn 8y ago
The price should approach the limit price if you assume there's no initial cost of making the software. And for most SaaS, there's still an upkeep cost the company must pay. Free software just isn't feasible in the real world past the things that can benefit everyone at a very low cost (where some entities will take it upon themselves to employ people to focus on, for example, the Linux kernel).

bsbechtel 8y ago

I think you are confusing the definition of rent seeking, meaning achieving economic gains by means of regulation that is virtually risk free, with collecting rent as a form of payment for a service or product. These are two different concepts, despite the name they share.

baq 8y ago
Photoshop, being nearly a monopolist, seems to almost fit the definition. Regulation is the only thing here that doesn't match, but being a de facto industry standard would be close enough for me.
syrrim 8y ago
"rent seeking", in economics, is not limited to regulation. We would distinguish between those who earn money by creating new value - as the inventor makes some process more efficient, and so makes his living - and those who earn a living despite creating no value. The easiest example of this is the man who has inherited some plot of land, and rents out the plot to someone. He might earn a healthy living - but where has he created value? The strongest example of this is perhaps he who earns money by destroying value - say the window repairman who goes out at night and smashes windows - but this is not required to be classed as rent seeking.

maxerickson 8y ago

Software costing a few hundreds of dollars frequently provides tens of thousands of dollars of value. This is quite similar to "free" (as in beer, let us not go down that tedious path). Say it only provides thousands of dollars of value and it's still pretty similar.

simonh 8y ago

>that the fair price according to classic economic theory is zero I don't think any economic theory is that naive. It's actually the cost of production divided by the number of sales, where the cost of production can be many millions of dollars worth of development and testing and the size of the addressable market can in some cases be very few.

ehnto 8y ago

Adobe products are continually worked on. Most subscription software is. You get continued support and feature updates, and the subscription model makes more sense for that kind of development than the yearly waterfall version releases. JetBrains has the best of both worlds with a fallback license to let you keep using an old version, or a subscription to get continued updates. Games are becoming increasingly long lived pieces of software as well. With bugfixing and updates continuing for years. The industry is struggling to find novel ways to make money in that environment, which is why you get things like loot crates. I would prefer an honest subscription over that. What I see is a devaluing of software as a product. I should be able to spend a couple of hundred hours on a package for a framework and sell it, but there is always someone offering a free version and then using weird and sometimes shady ways to make money. I wish it were more common to just sell code for money, instead of people pretending they are altruistic and then selling your data, selling your eyeballs or locking you into their ecosystem. Subscriptions are at least an open and honest transaction.

nv-vn 8y ago

The price should approach the limit price if you assume there's no initial cost of making the software. And for most SaaS, there's still an upkeep cost the company must pay. Free software just isn't feasible in the real world past the things that can benefit everyone at a very low cost (where some entities will take it upon themselves to employ people to focus on, for example, the Linux kernel).