84 Pages Posted: 24 May 2002
Date Written: May 21, 2002
Governments around the world are making or considering efforts to promote open-source software (typically produced by cooperatives of individuals) at the expense of proprietary software (generally sold by for-profit software developers). This article examines the economic basis for these kinds of government interventions in the market. It first provides some background on the software industry. The article discusses the industrial organization and performance of the proprietary software business and describes how the open-source movement produces and distributes software. It then surveys current government proposals and initiatives to support open-source software and examines whether there is a significant market failure that would justify such intervention in the software industry. The article concludes that the software industry has performed remarkably well over the past 20 years in the absence of government intervention. There is no evidence of any significant market failures in the provision of commercial software and no evidence that the establishment of policy preferences in favor of open-source software on the part of governments would increase consumer welfare.
Keywords: software, open source, market failure, GPL, BSD, intellectual property, innovation, security, privacy, network effects, externalities
JEL Classification: K0, L1, L5, O3
Suggested Citation: Suggested Citation
Reddy, Bernard and Evans, David S., Government Preferences for Promoting Open-Source Software: A Solution in Search of a Problem (May 21, 2002). Available at SSRN: https://ssrn.com/abstract=313202 or http://dx.doi.org/10.2139/ssrn.313202