Selfishness and the community, Adam Smith and a couple of miraculous new modes of production

It’s a pity we lost Troppoarmadillo, not the blog so much (for ClubTroppo lives on) as it’s archives. Anyway, I had occasion to look up the post and comments below, and they are safely encoded at archive.org, even if we don’t have any backup of the blog archive itself. I don’t think I’ve reposted myself here before (though I’m not sure – I certainly haven’t done it much in five years).  So here’s the post, which is really an essay.

The comments were great back then too. I think we’re noticeably a little less cerebral, a little less serious these days. Anyway I hope you enjoy and perhaps we can take up from where we left off.  And apologies for the formatting of comments.  For some reason once lifted from archive.org the comments wouldn’t go down more than one at a time, which wasn’t something I was going to persevere with, but you can read them better formatted here.

Here’s a short essay I’ve written. The magazine of the Aurora tower in Sydney (would you believe?) approached me to write something for them. They’re even paying me!

Readers of my piece on open source software (pdf) that I discussed on Troppo a month or so back (now published in Policy) will recognise it as having similar themes to that piece. Comments appreciated.

One for one and one for all

I. Introduction

When next you get depressed about planes flying into buildings, and the other myriad miseries we poor humans inflict on ourselves, just take it from me that maybe there’s still something to that old idea about human progress after all.

Two miraculous new ways of working have emerged that are steadily making the world a little better every day. They have their enemies of course – as the saying goes, no good deed should go unpunished – but their success is unstoppable and growing.

The first has allowed millions to lift themselves out of poverty – for a ridiculously small outlay. The second is building a software infrastructure for all that is freely accessible for an even smaller outlay – nothing.

The first miracle – micro-credit – arose from the observation that many poor people in the third world could escape from poverty with the tiniest of breaks. The first micro-credit loan in the mid 1970s was US$27 lent to – wait for it – 42 poor people in Bangladesh.

The second miracle is Linux – or more accurately open-source software (OSS). Its software that kind of writes itself, is usually available without charge, and is often technically superior to the software you have to pay for. It will be instrumental in supplying computers to the third world for under US$100 each. And it’s the major competitive threat to software giant Microsoft, whose internal documents describe it’s achievements as “simply amazing”.

These innovations are sufficiently striking to have inspired their own millenarian mythology according to which they will usurp the domination of profit and self interest. The truth is both more mundane and more interesting. The miraculous qualities of these innovations come not from the assertion of selflessness over selfishness, but rather because they provide a deft new alchemy between the two. And, though it’s a well kept secret, that’s the miracle of capitalism also.

As Adam Smith knew, and as the deregulators have sometimes lost sight of, capitalism at its best, is the individual in the community. Let me expand on this last claim, and the new dialectic introduced between these recent innovations between the individual and the community.

II. The individual and the community

Who wrote these words?

What are the pangs of a mother, when she hears the moanings of her infant that during the agony of disease cannot express what it feels? In her idea of what it suffers, she joins, to its real helplessness, her own consciousness of that helplessness, and her own terrors for the unknown consequences of its disorder; and out of all these, forms, for her own sorrow, the most complete image of misery and distress. The infant, however, feels only the uneasiness of the present instant, which can never be great. With regard to the future, it is perfectly secure, and in its thoughtlessness and want of foresight, possesses an antidote against fear and anxiety, the great tormentors of the human breast, from which reason and philosophy will, in vain, attempt to defend it, when it grows up to a man.

These words reflect the passion, sympathy and wisdom of Adam Smith – the patron saint of capitalism. In awe of Isaac Newton’s reduction of motion – whether as on earth or as it is in the heavens – to a few simple laws Smith sought a similar understanding of human society.

The Theory of Moral Sentiments in which the above quote appears poses an idea of society as an interlocking set of communities each bound by moral sentiment. Ties of sympathy radiated through society and held it together – from the closest bond imaginable between mother and the newborn child she tends, to the progressively weaker bonds of family, friendship, acquaintanceship through to strangers and to foreigners.

Smith’s economics of selfishness is situated within a society that is literally shot through with the bonds of human sympathy. Given peace, the rule of law and a healthy community, the benignity of Smith’s new liberal economics then proceeded – again according to the “Newtonian Method” – from Smith’s single principle about human economic behaviour – our innate tendency to “truck barter and exchange”.

It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.

This dialectic between loyalty to the group and to oneself is alive today. Dotted throughout our market system – which relentlessly rewards the pursuit of self interest – are networks of communities large and small acting collectively.

Families and firms are collective entities. Of course neither are communal utopias. But most of us associate our own self-interest with our interest in these collectives.

And sociability and peacefulness are the cultural ground within which markets grow. In addition to the ways in which capitalism provides avenues for peaceably acquiring riches there’s a huge system of government and law which keeps the peace and some semblance of justice. Of course there are rogues. But we catch and punish a sufficient number that wrongdoing doesn’t make for an easy life. Ask Rodney Adler or the late Rene Rivkin and Christopher Skase and his less late wife Pixie who seems to have finally wangled her way out of exile.

The closest real world example of the rule of pure self-interest is not with market deregulation but in the anarchy of the third world’s failed states where the collapse of the most basic elements of law and community channel self-interest into theft and violence. Who’d build for the future when it can be confiscated at the point of a gun?

III. Micro-credit

In 1974 Bangladeshi Economics Professor Muhammad Yunus observed a poor countrywoman and calculated that, if she could raise less than thirty cents, she might escape the poverty imposed by middle-men who manipulated the prices at which she bought her raw material and sold her finished furniture.

Bemoaning the failure of his American economics Ph.D. to highlight this travesty Yunus founded the ‘Grameen’ (meaning ‘Community’) Bank. But how could it make these loans and get them repaid when its borrowers had no collateral to put up and Bangladeshi culture was shot through with corruption and debt evasion?

The secret was lending to individuals, but doing so within groups of people – particularly women – all of whom went co-guarantor. People might walk away from a loan to themselves, but these ‘solidarity groups’ helped transfer skill and share risk as well as radiating both the financial pain and the social shame of default.

These groups, the desire to increase borrowing as businesses grow, and the ‘training’ that borrowers get enable the Grameen Bank inculcate a culture of trust and repayment and a default rate of around one percent.

Group and self-interest coalesce a deft and miraculous new combination.

IV. Open-source Software (OSS)

Open-source software kind of writes itself. How?

Source-code is the tool humans use to build and modify software. It is written in a ‘computer language – like ‘Visual Basic’ or ‘C++’ which is an amalgamation of formal logic and natural written language.

To run on a computer source-code is ‘compiled’ into ‘binary code’ – instructions to a computer written in gazillions of ‘1’s and ‘0’s. ‘Proprietary software’ firms like Microsoft and Adobe typically conceal their source-code to ‘cover their tracks’ and frustrate would be imitators.

In the early 1980s MIT programmer Richard Stallman was incensed that the culture of sharing and peer review that characterised science and academia was increasingly being frustrated by source-code secrecy in an area where it could do so much good. He was infuriated by the inefficiency of his inability to tinker with the proprietary software in a prototype laser printer that Xerox had donated to his lab. After all, he only wanted to improve the software for his own use and then donate his improvements back to Xerox.

But Stallman’s crusade for the source-code freedom was looking increasingly Quixotic. Where source-code was available for a program or a set of standards by which programs interoperated, it could be ‘embraced’ by proprietary software producers, and then ‘extended’. If users adopted the extensions – for their enhanced features or just to interface with existing software – the extending firm could then sell its extensions – less the source-code – effectively privatising an open-source program or standard.

Stallman turned the tables on this tactic – known as “embrace, extend and extinguish” by developing the ‘copyleft’ licence. Where software is ‘copylefted’ your right of access to it, and your cognate rights to access, modify and/or redistribute the source code are tied to your agreement that, should you further distribute the software either as you have received it or with your own enhancements, you will grant to those to whom you have distributed it, the same freedoms. As we see later, this ‘leverages’ the original software making it difficult to access without buying into its maintenance and development.

V. New ‘high trust’ ways of working

For Adam Smith progress was a process by which increasing human autonomy, capability, wellbeing, productivity and virtue all grew together. The move from the pure hierarchy and coercion of slavery towards greater worker autonomy – for instance sharecropping and wage labour – was progress in this sense.

So too in our own day modern ‘just in time’ or ‘lean production’ management has taken things further still in ways that are strikingly similar to Grameen Bank’s modus operandi. In both cases, progress is made, not by strengthening surveillance and coercion from above but by relaxing it and assuming that, properly treated, people are well motivated.

The challenge is then to develop institutions within which they can be empowered to pursue their own interest in higher functioning activity. This is often done within ‘teams’ or groups. Just as ‘lean production’ uses ‘teams’ or ‘quality circles’ to harness people’s creativity in improving their productivity (as well as providing better surveillance and sanctions against shirking than can be provided by management), so Grameen Bank’s ‘solidarity groups’ provide the institutional structure for realising Yunus’ philosophy of building and harnessing trust.

[W]e knew we had to trust our clients. . . Today commercial banks assume that every borrower is going to run away with their money. . . . In contrast, Grameen assumes that every borrower is honest. There are no legal instruments between the lenders and the borrowers.

Open-source too belongs in this in this optimistic story of human progress. Its unique economics are captured in the words of the traditional marriage vow – to love honour and obey.

Firstly, ‘hackers’ or programming enthusiasts usually produce the original core programs that are built into OSS. Not implausibly for hobbyists they often describe themselves as motivated by the love of programming well.

Secondly, as in science, academia and the professions, reputation – one might call it ‘honour amongst peers’ – is also central in motivating and organising further coding. Again, note the parallel with Smith who argued that our near universal desire for others’ deserved approbation was a central ‘moral sentiment’ on which society was founded.

But the clincher is obedience – to the ‘copyleft’ licence – which simultaneously protects the software from being ‘embraced, extended and extinguished’ by proprietary software and undermines the incentive to hoard code. (Because, according to the copyright licence under which you have gained access to the software in the first place, you can’t sell your enhancements without granting the buyers the right to distribute what you’ve sold to others as they see fit.)

In the economic environment thus created the ‘chain letter’ of OSS grows progressively stronger through the process summarised in the hacker slogan ‘give a little, take a lot’. By giving a little back to the OSS project, (any enhancements that they have created for love, honour or more usually their own use) OSS users can take a lot (the use of the existing and developing software). If your new coding is accepted within the OSS project, you avoid the cost of rebuilding it back into new releases of the core software, or worse still having others add incompatible enhancements.

Now the biggest companies around – IBM, Novell, Hewlett Packard – are joining in out of the goodness of their selfish little hearts. They now do the lion’s share of OSS development. Why? It enables them meet better their customers’ needs. So they sell more hardware and consulting services.

Yet another case of one for one, and one for all.

VI. Conclusion

As I mentioned at the outset, as ever those that threaten change have their enemies. Micro-credit has a long list of enemies in the developed countries from local religious leaders to the husbands of wives Grameen threatens to set free to the moneylenders it is displacing. The enemies of OSS are probably more formidable.

The chief threat is the subversion of both public sentiment and government policy by the self interest of the rich and powerful, most particularly in an absolutist conception of intellectual property. Taken literally it implies that we owe royalties to the estates of inventors back to antiquity upon whose shoulders we still stand.

Where software initially grew and flourished without software patenting, judicial decisions have now established software patenting and the result is an extravaganza of new patent claims, creating a legal minefield that suppresses software investment particularly by smaller firms and those writing OSS.

Still its hard to believe that their enemies can possibly do much more than slow the inexorable spread of OSS and micro-credit. Of course neither is a panacea, and neither will displace older practices, like traditional money lending and proprietary software. Nor in a pluralist world should they.

But we can be grateful that these new economic forms are already thriving and that their peculiar alchemy of self and collective interest plays to what Abraham Lincoln so memorably described as the better angels of our nature.

Posted by Nicholas Gruen at June 5, 2005 06:03 PM

Nicholas,
Hope you don’t mind forthright commentary seeing as you asked for comments! I like the article overall and I always enjoy your writing style, but I feel the section on Open Source software is weak.
I am guessing that you are an Open Source enthusiast yourself (at least a flag-waver from the sidelines), and I appreciate the difficulty in explaining the concepts behind the movement without resorting to technical jargon.
However, assuming that this article is for a non-technical audience, I would suggest stripping out several phrases that are laden with meaning for OSS advocates but mean nothing to the general population.
In particular, I would consider modifying or removing references to “embrace, extend and extinguish”, “copyleft” and the specific programming languages of C++ and Visual Basic — the statement works just fine without them.
Also, I’d consider ‘removing’ some ‘quotes’ — if the words won’t make sense to the general readership, either explain them or remove them. Either way, most of the quotes are unnecessary IMO.
Just my 2c.
Posted by Stephen Bounds at June 5, 2005 10:10 PM [permalink]
Interesting article. Good connection between OSS, the Grameen Bank and self-interest expressed within a collective goal.
Posted by Cameron Riley at June 5, 2005 11:37 PM [permalink]
Thanks for the comments Stephen. I appreciate your taking the time.
I’d like to respond to your kind words by taking your advice, but let me go through it.
A lot of the writing decisions you criticise were the product of a fair bit of thought and I couldn’t come up with improvements with what I did.
I agree that ’embrace, extent and extinguish’ is jargon. I do however explain it. More to the point, EEE is critical to my exposition of OSS, because I don’t believe that OSS is just ‘sharing’ plus the net – the way Wikipedia is.
OSS works because the licence was specifically designed to combat EEE.
As for ‘copyleft’ I kind of agree with you. It is not an expression I like at all and – from memory – I didn’t use it at all in the OSS essay for Policy. I used it here because I needed a short word to describe the licence, and I thought OSS was tautilogical and GPL or GNU was worse.
On naming the computer languages – they’re just a couple of ‘f’ristances’. But maybe they should go. The editor will be in a better position to judge – so I’ll make sure he sees the comments.
What quotes do you have a problem with. Quotes can be a little profligate with words, but they add colour, and there’s no way I’m removing a word of the magnificent Adam Smith quote! But are there problems with others?
Btw, these things are all about judgement, so I’d welcome others’ views on this.
Posted by Nicholas Gruen at June 6, 2005 12:14 AM [permalink]
For what it’s worth, I disagree with all of Stephen Bounds’ criticisms. The only quote you use besides the Adam Smith one (which I agree is superb and the linchpin of your article) is that of Yunus about the Grameen Bank concept. It too is well chosen and highlights the trust philosophy succinctly, therefore reinforcing the link with OSS that you want to draw.
Similarly with your mentions of the “embrace, extend and extinguish” phenomenon and “copyleft”. Your article explains both concepts succinctly and clearly for a lay audience. I certainly wouldn’t remove them.
The mentions of C++ and Visual Basic probably don’t add anything much, but nor are they intrusive or confusing nor do they add unnecessary length.
I’m much more interested in the broad topic you open up than in editing nitpicks – the way in which capitalism at its best involves a flexible amalgam of playful but deadly serious competition, enlightened self-interest and co-operative, collective endeavour and sharing.
The difference between Adam Smith and OSS is that the former assumed co-operation and ethical commercial behaviour would flow automatically from the socialising effect of family, church and community. However, modern global capitalism at least arguably places grave stresses on all these social institutions – at least there is an observable phenomenon of families and communities being fragmented in the interests of flexible production and impulsive consumerism. Of course, one can overstate the extent of that phenomenon, as your article argues. Nevertheless, it’s unlikely that a Grameen Bank concept would work in a first world society like Australia or the US, because the ties of extended family and community are too weak to create a sufficiently powerful sense of social obligation and shame to inhibit default. I don’t think the existence of an evident social shaming mechanism with high profile individuals like Rivkin, Skase or Adler says anything much at all about the probability of it having meaningful operation with less prominent, more obscure individuas (i.e. most of us), where unscrupulous defaulters can and do take advantage of the anonymity and mobility of modern society.
Nevertheless, I agree that the OSS movement shows that a workable competitive/collaborative ethos CAN be created in first world society, and may well be both optimally productive and “worker friendly”, but it can’t be achieved by assuming the existence of strong social ties to civilise self-interest (as Adam Smith does) nor operate by calculatedly harnessing those ties (as the Grameen Bank concept does). In the first world, the social ties and obligations need to be carefully recreated by some means or another. The OSS movement provides a good example of how that can be done.
I wonder how it could be extended to other areas, for example workplace organisation generally? I’ve always tended to see outsourcing, casualisation and the “flexible labour market” as mostly malevolent forces to allow employers to jettison hard-won employment conditions and save a buck at the expense of the workers. But I know that many former employees who’ve been forced into an outsourcing situation have thrived on it and say they’d never willingly go back to being an employee. It’s an observation that many union bosses and lefties generally prefer to ignore or discount. But maybe, rather than fondly hoping to re-impose the old blueprint when they get back into power federally, they’d be better advised to think laterally and find ways to maximise the benefits of the “flexible labour market” by seeking to nurture that magic combination of enlightened self-interst, playful/serious competition and collaborative endeavour. How those sorts of structures and ethoses could be engineered is a topic worth exploring in depth and over time. Sounds like a conference theme to me, at the very least.
Posted by Ken Parish at June 6, 2005 09:47 AM [permalink]
Ken – We have our own versions of the Grameen Bank concept. The first ones I was aware of were the local community health services here in VIC offering small loans for emergencies. The first big (ish)one I was aware of was The Sisters of the Good Shepherd (Catholics) in Collingwood some many years ago offering loans up to $500- $1,000 for things such as fridges, washing machines. Part of the thinking is that poverty is the lack of capital (even if small $) forces people into higher expenditure for say commercial laundrys and reinforces the poverty cycle. I think these initial loans services have also morphed into services which search around for the cheapest and best deals on whitegoods, including delivery, saving unsophisticated people up to 30% + on essential family whitegoods.
Posted by Francis Xavier Holden at June 6, 2005 11:10 AM [permalink]
Francis
It would be interesting to know what default rate the Sisters of the Good Shepherd experience/d on their loans scheme. One suspects that they’re offering the scheme more as a charitable endeavour than a business, and reckon they’re doing well if even some of their customers repay the debt. A business could not operate this way and survive.
That said, I wouldn’t deny that there would be discrete parts of the Australian community where a Grameen scheme can work. For example, many remote Aboriginal communities (in fact some such schemes are operating with the Aboriginal community). And the Chinese community has always operated its own system of financial help and interlocking obligation. It’s one of the big reasons for the success of the Chinese commercial diaspora worldwide. But in both cases, it’s underpinned by a degree of intact sense of community and shared cultural understandings that I think just don’t exist among the broad mass of middle class caucasian Australians. I suspect that most Australians would have Buckley’s chance of persuading a significant group of friends and relations to sign up as co-guarantors for even a very small loan. And in the absence of such interlocking obligations, one suspects that the default rate would be unsustainably high for any commercial credit provider.
Posted by Ken Parish at June 6, 2005 11:43 AM [permalink]
Anyway, debating the feasibility or otherwise of a Grameen Bank concept wasn’t really the reason I commented. I don’t know very much about the area. As a commercial credit provider himself, Nicholas will no doubt have some very well-developed and informed views. Moreover, much of the point of the Grameen Bank concept appears to have been to find a viable way to extend credit to people who would be regarded as unacceptable credit risks by conventional lenders, which they would then hopefully utilise in productive ways. Wondering how one could extend such a system to the broad middle class in a first world country is inherently a meaningless speculation. The middle class doesn’t suffer from lack of sufficient access to credit, if anything quite the reverse.
Posted by Ken Parish at June 6, 2005 11:52 AM [permalink]
ken – I know that micro credit wasn’t the main point, but I’d argue that the concept, if not the details can be readily adapted. From what I remember the Good Shepherd default rate was about zero as they took a flexible approach to repayments, eg $5 a week was ok as long as you kept paying. I think they started off with a grant of about $10,000 and it was self sustaining. It had to be.
Posted by Francis Xavier Holden at June 6, 2005 12:06 PM [permalink]
Very nice article indeed. Loved the connection you drew between the grameen bank and OSS. About time Adam Smith was quoted in support of the eternal community of people rather than misquoted in support of sociopathic individualism.
Posted by wbb at June 6, 2005 01:31 PM [permalink]
Ken: As (I’m guessing) you are a member of a lay audience, it’s probably far more telling that you don’t find the concepts Nicholas uses as either confusing or obtuse. If you think the explanation is fine, then the article is more than probably fine.
Nicholas: I should clarify one aspect of my earlier remarks — I didn’t mean quotations in the sense of the Adam Smith quote. I meant the physical presence of quotation marks around words that probably don’t need them. This was the paragraph that really seemed a little excessive to me:
“To run on a computer source-code is ‘compiled’ into ‘binary code’ – instructions to a computer written in gazillions of ‘1’s and ‘0’s. ‘Proprietary software’ firms like Microsoft and Adobe typically conceal their source-code to ‘cover their tracks’ and frustrate would be imitators.”
Maybe my objections to terms like ‘copyleft’ are simply a case of being too close to my subject. I dabble in developing Open Source software myself, and while Open Source software developers create some extraordinary technology, some of the terms they create strike me as slightly … immature? smug?
As for ’embrace, extend and extinguish’, I find it too commonly used by knee-jerk Microsoft-bashers in the Open Source community for it to be a neutral term.
(Apologies for the computer jargon that follows.) I also believe the common use of the phrase doesn’t refer to the misuse of open source code without GPL protection. Rather, it refers to a computer standard (such as SQL or HTML) that has had custom extensions added that prevents customers from choosing their desired vendor implementation of the standard.
In most cases, the various implementations don’t share code — it the question of obeying or disregarding the standard which is key.
I feel like I’m splitting hairs a bit here, and if so, I apologise. However, I think it’s important to recognise that the reason OSS combats EEE is that it creates a community with a vested interest in **maintaining** the standard, rather than in creating a proprietary alternative which can produce lucrative monopoly gains. The GPL and less-stringent alternatives such as the MPL help reinforce this vested interest.
For example, Apple and Red Hat are examples of two companies that use open source as a point of competitive advantage. In Apple’s case, embracing open source revitalised a struggling company because people could feel confident that solutions designed for Apple’s OS X were compatible implementations of industry standards.
Posted by Stephen Bounds at June 6, 2005 11:33 PM [permalink]
Thanks Stephen,
I certainly agree with your point about too many inverted commas. Will have to do something about that.
I do use EEE as a pejorative. No doubt about it. But its true that I don’t know enough to know when EEE is legitimate – for generating new functionality and when its used as a competitive ruse. On the other hand even where it is legitimate, the appropriate response should usually be to impose some kind of ‘access regime’ on extended standards.
It surprises me that mainstream policy economists are not more vocal about this and don’t talk more about extending access regimes of the kind we have in natural monopoly infrastrucrure to standards in software. The arguments are very similar – and frequently even more compelling.
Posted by Nicholas Gruen at June 6, 2005 11:59 PM [permalink]
no such thing as capitalism, there is only the market
no such thing as community, there is only the market
if the market thinks IP should go, then it will
if the market thinks vertical and horizontal ties should go, then they will (no dole)
and if the market thinks that Unions of Equity should go, they they will too (no dividend)
the question is when, and will any humans be around at that time
Posted by meika at June 7, 2005 12:03 AM [permalink]
I’m a bit worried here that the article is a bit GPL-conscious. Stallman might approve of such a focus, but in reality there are many open source licenses in use, with varying restrictions particularly on products that extend or reuse the original software. GPL (GNU Public License) is often considered “viral” (although the term is pejorative), in that it dictates very strongly the license of any extending/reusing software, and is shunned in some circles (mine included) for this reason.
Of course, going into the differences between OSS licenses is probably not something you want to do for an article like this, but I thought I’d note here that it’s more complicated than just OSS vs proprietary.
Posted by Jim Steel at June 7, 2005 01:34 AM [permalink]
Yes, you’re quite right. I was not happy with not covering the Debian licence which doesn’t contain anything ‘viral’ but it seemed to me that it was too technical a point.
My write up is too GPL conscious and in this sense it is of a piece with most of the other writing about OSS – from lay-people anyway.
Sad thing is, I’m not sure if there is much I can do about it within genere and the word limit. Will give it some thought though.
Thx for the comment.
Posted by Nicholas Gruen at June 7, 2005 06:31 PM [permalink]
Retuning to your originial post Nick, I thought it was a well thought out, well written and timely reminder of how Adam Smith qualified his invisible hand analogy.
“In civilized society he [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.”
That bright young Scottish whizzkid academic would have purely loved blogging, I reckon.
Posted by Nabakov at June 7, 2005 09:23 PM [permalink]
I think blogs and wikis are a better illustration of many of the crucial points than Linux and OSS. Evidently people who read you here have seen blogs and have at least some idea what they are and how they work. Even for the audience of Aurora, I imagine the proportion who are (or can easily become) blog aware is much higher than the proportion who understand what Linux is and how it works.
More generally, I agree that these things aren’t the result of selflessness, but they’re also not (to any great extent) the product of narrowly economic motives. In fact the two are substitutes not complements: the introduction of money kills off the kinds of motives needed to produce things like blogs and OSS
Posted by John Quiggin at June 7, 2005 10:44 PM [permalink]
No man is a blog?
Posted by Nabakov at June 7, 2005 11:07 PM [permalink]
Fuck! Thread d’escalier.
No man is a blog.
I contradict myself?
Very well, wikis contain multitudes.
Posted by Nabakov at June 7, 2005 11:11 PM [permalink]
John I think that there are critical distinctions which your analogy with bloggs/wikis ignores.
At least GPL style licences (about which I was writing) effectively ‘leverage’ an existing public asset (existing OSS) to generate more – by preventing those who extend it from privatising it and selling it as proprietary software. The way in which this undermines the incentives for hoarding code means that the bulk of the incentives left are in favour of sharing code. And – voila – a public good is produced without any kind of coercive collectivism or any particularly altruistic or even social motives from anyone though these don’t do any harm and can do some good. I can’t think of any analogous form of economic production (there may be the biological analogy with coral – but then I don’t know enough about coral).
Wikis and bloggs are simply sharing geared up by the minimal marginal costs of sharing over the internet. You can benefit from them, and in doing so you may contribute, but you undertake nothing in consuming the benefit that they produce. Your production therefore is the result of some social, intellectual, altruistic itch that you want to scratch.
Further, I don’t think you can be nearly so categorical in saying that money incentives will be harmful for OSS. Something like 90% of Linux is written within a world of monetary incentives. And Wikipedia didn’t arise without seed funding – and could (perhaps) benefit from some additional funds if they were applied in the right way. I would like to see the public sector do a lot more funding of OSS – at the very least in the same way it is done in the private sector, by funding new projects that would go ahead anyway as open source projects. There should be a huge application for htis in the public sectors of the world.
Finally I do agree with you that the readers of Aurora might have been better served with an article about blogs and wikis, but I hope they’re not ill served by the article on OSS.
Posted by Nicholas Gruen at June 8, 2005 12:06 AM [permalink]
Nabakov,
You can’t teach an old blog new tricks.
Posted by Nicholas Gruen at June 8, 2005 12:08 AM [permalink]
Of course, the Internet as a whole is the biggest example of this kind of thing. And, as with Wikipedia it points up the importance of seed funding.
I think the Aurora readers will benefit from the article, which makes a lot of the important points very well.
Speaking generally though, I’d like to see examples other than OSS discussed in this context. Conversely, I’d like to see talk about blogs that doesn’t focus exclusively on blogs vs MSM.
Posted by John Quiggin at June 8, 2005 07:18 AM [permalink]
A nice little essay, Nicholas. A couple of thoughts spring to mind.
The first is that commerce and trade are not rooted in only in the self-interested side of human nature. The distinctive, innate human propensity to truck and barter clearly has its own roots in sympathy. It is our facility – not shared by other animals – of imagination, of putting ourselves in the other person’s shoes, that allows us to discover what we might offer in exchange, rather than beg like dogs when we want something.
The second point is that technical cooperation between rivals would have seemed perfectly natural to Smith. He would have been impressed by the resemblance between the OSS community and ‘farmers and country gentlemen’ who, rather than pursue monpoly privileges and harrass potential competitors,
‘on the contrary, are generally disposed rather to promote than to obstruct the cultivation and improvement of their neighbours’ farms and estates. They have no secrets such as those of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours and of extending as far as possible any new practice which they have found to be advantageous.’
The pressure to guard secrets and patents through subterfuges and litigation would have fallen most heavily on joint stock companies, which he regarded as inefficient and corrupt. His tirade against the British East Company could be adapted, with only minor revisions, to Microsoft.
Posted by James Farrell at June 8, 2005 12:19 PM [permalink]
Thanks very much for that James. A great point.
Here’s Emma Rothschild on the subject. “In his lectures on Jurisprudence, Smith describes exchange as a sort of oratory. “It is clearly the natural inclination everyone has to persuade” he says, which is “the principle in the human mind on which this disposition of trucking is founded”; “the offering of a shilling, which to us appears to have so plain and simple a meaning, is in reality offering an argument to persuade one to do so and so as it is for his interest . . . And in this manner every one is practicing oratory on others through the whole of his life”. p. 8 of ‘Economic Sentiments’.
Posted by Nicholas Gruen at June 8, 2005 01:58 PM [permalink]

Nicholas,
Hope you don’t mind forthright commentary seeing as you asked for comments! I like the article overall and I always enjoy your writing style, but I feel the section on Open Source software is weak.
I am guessing that you are an Open Source enthusiast yourself (at least a flag-waver from the sidelines), and I appreciate the difficulty in explaining the concepts behind the movement without resorting to technical jargon.
However, assuming that this article is for a non-technical audience, I would suggest stripping out several phrases that are laden with meaning for OSS advocates but mean nothing to the general population.
In particular, I would consider modifying or removing references to “embrace, extend and extinguish”, “copyleft” and the specific programming languages of C++ and Visual Basic — the statement works just fine without them.
Also, I’d consider ‘removing’ some ‘quotes’ — if the words won’t make sense to the general readership, either explain them or remove them. Either way, most of the quotes are unnecessary IMO.
Just my 2c.
Posted by Stephen Bounds at June 5, 2005 10:10 PM [permalink]Interesting article. Good connection between OSS, the Grameen Bank and self-interest expressed within a collective goal.
Posted by Cameron Riley at June 5, 2005 11:37 PM [permalink]Thanks for the comments Stephen. I appreciate your taking the time.
I’d like to respond to your kind words by taking your advice, but let me go through it.
A lot of the writing decisions you criticise were the product of a fair bit of thought and I couldn’t come up with improvements with what I did.
I agree that ’embrace, extent and extinguish’ is jargon. I do however explain it. More to the point, EEE is critical to my exposition of OSS, because I don’t believe that OSS is just ‘sharing’ plus the net – the way Wikipedia is.
OSS works because the licence was specifically designed to combat EEE.
As for ‘copyleft’ I kind of agree with you. It is not an expression I like at all and – from memory – I didn’t use it at all in the OSS essay for Policy. I used it here because I needed a short word to describe the licence, and I thought OSS was tautilogical and GPL or GNU was worse.
On naming the computer languages – they’re just a couple of ‘f’ristances’. But maybe they should go. The editor will be in a better position to judge – so I’ll make sure he sees the comments.
What quotes do you have a problem with. Quotes can be a little profligate with words, but they add colour, and there’s no way I’m removing a word of the magnificent Adam Smith quote! But are there problems with others?
Btw, these things are all about judgement, so I’d welcome others’ views on this.
Posted by Nicholas Gruen at June 6, 2005 12:14 AM [permalink]For what it’s worth, I disagree with all of Stephen Bounds’ criticisms. The only quote you use besides the Adam Smith one (which I agree is superb and the linchpin of your article) is that of Yunus about the Grameen Bank concept. It too is well chosen and highlights the trust philosophy succinctly, therefore reinforcing the link with OSS that you want to draw.
Similarly with your mentions of the “embrace, extend and extinguish” phenomenon and “copyleft”. Your article explains both concepts succinctly and clearly for a lay audience. I certainly wouldn’t remove them.
The mentions of C++ and Visual Basic probably don’t add anything much, but nor are they intrusive or confusing nor do they add unnecessary length.
I’m much more interested in the broad topic you open up than in editing nitpicks – the way in which capitalism at its best involves a flexible amalgam of playful but deadly serious competition, enlightened self-interest and co-operative, collective endeavour and sharing.
The difference between Adam Smith and OSS is that the former assumed co-operation and ethical commercial behaviour would flow automatically from the socialising effect of family, church and community. However, modern global capitalism at least arguably places grave stresses on all these social institutions – at least there is an observable phenomenon of families and communities being fragmented in the interests of flexible production and impulsive consumerism. Of course, one can overstate the extent of that phenomenon, as your article argues. Nevertheless, it’s unlikely that a Grameen Bank concept would work in a first world society like Australia or the US, because the ties of extended family and community are too weak to create a sufficiently powerful sense of social obligation and shame to inhibit default. I don’t think the existence of an evident social shaming mechanism with high profile individuals like Rivkin, Skase or Adler says anything much at all about the probability of it having meaningful operation with less prominent, more obscure individuas (i.e. most of us), where unscrupulous defaulters can and do take advantage of the anonymity and mobility of modern society.
Nevertheless, I agree that the OSS movement shows that a workable competitive/collaborative ethos CAN be created in first world society, and may well be both optimally productive and “worker friendly”, but it can’t be achieved by assuming the existence of strong social ties to civilise self-interest (as Adam Smith does) nor operate by calculatedly harnessing those ties (as the Grameen Bank concept does). In the first world, the social ties and obligations need to be carefully recreated by some means or another. The OSS movement provides a good example of how that can be done.
I wonder how it could be extended to other areas, for example workplace organisation generally? I’ve always tended to see outsourcing, casualisation and the “flexible labour market” as mostly malevolent forces to allow employers to jettison hard-won employment conditions and save a buck at the expense of the workers. But I know that many former employees who’ve been forced into an outsourcing situation have thrived on it and say they’d never willingly go back to being an employee. It’s an observation that many union bosses and lefties generally prefer to ignore or discount. But maybe, rather than fondly hoping to re-impose the old blueprint when they get back into power federally, they’d be better advised to think laterally and find ways to maximise the benefits of the “flexible labour market” by seeking to nurture that magic combination of enlightened self-interst, playful/serious competition and collaborative endeavour. How those sorts of structures and ethoses could be engineered is a topic worth exploring in depth and over time. Sounds like a conference theme to me, at the very least.
Posted by Ken Parish at June 6, 2005 09:47 AM [permalink]Ken – We have our own versions of the Grameen Bank concept. The first ones I was aware of were the local community health services here in VIC offering small loans for emergencies. The first big (ish)one I was aware of was The Sisters of the Good Shepherd (Catholics) in Collingwood some many years ago offering loans up to $500- $1,000 for things such as fridges, washing machines. Part of the thinking is that poverty is the lack of capital (even if small $) forces people into higher expenditure for say commercial laundrys and reinforces the poverty cycle. I think these initial loans services have also morphed into services which search around for the cheapest and best deals on whitegoods, including delivery, saving unsophisticated people up to 30% + on essential family whitegoods.
Posted by Francis Xavier Holden at June 6, 2005 11:10 AM [permalink]Francis
It would be interesting to know what default rate the Sisters of the Good Shepherd experience/d on their loans scheme. One suspects that they’re offering the scheme more as a charitable endeavour than a business, and reckon they’re doing well if even some of their customers repay the debt. A business could not operate this way and survive.
That said, I wouldn’t deny that there would be discrete parts of the Australian community where a Grameen scheme can work. For example, many remote Aboriginal communities (in fact some such schemes are operating with the Aboriginal community). And the Chinese community has always operated its own system of financial help and interlocking obligation. It’s one of the big reasons for the success of the Chinese commercial diaspora worldwide. But in both cases, it’s underpinned by a degree of intact sense of community and shared cultural understandings that I think just don’t exist among the broad mass of middle class caucasian Australians. I suspect that most Australians would have Buckley’s chance of persuading a significant group of friends and relations to sign up as co-guarantors for even a very small loan. And in the absence of such interlocking obligations, one suspects that the default rate would be unsustainably high for any commercial credit provider.
Posted by Ken Parish at June 6, 2005 11:43 AM [permalink]Anyway, debating the feasibility or otherwise of a Grameen Bank concept wasn’t really the reason I commented. I don’t know very much about the area. As a commercial credit provider himself, Nicholas will no doubt have some very well-developed and informed views. Moreover, much of the point of the Grameen Bank concept appears to have been to find a viable way to extend credit to people who would be regarded as unacceptable credit risks by conventional lenders, which they would then hopefully utilise in productive ways. Wondering how one could extend such a system to the broad middle class in a first world country is inherently a meaningless speculation. The middle class doesn’t suffer from lack of sufficient access to credit, if anything quite the reverse.
Posted by Ken Parish at June 6, 2005 11:52 AM [permalink]ken – I know that micro credit wasn’t the main point, but I’d argue that the concept, if not the details can be readily adapted. From what I remember the Good Shepherd default rate was about zero as they took a flexible approach to repayments, eg $5 a week was ok as long as you kept paying. I think they started off with a grant of about $10,000 and it was self sustaining. It had to be.
Posted by Francis Xavier Holden at June 6, 2005 12:06 PM [permalink]Very nice article indeed. Loved the connection you drew between the grameen bank and OSS. About time Adam Smith was quoted in support of the eternal community of people rather than misquoted in support of sociopathic individualism.Posted by wbb at June 6, 2005 01:31 PM [permalink]Ken: As (I’m guessing) you are a member of a lay audience, it’s probably far more telling that you don’t find the concepts Nicholas uses as either confusing or obtuse. If you think the explanation is fine, then the article is more than probably fine.

Nicholas: I should clarify one aspect of my earlier remarks — I didn’t mean quotations in the sense of the Adam Smith quote. I meant the physical presence of quotation marks around words that probably don’t need them. This was the paragraph that really seemed a little excessive to me:
“To run on a computer source-code is ‘compiled’ into ‘binary code’ – instructions to a computer written in gazillions of ‘1’s and ‘0’s. ‘Proprietary software’ firms like Microsoft and Adobe typically conceal their source-code to ‘cover their tracks’ and frustrate would be imitators.”

Maybe my objections to terms like ‘copyleft’ are simply a case of being too close to my subject. I dabble in developing Open Source software myself, and while Open Source software developers create some extraordinary technology, some of the terms they create strike me as slightly … immature? smug?
As for ’embrace, extend and extinguish’, I find it too commonly used by knee-jerk Microsoft-bashers in the Open Source community for it to be a neutral term.
(Apologies for the computer jargon that follows.) I also believe the common use of the phrase doesn’t refer to the misuse of open source code without GPL protection. Rather, it refers to a computer standard (such as SQL or HTML) that has had custom extensions added that prevents customers from choosing their desired vendor implementation of the standard.
In most cases, the various implementations don’t share code — it the question of obeying or disregarding the standard which is key.
I feel like I’m splitting hairs a bit here, and if so, I apologise. However, I think it’s important to recognise that the reason OSS combats EEE is that it creates a community with a vested interest in **maintaining** the standard, rather than in creating a proprietary alternative which can produce lucrative monopoly gains. The GPL and less-stringent alternatives such as the MPL help reinforce this vested interest.
For example, Apple and Red Hat are examples of two companies that use open source as a point of competitive advantage. In Apple’s case, embracing open source revitalised a struggling company because people could feel confident that solutions designed for Apple’s OS X were compatible implementations of industry standards.
Posted by Stephen Bounds at June 6, 2005 11:33 PM [permalink]Thanks Stephen,
I certainly agree with your point about too many inverted commas. Will have to do something about that.
I do use EEE as a pejorative. No doubt about it. But its true that I don’t know enough to know when EEE is legitimate – for generating new functionality and when its used as a competitive ruse. On the other hand even where it is legitimate, the appropriate response should usually be to impose some kind of ‘access regime’ on extended standards.
It surprises me that mainstream policy economists are not more vocal about this and don’t talk more about extending access regimes of the kind we have in natural monopoly infrastrucrure to standards in software. The arguments are very similar – and frequently even more compelling.
Posted by Nicholas Gruen at June 6, 2005 11:59 PM [permalink]no such thing as capitalism, there is only the marketno such thing as community, there is only the marketif the market thinks IP should go, then it willif the market thinks vertical and horizontal ties should go, then they will (no dole)and if the market thinks that Unions of Equity should go, they they will too (no dividend)
the question is when, and will any humans be around at that time
Posted by meika at June 7, 2005 12:03 AM [permalink]I’m a bit worried here that the article is a bit GPL-conscious. Stallman might approve of such a focus, but in reality there are many open source licenses in use, with varying restrictions particularly on products that extend or reuse the original software. GPL (GNU Public License) is often considered “viral” (although the term is pejorative), in that it dictates very strongly the license of any extending/reusing software, and is shunned in some circles (mine included) for this reason.
Of course, going into the differences between OSS licenses is probably not something you want to do for an article like this, but I thought I’d note here that it’s more complicated than just OSS vs proprietary.
Posted by Jim Steel at June 7, 2005 01:34 AM [permalink]Yes, you’re quite right. I was not happy with not covering the Debian licence which doesn’t contain anything ‘viral’ but it seemed to me that it was too technical a point.
My write up is too GPL conscious and in this sense it is of a piece with most of the other writing about OSS – from lay-people anyway.
Sad thing is, I’m not sure if there is much I can do about it within genere and the word limit. Will give it some thought though.
Thx for the comment.
Posted by Nicholas Gruen at June 7, 2005 06:31 PM [permalink]Retuning to your originial post Nick, I thought it was a well thought out, well written and timely reminder of how Adam Smith qualified his invisible hand analogy.
“In civilized society he [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.”
That bright young Scottish whizzkid academic would have purely loved blogging, I reckon.
Posted by Nabakov at June 7, 2005 09:23 PM [permalink]
I think blogs and wikis are a better illustration of many of the crucial points than Linux and OSS. Evidently people who read you here have seen blogs and have at least some idea what they are and how they work. Even for the audience of Aurora, I imagine the proportion who are (or can easily become) blog aware is much higher than the proportion who understand what Linux is and how it works.
More generally, I agree that these things aren’t the result of selflessness, but they’re also not (to any great extent) the product of narrowly economic motives. In fact the two are substitutes not complements: the introduction of money kills off the kinds of motives needed to produce things like blogs and OSS
Posted by John Quiggin at June 7, 2005 10:44 PM [permalink]No man is a blog?
Posted by Nabakov at June 7, 2005 11:07 PM [permalink]Fuck! Thread d’escalier.
No man is a blog.I contradict myself?Very well, wikis contain multitudes.
Posted by Nabakov at June 7, 2005 11:11 PM [permalink]John I think that there are critical distinctions which your analogy with bloggs/wikis ignores.
At least GPL style licences (about which I was writing) effectively ‘leverage’ an existing public asset (existing OSS) to generate more – by preventing those who extend it from privatising it and selling it as proprietary software. The way in which this undermines the incentives for hoarding code means that the bulk of the incentives left are in favour of sharing code. And – voila – a public good is produced without any kind of coercive collectivism or any particularly altruistic or even social motives from anyone though these don’t do any harm and can do some good. I can’t think of any analogous form of economic production (there may be the biological analogy with coral – but then I don’t know enough about coral).
Wikis and bloggs are simply sharing geared up by the minimal marginal costs of sharing over the internet. You can benefit from them, and in doing so you may contribute, but you undertake nothing in consuming the benefit that they produce. Your production therefore is the result of some social, intellectual, altruistic itch that you want to scratch.
Further, I don’t think you can be nearly so categorical in saying that money incentives will be harmful for OSS. Something like 90% of Linux is written within a world of monetary incentives. And Wikipedia didn’t arise without seed funding – and could (perhaps) benefit from some additional funds if they were applied in the right way. I would like to see the public sector do a lot more funding of OSS – at the very least in the same way it is done in the private sector, by funding new projects that would go ahead anyway as open source projects. There should be a huge application for htis in the public sectors of the world.
Finally I do agree with you that the readers of Aurora might have been better served with an article about blogs and wikis, but I hope they’re not ill served by the article on OSS.
Posted by Nicholas Gruen at June 8, 2005 12:06 AM [permalink]Nabakov,
You can’t teach an old blog new tricks.
Posted by Nicholas Gruen at June 8, 2005 12:08 AM [permalink]
Of course, the Internet as a whole is the biggest example of this kind of thing. And, as with Wikipedia it points up the importance of seed funding.
I think the Aurora readers will benefit from the article, which makes a lot of the important points very well.
Speaking generally though, I’d like to see examples other than OSS discussed in this context. Conversely, I’d like to see talk about blogs that doesn’t focus exclusively on blogs vs MSM.
Posted by John Quiggin at June 8, 2005 07:18 AM [permalink]A nice little essay, Nicholas. A couple of thoughts spring to mind.
The first is that commerce and trade are not rooted in only in the self-interested side of human nature. The distinctive, innate human propensity to truck and barter clearly has its own roots in sympathy. It is our facility – not shared by other animals – of imagination, of putting ourselves in the other person’s shoes, that allows us to discover what we might offer in exchange, rather than beg like dogs when we want something.
The second point is that technical cooperation between rivals would have seemed perfectly natural to Smith. He would have been impressed by the resemblance between the OSS community and ‘farmers and country gentlemen’ who, rather than pursue monpoly privileges and harrass potential competitors,
‘on the contrary, are generally disposed rather to promote than to obstruct the cultivation and improvement of their neighbours’ farms and estates. They have no secrets such as those of the greater part of manufacturers, but are generally rather fond of communicating to their neighbours and of extending as far as possible any new practice which they have found to be advantageous.’
The pressure to guard secrets and patents through subterfuges and litigation would have fallen most heavily on joint stock companies, which he regarded as inefficient and corrupt. His tirade against the British East Company could be adapted, with only minor revisions, to Microsoft.
Posted by James Farrell at June 8, 2005 12:19 PM [permalink]Thanks very much for that James. A great point.
Here’s Emma Rothschild on the subject. “In his lectures on Jurisprudence, Smith describes exchange as a sort of oratory. “It is clearly the natural inclination everyone has to persuade” he says, which is “the principle in the human mind on which this disposition of trucking is founded”; “the offering of a shilling, which to us appears to have so plain and simple a meaning, is in reality offering an argument to persuade one to do so and so as it is for his interest . . . And in this manner every one is practicing oratory on others through the whole of his life”. p. 8 of ‘Economic Sentiments’.Posted by Nicholas Gruen at June 8, 2005 01:58 PM [permalink]

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John Passant
10 years ago

Hi Nicholas, there’s a review of a new book on Smith in yesterday’s AFR. It makes similar points.