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03/02/2002 Archived Entry: "Great movies, great minds and the economics of the internet..."

I was reading Commonspace last night and they were talking about how the Internet economy wasn't just whiz bang let's make tons of cash and then have a bubble that bursts. The internet has a gift economy, whereby everyone profits because everyone gives - either knowledge or stuff or entertainment... The internet is made up of virtual communities that become the marketplace of ideas - and ideas have value. They also talked about the open source community and how that was changing the economy, because it was no longer true that scarcity = value, but that ideas (and code) that became more valueable as everyone improves upon them and can tinker with them.

I've also read this great article about market lock in as it applies to computers and software. I think that the open source community has been a sort of answer to the phenomenon of Microsoft and the ubiquity of Windows. But on the other hand - the theory also applies to open source software, the more people that use it and contribute to it, the better it gets (and the more usable and newbie friendly) and the harder it will be for people to go back to Microsoft style software licenses.

I also saw A Beautiful Mind last week (great movie - go see it) a movie about mathematician John Nash. In the movie, they explained Nash's equilibrium theoryusing a group of girls in a bar, one of whom was a blond. Basically, all the guys went for the blond girl. Nash (in the movie) said, that the Adam Smith idea of the supremacy of competition was flawed, because in cases like the blond co-operation works better. If all the guys go for the blonde they'll all lose out - the blonde will reject them and her friends will be pissed at being second choice, so they will reject the guys too. No one gets any. But if all the guys just go for the friends, the girls will be flattered and the guys'll get some. Apparently, this was a ground breaking theory (I think it is probably more complicated then that), and has changed economics forever. I wonder how this type of mechanism is affecting the Internet economy.

Anyway... just some thoughts. I think I'll do some more research. Maybe I'll ask my dad (he's a professor of economics).