WASHINGTON, D.C. - Despite its interesting insights, occasional successes and determined proponents, the open source movement is based on faulty economic theory and cannot serve consumers or producers as a model of production for intellectual goods, such as music, books, drugs or games. That is the view of James V. DeLong, director of the Center for the Study of Digital Property at The Progress & Freedom Foundation. In fact, DeLong even doubts open source's workability for software.

"Like so much of the past decade's worth of New Economy hype, the theory anchoring the open source movement is partly legitimate insight and partly vaporware," DeLong writes in today's Tech Central Station . He cites the movement's insights: the power of the Internet to reduce transaction costs and enable people to form functioning communities; the ability of the "human intelligence equivalent of distributed computing" to create value; and the realization that digitization renders marginal costs near zero.

According to DeLong, those insights have led proponents to an "exceedingly dubious" conclusion: "By de-propertizing everything, we will produce a cornucopia of plentitude because the need to hassle expensively over who owns what will be eliminated, and current barriers will be replaced by free osmosis of ideas." The problem, he says, is that each insight comes with a "but".

DeLong questions the notion that open source can be 'free' and defends the Internet's current market orientation: "Where the movement is producing interesting things, it is doing so with heavy funding from academia, foundations, or corporations, and it is far from clear why such funding is superior in any way - practically or morally - to funding through market processes." Branding it a "socialization of the creative sector," he also questions open source theory's goal "to make content free, tax the hardware industry, and then distribute the revenues to the creative community according to some complicated government-run formula. " According to DeLong, "The Open source advocates miss the fact that markets are also communities, and far more efficient and moral ones than are the mythical realms of academic dreaming." 

DeLong will release a major study of open source in a few weeks.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.