Abstract
The Internet was built using the efforts of a worldwide team of programmers that coordinated and competed through laissez-faire methods. Much of the effort was freely provided, or paid for by entities in a process that did not conform to normal commercial revenue-seeking or government regulatory behaviour. This points to major inefficiencies in the market for software. One inhibitor is the large search costs undertaken by managers to acquire new programmers.
On the other hand, there are inherent inefficiencies in the way in which much of the free Internet software is developed. Specifically, there is no efficient way for users to direct the efforts of developers, other than by contracting for entire projects. This often results in a mismatch between development and requirement, as user communities and developer communities are sufficiently culturally different to make communication non-perfect.
We propose a market-based solution that allows many users to each contribute small amounts to projects, and for the sum effect of these contributions to influence and direct the activities of programmers towards tasks that users demand. A range of solutions is presented, from a web billboard bounty market to trading exchange markets for digital financial instruments. Reputational effects, intermediaries and differentiation are considered.
Relying on the existante of efficient electronic payment mechanisms and the efficiency promised by new electronic markets (both web billboard and digital financial instrument forms), we submit that the markets proposed could make small tasks more readily directable over the Internet, and could significantly enhance the efficiency of certain classes of software development.
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Version 0.6. Presented at Financial Cryptography 1997. To be jointly published in JBC and Springer-Verlag. Original source is at http://www.systemics.corWdocstpapem/task_market.html
Iao Grigg can be reached at iang@systemics.com. He is a founder of Systemics, Ltd, a developer of Internet Financial Systems software.
Christopher C. Petro can be reached at petro@subacom.
Networks. Specifically, the Internet has outstripped efforts by major companies and governments in networking ventures. For example. the combined competitive efforts of AOL MSN, Compuserve, and Prodigy have been subsumed, and Minitel in France is being overtaken.
The Firm. The nature of costs used here derives from The Theory of the Firm, a branch of microeconomics. Specific framework was extracted almost verbotim from Erik Brynjolfsson. Thomas W. Malorte, Vijay Gurbaxani, Ajit Kambil. An Empirical Analysis of the Relationship Between Information Technology and Finn Size MIT Center for Coordination Science Working Paper 123
For reference, see especially Oliver Williamson, Markets and Hierarchy: Analysis and Antitrust Implications. Free Press. New York 1975: and also Oliver Williamson The Economic Institutions of Capitalism. Free Press. New York. 1985. The Theory of the Film was sparked by Coase. R. H., “The Nature of the Firm”. Economica. New Series (1937), Vol. IV, pp. 386–405; reprinted in: Stigler. G. J., and Boulding, K. E., (eds.). Readings in Price Theory published by Richard D. Irwin, Inc.. Chicago. 1952.
Internal&External. The theory goes on to divide these costs into internal and external coordination costs, although that distinction is not used here.
J Months. It is often stated as 3 months + where the plus signifies that the employer has an option for further work, but the contractor does not. Based on the authors s experiences. try searching today's contractor positions at JobServe.
1 month. This is a personal observation based on the author's time as contractor. YMMV.
Lee&Kim 96. “A Game-Theoretic Analysis of the IT Paradigm Shift to Network Computing with Component-Ware”. presented at Workshop on Information Systems and Economics. Bryngme Lee (University of Arizona) and Beomsoo Kim (UT Austin).
Bakos. “A Strategic Analysis of Electronic Marketplaces.“ MIS Quarterly. Volume 15, No. 3, September 1991. pp. 295–310.
Hughes. Eric Hughes. “The Universal Piracy Network” unpublished paper presented in DFFCON IV.
Detail. I am indebted to the notes of David Molnay and cyphermpunk posts for what information I have on this proposal. The detail listed here could be wildly inaccurate. Hereafter are some random queries: Is the completion bond on the component or the project? E.g., in the Hollywood film production cycle. is it on the actor who spits the dummy, or the film production that gets bucketed? If the bond is on the former, cost is likely to be difficult to manage due to intricacies (need to re-engage other actors etc, for re-shoot, or lost time to market). If on the entire production. it is much mere manageable in terms of cost. as it becomes built into the dicount factor. However. this implies that the investor can do it themselves (by diversification).
Hanson. Idea Futures is a market for betting on future events. It uses virtual money to generate odds which reflect the prediction of those who betted.
Mallow. The best source of inspiration here is still Maslow's Pyramid of Needs. IMHO.
Freeware. For example, Systemics publishes the Cryptix library. This libtary is freeware essentially free for all-comets. In return for this open benefit, the authors are rewarded by bug reports and reputation, Systemics gains credibility. and all gain sense of belonging to the Internet community.
Dramatis Personae. We will use the cryptographers' friends to play our parts. Specifically. Alice, is a proposes of tasks, and Bob and Carl can programmers. Dave will be a manager (responsible for the production of others). Victor is a verifier of other's claims. Walter is an intermediary who watches (and protects) the interests of others. Bruce Schneier, Applied Cryptography, 2nd edition. Users are, as always. users, and represent the buying mass of the market.
Exchange. Normally we will talk about a market, the markets and the market without distinction. Where a distinction is necessary, a market will trade one item, and an exchange will consist of many such markets. The market, in the global sense, refers to the sum total of all trading opportunities.
Browse. It is an architectural principle of the Systemics markets, at least. that the traders must have access to the exact contract that s traded. Hence, all contracts am made available for download.
Issuer. An Issuer is a manager of digital value. In this case. it is assumed that the Market will trade cash for contract items (although for some variants this might be overly complex). Regardless. the presence or otherwise of the Issuer does not effect the architecture described.
Bruce. Looking at the Debian group. a loosely organized band of Linux hackers, Bruce suggests that if programmers were to coordinate in off-market channels they could avoid losses such as duplication. There are two counter-arguments to this: firstly, that if programmers can coordinate in this fashion, then they might not benefit from a structured market in the first place, and secondly. that the coordination of resources by non-market mean is not as scaleable as that achieved by markets. Post to e$@thamper.vmeng.com on Wed 19 Mar 1996.
Padgett Or, as Padgett warmly puts it. “good software takes unit to write. Schlock does not” Post to dcsb@ai.mit.edu on Tue. 26 Nov 1996.
Burden. For an explanation of the shifting the burden see Peter Senge, The Fifth Discipline. Currency Doubleday, 1990.
Obligations. In some cases the intermediary could step in at a particular moment. rather than being a central part of the trade. For example. Walter could step into the market on default by Bob to meet their mutually promised obligations. This requires. however, more complexity in the way of out-of-band protocols such as email. or intervention by the Issuer, or open market operations, described later.
Bids&Offers. In markets, we talk about bids to buy and opposing offers to sell. In this type of market we are really talking about bids to enthuse and offers to hack, but the flow is the same.
Caveat Emptor. The Internet uses caveat emptor as its natural law approach to everything. On top of that is imposed a laissez-faire approach to revenge that tends to be self-regulating: Frequently, reputations have been mined by mistakes made, and perpetrators of crimes have been hounded by the mailgroups' kangaroo courts. Reputation is a powerful tool in the small and dynamic communities on the net.
Identity. Identity can be established using public key cryptography tools such as PGP. These techniques allow the secure building up of reputations over time, as is often done in newsgroups.
Nyms. Little we have discussed precludes or insists on the presence of psuedonyms (nyms). and we believe the decision to use them or not is orthogonal to the design of the market. One exception is the notion of code checks, although Lucky Green, in a post to e$ (03 March 97) suggests that there are certificate blinding protocols to preserve the essential anonymity.
Derivatives. For traders, these instruments are options on futures on shares. Working backwards, the shares are portions of ownership of the project assets, just like soy project such as a company. Then, before delivery but after clearance, the items act as futures on the shares, as the programmer has contracted to deliver, with a time and place. Then. before clearance. the instruments ate options on the future. with the option being ‘in the money’ automatically in the event of clearance. At least. that's what f think they are. YMMV. The pmblem with this view is that as options. they are valuable, and thus they should be traded. However, simplify, we assume that they are valueless until clearance; this is clearly challengeable.
Takeover. Indeed, it should be possible to write a contract that provides software wholey and solely under the control of the owners, thus presenting the possibility of innovative financing techniques to promote attacks on insecure software, a popular task on the net. When a toolkit is complete that enables users to attack badly protected communications. such as satellite transmissions, would the satellite provider feel compelled to buy out the owners? In an anonymous market this might be possible, although Internet programmers have generally been far too responsible to participate in damaging or immoral attacks (although all bets are off when they view the opponents as damaging or immoral).
GHM. A more formal model is the incomplete convicting framework of Grossman Hart and Moose.
Grossman. S. and O. Hart, “The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration.” Journal of Politicol Economy, 24, 4, (1986).
Hart, O. and J. Moose, “Property Rights and the Nature of the Firm” Journal of Political Economy, 98, 4 (1990), 1119–1158.
Erik Brynjolfsson, “An Incomplete Contracts Theory of Information, Technology and Organization,” Management Science, revised June 1993.
Partner. Bakos and Brynjolfsson suggest that as transactions costs go down, encouraging markets, competition shifts to intangible quality aspects. This leads to more partnerships built on sharing the costs and benefits of investment in improvements in quality-which are otherwise difficult to tie down in a contractual arrangement Their model suggests a natural counterbalance to the shift towards markets.
J. Yarns Bakos, Erik Brynjolfsson, “ An Incomplete Contracts Theory of Information. Technology and Organization,” Journal of Organizational Computing, revised June 1993.
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Grigg, I., Petro, C.C. (1997). Using electronic markets to achieve efficient task distribution. In: Hirschfeld, R. (eds) Financial Cryptography. FC 1997. Lecture Notes in Computer Science, vol 1318. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-63594-7_89
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DOI: https://doi.org/10.1007/3-540-63594-7_89
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