Most economists agree that open source candidates have an information good[12] (also termed 'knowledge good') aspect. In general, this suggests that the original work involves a great deal of time, money, and effort. However, the cost of reproducing the work is very low, so that additional users may be added at zero or near zero cost — this is referred to as the marginal cost of a product. At this point, it is necessary to consider a copyright. The idea of copyright for works of authorship is to protect the incentive of making these original works. Copyright restriction then creates access costs on consumers who value the original more than making an additional copy but value the original less than its price. Thus, they will pay an access cost of this difference. Access costs also pose problems for authors who wish to create something based on another work but are not willing to pay the copyright holder for the rights to the copyrighted work. The second type of cost incurred with a copyright system is the cost of administration and enforcement of the copyright.
Being organised effectively as a consumers' cooperative, the idea of open source is then to eliminate the access costs of the consumer and the creator by reducing the restrictions of copyright. This will lead to creation of additional works, which build upon previous work and add to greater social benefit. Additionally some proponents argue that open source also relieves society of the administration and enforcement costs of copyright. Organizations such as Creative Commons have websites where individuals can file for alternative “licenses”, or levels of restriction, for their works.[13] These self-made protections free the general society of the costs of policing copyright infringement. Thus, on several fronts, there is an efficiency argument to be made on behalf of open sourced goods.
Others argue that society loses through open sourced goods. Because there is a loss in monetary incentive to the creation of new goods, some argue that new products will not be created. This argument seems to apply particularly well to the business model where extensive research and development is done, e.g. pharmaceuticals. However, this argument ignores the fact that cost reduction for all concerned is perhaps an even better monetary incentive than is a price increase. In addition, others argue that visual art and other works of authorship should be free. These proponents of extensive open source ideals argue that monetary incentive for artists would perhaps better be derived from performances or exhibitions, in a similar fashion to the funding of provision of other types of services.
source : http://www.wikipedia.org/
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