Quantifying the Value of Open Source Hardware Development

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Quantifying the Value of Open Source Hardware Development (2015; summary) suggests valuations based on

  • reduced costs for users (who can download and 3-D print a design instead of buying or licensing and manufacturing product); “simply scaling economic savings from distributed manufacturing that has been previously demonstrated”
  • reduced costs for designers/manufacturers (who can use and improve design rather than replicate effort) “using development costs is similar to that employed to calculate the value of Linux”
  • extrapolation of these, if open source hardware design takes over entire market for a product
  • secondary effects: increased market size, research, education, and medical benefits, and other (e.g., environmental)

and uses an open-source syringe pump design for a case study of each of these. Conclusion:

This paper successfully provided three methods of quantifying the value of free and open source hardware in order to provide economic justification for the support in FOSH development investment. The methods are relatively straight-forward to institute and are based on reliable freely-available data with minimal assumptions. The case study presented found millions of dollars of economic value from a relatively simple scientific device being released under open-licenses. This represents orders of magnitude increase in value from proprietary development. It is clear that FOSH development should be funded by organizations interested in maximizing return on public investments particularly in technologies associated with science, medicine and education.

Welcome conclusion. Qualms mixed with wishes:

  • The first two, realized savings for consumers and developers, seems to be built on the assumptions that design download count is a good proxy for both actual users and number of interested firms. I’d wish for this to be backed up with other data reflecting use/adoption, perhaps survey-based.
  • As a Free/Open Source Hardware design makes an impact on market for its product, data on proprietary sales and profits ought to be pertinent
  • The potential savings from a FOSH design taking over a market (incidentally, $767m annually starting from 2019 for the open source syringe case, assuming it took over by then) might be less questionable than those for realized value, as not dependent on use assumptions based on downloads, and more interesting for policy generally. But perhaps less useful for making case to fund a particular FOSH design project that does not have a reasonable expectation for taking over its category.
  • Speaking of policy generally, could method be used to speculate about not just a product category being dominated by a FOSH design, but FOSH designs being used for a large fraction of all products?
  • Other than increased market size, no attempt is made to quantify secondary effects, which could be large and (as noted) would more substantially benefit the poor. Reducing inequality, both from this increased access, and decreased concentration of wealth in proprietary vendors, is not mentioned.
  • The paper’s sole author, Joshua Pearce, is an engineer and the paper is in Modern Economy, whose publisher does not have a great reputation. I would love to see follow-up work co-authored with an economist (which would increase my confidence in the conclusion; I intend this humbly, as I lack the expertise to critically evaluate models and methods) in a high status venue (which would, perhaps sadly, probably increase the status and impact of the research). I would almost as much enjoy seeing criticism of the research by an economist.

I highly commend Pearce for articulating the value of his work with some rigor and recommend checking out the Pearce Research Group at Michigan Tech in Open Sustainability Technology. Both the articulation and the actual FOSH work of the lab are incredibly helpful for obtaining good Innovation Policy in a World With Less Scarcity.