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Arguing in My Spare Time, December 1997 - April 1998

Title DateStarts WithEnds With
Your Bank is Not Microsoft 12-06In the financial trade press, most notably American Banker, the role of computer technology in banking is a frequent topic of discussion. One issue that is posed is the competitive threat to banks posed by software companies (with one company in particular cited as the chief menace). A bank that offers traditional services powered by computer applications based on generic software would be a formidable competitor. The banks that continue to think that they should invest in developing major proprietary software systems would be well advised to stay out of Microsoft's business.
There is no Labor Shortage12-20 "Two main lessons derived from [my experience as an economist] are:

1. Economists do not know very much

Noneconomists, who forecast a chronic labor shortage as if there were no equilibrium wage rate, know even less than economists do.

The New Industrial State and the Rise of the Dilbert Sector01-05"So complex, indeed, will be the job of organizing specialists that there will be specialists in organization. More even than machinery, massive and complex business organizations are the tangible manifestation of advanced technology." Once software architecture conforms to hardware architecture, the computer systems that support business applications will bear less resemblance to large capital equipment. This in turn has implications for the size and structure of firms.
Why Microsoft Doesn't Have to Cheat to Win01-09The central question raised by the success of Microsoft is the following:

Given that Microsoft software is flawed, how is it

such a dominant company?

Microsoft, as a premier supplier of software infrastructure, is positioned to benefit from this, what is arguably the most important trend in software economics. Even if Microsoft does not cheat, it stands to win from the decline of the Dilbert sector.
The Economics of Pop-Tarts01-17To non-economists, Pop-Tarts are an abomination. Purists see them as junk food, which one finds in stores only because of the strong-armed marketing tactics of Kellogs, the creators of the product.Netscape still has not shown that it has the organizational processes and culture needed in the business of commercial software development. Microsoft losing to Netscape would be like the Green Bay Packers losing to Swarthmore.
Start the Java Revolution Without Me Part One: Demographics01-31Java(tm by Sun Microsystems) is a programming language that has been touted by some analysts (George Gilder, for example) as the tool that will break Microsoft's monopoly.Other developments in computing have increased the productivity of millions of people. Java will increase the productivity of thousands. It is difficult to think of any other development in the history of computing that affected the capabilities of so few people and yet today is described as revolutionary.
Impediments to the Java Revolution Part Two: Applications02-14In the previous essay in this series, I suggested that Java (tm by Sun Microsystems) can only be used by about 100,000 hard-core programmers. This would appear to constrain its importance. Another factor that will limit its impact is the applications for which it is used.With all of the buzzwords that Java boasts (portability, object orientation, multithreaded, etc.), the phrase "suitability to task" does not jump out in any context. Even the dynamic Web server niche is highly fluid, with Java having drawbacks as well as advantages. One plausible scenario is that 1998 or 1999 will be the peak year for Java, and in two years the more ambitious visions will have receded.
Boxes Without Windows02-28The previous two essays explained why I am skeptical about the ability of Java to overthrow the existing order in computing. Here I will examine another area where the hegemony of Microsoft might be threatened: hardware.When the best solution is a versatile product, Microsoft has an advantage, because of its experience and skill at developing multi-featured products. However, when the best solution is a simple product, other companies may be able to compete more successfully.
Does Software Want to be Free?03-14The most popular Web server software, according to the survey taken by Netcraft (, is Apache. Apache is freeware. So is Linux, a version of the Unix operating system. The most popular Web browsers can be obtained at no charge. The Justice Department notwithstanding, my guess as an economist is that we should want to encourage software bundling rather than discourage bundling.

The next essay will sketch out the software club idea in more detail.

Software Clubs03-29At the end of the previous essay, I introduced the concept of a software club. The idea is that individuals and businesses could join clubs. The fees for joining these clubs would be sign-up charges and membership dues. The clubs would purchase the services of software developers, and members would be able to use all of the software provided by the club at no marginal cost.Today's approach is to charge for something--a software license--that costs nothing at the margin to produce. A software club would pay software developers for their time. It would allocate their time in order to maximize member satisfaction, thereby increasing its ability to extract revenue from its members. This would come closer to pricing the correct resource.
Software Referees04-13In the Internet arena, will supremacy in book selling and distribution belong to Barnes and Noble,, . . .or Kinko's?The question is whether the market can support a diverse set of referees. If so, then there can be some evolution of software away from requiring mass market acceptance.