A "gift economy" is a social system in which status is given by how much one shares or gives to their community, as opposed to an "exchange economy" where status is given to those who own or control the most stuff. In today's world we're used to the latter economic philosophy as it has been closely affiliated with the capitalist system since at least the Industrial Revolution and the invention of the corporation. But the Industrial Age is over -- this is the Information Age now, and things are changing.

The idea of the gift economy does not interfere with capitalism at all, despite the untruths perpetuated by large proprietary software corporations and the general misunderstanding and mythology that surrounds the gift economy concept. Regardless of the uproar over the gradual shift in the software industry toward a community-based social system, there are already many microcosms which thrive on the concept of the gift economy, the scientific community being the most famous. Scientists generally receive status from their peers by contributing the greatest ideas and inventions and allowing others to use them in the creation of more ideas and inventions. The benefits from this method of idea propagation are immeasurable. Can you imagine the setbacks that the world of physics would have experienced if Albert Einstein had been willing and able to restrict the use of his theories and formulas? The world would not be as advanced as it is today if that had been the case; nuclear power might not be possible yet and we wouldn't understand as much about the Universe as we currently do.

Capitalism was founded on the premise that money would encourage people to be more productive; the key here is encouraging people to be more productive, not the means by which it is achieved. By being productive a society will also be prosperous. Free Software projects do give status to those whose contributions are most useful, and this encourages better software development. It does not mean that the entire global economy should switch to this philosophy; there is no evidence to suggest that the gift economy is the best fit for all situations -- truly, nothing is -- but its benefit to defined communities is obvious.

There is no comparison between a gift economy and a socialist economy -- communism requires a forced redistribution of wealth and a decided lack of status among all people. The gift economy philosophy wants us to do better and achieve wealth through contribution, to create more things for the purpose of achieving status and benefitting our community and society in general.

The trouble with an exchange economy is that it discourages the formation and support of the community structure, encouraging the personal greed of the individual instead. If someone has an idea in an exchange economic structure, they're more inclined to keep it secret until they can find a way to safely use it to gain power over others. An example of this are the concepts of "trade secrets" and patents. If you have a great idea and can patent it, you are in position of power over anyone who wants to use that idea for the next twenty years; they are not free to use it, modify it, build on it, or sell it without your permission. The trouble with this social system (or rather, antisocial system) is that ideas rarely flourish in isolation -- they require the input and insight of several others to truly evolve and become valuable. With that in mind a software corporation in an exchange economy is like an isolated community where ideas are passed around and improved upon internally before being developed and sold as a licensed software product. In the gift economy of the Free and Open-Source Software world, the community is larger, more open and non-exclusive, thus tapping a larger reserve of intelligence and experience to formulate and cultivate ideas and implementations. So the gift economy approach is more conducive to the formulation and development of new ideas and technologies, and in that respect it is beneficial to both the consumer and the developer.

When put into this kind of perspective it's easy to see why the executives of large proprietary software corporations are scared silly of the Open Source philosophy. How can they compete when they're using inferior methods to develop new ideas, and with significantly fewer people contributing? Again, this is the Information Age, and the trouble with the exchange economy is that it requires strict and rigid control over ideas in order to prosper. Fifty or a hundred years ago it wasn't as easy to communicate and transfer ideas as it is today. Whereas programmers and engineers of the past had to work in isolation or in small groups, the power of the Internet now enables them to harness the limitless knowledge of thousands of their peers in an instant. It is no longer easy to clamp down on information, and in fact the very attempt to do so is the antithesis of the Information Age.

While it may mean the eventual end (or at least shrinkage) of the big proprietary software corporations, the Free Software community is an invaluable resource to other companies who are on the user end rather than the development end of the software spectrum. Instead of paying a huge amount of money to a big proprietary firm for a specially-designed rights-restricted software application, a business can take and modify a Free Software project to meet their needs at a lower cost and with greater control over their own software. Individual users are also free to use, modify and distribute Free Software programs as they see fit. So the gift economy philosophy definitely benefits the end-user, and that benefit is more immediate and definitive than it is for the development community that creates the software.

But what do the developers get in return? What is the benefit in producing Free Software? That seems to be the primary concern among programmers who scorn and ridicule the Free Software movement. Just like there are untruths that come from software corporations scared of being displaced by an enemy they can't fight, programmers who work for these corporations feel similarly threatened by Free Software.

It's not necessarily the development philosophy that scares them so much as it is the erroneous idea that Free Software must be free of charge as well as free as in rights, and therefore there are no benefits for the creators and maintainers of the software. This is, as modern philosophers often say, "old thinking." It's a form of outdated reasoning from the Industrial Age.

The "gift" part of "gift economy" should not be taken literally. This social system does not demand that people work as slaves with no compensation, their needs being met only by karma and magic manna falling from the sky. The "gift" in "gift economy" does not equate to a birthday gift or a wedding present; it is an entirely different context.

It may well be that a Free Software project may not yield much (if any) direct and immediate monetary profit by itself, but not all that glitters is gold. We're so entrenched in the exchange economy that we assume that money is the direct and only benefit that can be produced by working. We go to our jobs during the day and for our efforts get paychecks at regular intervals, and the more important our work is judged to be, the more we get paid. So following this logic, if someone designs an important Free Software project they should be paid a lot of money, right? Well, not exactly.

The payment for volunteer or nonprofit work comes in many forms, and often pays back for years to come. Richard Stallman, the president of the Free Software Foundation and the original developer behind many of the most important parts of the GNU/Linux operating system, doesn't think of any of this in terms of economic theory. "The main benefit for me," he says, "is that I can use a computer without starting through an act of betrayal -- promising not to share." So the first benefit to developing Free Software is, of course, to be able to use it yourself without having to accept an unreasonable license agreement. Stallman adds, "I also like the admiration that some people feel for my work. Of course, other people have scorn for me, but I don't care much what they think."

Despite the occasional scorn, Richard Stallman's status is so high in the software community that he can travel virtually anywhere in the world and admirers will offer him a place to stay and a meal to eat. He's received numerous fellowships, awards, honorary degrees, and is often asked to speak at conventions and conferences. He's also worked as a consultant to several companies and MIT has allowed Stallman the use of an office on their campus for the past two decades. He's even spoken privately with leaders of countries and other important dignitaries regarding software philosophy and policy. While a few of these things translate directly into money, some are measured in resources and others have a value beyond dollars and cents.

Theo de Raadt of the OpenBSD project survives off of monetary donations and sales of OpenBSD CD sets. But there's a lot more than money that makes it all worthwhile. "To a large extent we exist because we are tired of running corporate produced software... not because it costs, but because the quality of it is lower. We are just tired of running low quality crap, and hence, are writing our own," he says of OpenBSD and its associated software projects. So like Richard Stallman, de Raadt sees the primary benefit being the ability to use the very software that he helps produce. While a great deal of hardware is donated to him, Theo still has to spend thousands of dollars per year buying hardware for testing and development, and at times has difficulty finding a place to keep it all. What money is left pays for rental space and accommodations for "Hackathons" for the project, which are large get-togethers for OpenBSD developers to work on modifying and improving the software for extended periods of time. Although to some that probably sounds like work, developers fly from around the world to sit among their friends and colleagues and hack OpenBSD code -- it's a lot of fun for those who enjoy programming.

Eric Raymond of the Open Source Initiative, author of several books and the developer responsible for key networking and programming tools and technologies, is able to more easily capitalize on his status: "I sell a lot of books and people fly me to places. And there's my stock from the boom days, though that's not worth what it was." The OSI survives on monetary donations -- sometimes very large ones -- from individual donors and large corporations who have or will soon benefit from Open Source Software. Several leaders in the Free and Open Source Software community (including Eric Raymond and Linus Torvalds) received large allocations of IPO stock when companies -- such as Red Hat -- who depend on that software went public. While the tech boom is over and the stock has devalued somewhat, it's still worth money.

Raymond also originally introduced the distinction between gift and exchange economies into the theory of open source, and objects to the view that markets are destructive of community; he sees the open-source community and its gift economy as a natural production of the free market as opposed to an enemy of the exchange economy.

The gift economy pays in status, and status pays in many ways -- sometimes with money, sometimes with donations of hardware or offers for help. So those who do a lot of good work will see their efforts returned to them over a long period of time -- and I'm not talking about magic karma and rainbows and hippies. Good work is noticed, admired and rewarded by those who benefit from it.

Status is something that fades little with time, and in fact can grow if it is not fulfilled. It is the fact of unrequited status that creates legends; by dying before they can receive a return on their contributions, a great community contributor becomes legendary after his or her death. The community rewards them with the only method that is left -- to make them into a legend.

By helping the software community through contributions of time, work, money or other resources, you become eligible to receive help from members of the community -- you've "given," so you will "get" as well. The above examples are of people who have given a lot to the community and continue to do so; they consider this their life's work. The majority of the community is not comprised of people who give this much, so how much would you as an individual developer be entitled to receive and what could you expect as payment for your efforts?

Status eventually leads to money if you continue to grow it. If you have something to sell, such as a CD copy of your program or a t-shirt with your program's logo or motto on it, books on related subjects or other goods that can be sold, you can capitalize on your status in the gift economy. Even if what you're selling has nothing to do with the software you're creating, you can still use your status to make money. It's also perfectly acceptable to solicit monetary or other donations from those who use the software you've created. Pamela Jones hosts her Groklaw site on donated web space and bandwidth, and NetBSD developers often rely on donated hardware to port their operating system to new architectures.

There are also a large number of technology and services corporations who need experienced programmers who are familiar with the world of Open Source Software. Such companies include AMD, Intel, IBM, Apple, HP and many others. By doing good work on Free Software projects you're making yourself more valuable as a potential job applicant. For a long time it's been a common and accepted practice for recent college graduates to accept unpaid internships as a method of gaining industry experience. If you're a programmer, working on a Free Software project can be just as beneficial to your career as a standard internship.

There are also software bounties out there, and it's not uncommon for a user in need to offer money to fix a problem with or add a feature to an Open Source program.

Things are quite different in the proprietary software world. While working on a large project may grant you some status, you might also find yourself under a non-disclosure agreement which prevents you from receiving credit for your contributions, thereby eliminating your status. As an end-user, buying or supporting proprietary software gets you little more than a license to use the software, and in many ways cuts you off from your community. Adobe, for instance, is not a community and it will never help you in any way (aside from predefined support agreements) even if you've been buying their software since the first version of Photoshop. To the big proprietary software corporations of the world, you the repeat customer are no more or less important than the customer who has only purchased one license. Your status is based on your purchasing power and nothing else.

Most proprietary software is restrictively licensed to prevent you from sharing programs with other people. This is, as Richard Stallman said, a betrayal -- you're turning your back to your friends and family because the license prevents you from helping them by giving them the software to use. Proprietary software is purposefully anti-community and antisocial because that's the best way to maximize profits, so of course the idea of Free Software is going to scare the producers of proprietary programs.

One response to the above point may be that corporations often give money to charitable organizations as a means of helping communities. Recently CNN called Bill Gates, the co-founder of Microsoft Corp., a "leading philanthropist" for his donations of money, computers and other resources to help third-world nations and poor urban areas of the United States. Given the fact that Bill Gates was one of the pioneers of the restrictive proprietary software license, this is heavily ironic. Why would a man who means to prevent you from sharing your resources with your friends, family and community be so interested in sharing his own resources with poor people? Given the press coverage of these so-called philanthropic acts, the only logical conclusion is that these monetary donations were nothing more than a redirection of funds that would have otherwise gone toward paying taxes; this was most probably a public relations stunt to put a smiley face on Microsoft by using a charitable donation as a tax write-off. Bill Gates gave nothing that he wouldn't have lost anyway. Genuine philanthropists generally don't want their name associated with large donations because it makes them seem like egomanics. If he truly wanted to help people, Bill Gates could more easily do it by licensing Microsoft's products in a way that allows his customers to help their community instead of threatening them with legal action if they share. That would be a risk, though, whereas donating money simply means less taxes to pay. This is not a community-minded individual, although he certainly seems to want people to think otherwise.

So why not license Microsoft software so that it can be shared with your friends and family? The fear is that this would eliminate Microsoft's profits because in theory no one would be inclined to buy software that they can get for free from their friends. The reality of the software world is that this happens anyway. Despite copy protection and product activation schemes, families and friends share their proprietary software against the licensing terms that they agreed to. In other words they're willing to lie to help their community; the license's restrictions are ineffectual. The eventual fatal flaw in the proprietary software model is that a mere software license cannot change that element of human nature which encourages us to share.

If people are going to illegally distribute software anyway, it would make sense to remove the restriction that makes this practice illegal. In a gift economy, people do buy what they can get for free because they want to reciprocate -- they have been given, so they must in turn give back. They have to make a payment in one way or another. This is something hardwired into the human brain; if we feel we have been given something of value, we must give something of roughly equal or greater value in return. Professor Eben Moglen of Columbia University, for instance, initially offered free legal counsel to the Free Software Foundation because he received so much benefit from using a free copy of the GNU Emacs program that he felt he had to repay its author (Richard Stallman) in the best way he knew how -- with pro bono legal work.

The OpenBSD operating system can be installed for free via an FTP installation, but ISO images are not offered for download at all. If you want CDs, you have to buy them from the OpenBSD project. Theo de Raadt says that CD sales are slowly declining but donations are increasing, a curious trend that is echoed at the GNU project, which also sells software CDs but under different conditions. It may well be that donation has simply become a more accepted practice and is more useful to people who wish to give back to the community. It might also be that people don't really need the official CDs anymore because CD writers and broadband Internet access have become cheaper and more commonplace, and Internet donations have become easier to make. Regardless of reason or method, a significant portion of people are paying for the software they're using despite the fact that it was obtained without cost.

The Open Source Development Lab (OSDL) provides access to enterprise-grade hardware and infrastructure resources to Open Source developers who wish to add support or write software for such devices. OSDL relies on money from its members, which are primarily computer hardware manufacturers and service providers who benefit in some way from Free and Open Source Software. Tim Witham, an Open Source advocate and Chief Technology Officer of OSDL, sees Open Source Software as a quid pro quo, a classic business relationship where you get and give in return. By sharing source code like scientists share their theories and discoveries (as mentioned above), greater solutions can be reached. "A gift," he says, "comes with no attachments. Software licenses add attachments; they allow you to keep your intellectual property." So even though you're sharing your ideas and methods, you're still retaining the rights to your work. "I think every major player in Open Source has business in mind," Witham says. "No one is giving anything away." Instead, developers create software which is useful; if it is useful to them, then, like Theo de Raadt, that is the return and if it is shared then others may capitalize on it in the same way. If it was created to be useful to others, then that developer or business generally works on the project with the expectation of some kind of compensation in return. In both cases the return of the Open Source development method is also that other programmers can make your program better for free. So while they get to use it, you get to have it updated, expanded and improved -- again, quid pro quo.

Tim Witham is right, certainly, in the sense that the term "gift" doesn't really fit in "gift economy." It's a sort of misnomer in the same way that "Free Software" is -- it misleads if misinterpreted. Of course no one really wants to work for free and we're not slaves, but volunteerism and Free Software programming is not a gift in the sense that no return is expected. Whatever we do with our time, we always expect a return of some kind even if it is only to have fun, such as the OpenBSD programmers do at their Hackathons. Generally there is more at stake than that, but the point is that there is always a reason, always motivation for what we do. Usually there are several distinct motivating factors involved when someone dedicates time to writing a software program, so the returns can be many and varied.

There are myriad ways to achieve a return on your investment in Free Software. Great work earns prestige and status, which translates into opportunity. Useful programs help you be more productive and allow you to use your computer without starting with an act of betrayal. Sharing ideas helps to develop news ones. Software bounties offer money for work performed. And certainly not to be overlooked is the satisfaction of a job well done.

You don't have to be poor to contribute to Free and Open Source Software, but by the same token you don't have to be rich. The gift economy is the system that will succeed for software development in the Information Age because it is about sharing information and ideas instead of locking them up to wield power over others. Only time will tell, but the emerging trend is already clear.