Extract from the book: Downes L. and Mui C. Killer App. Harvard Business School Press, Boston 2000

A critical feature of the old economics that takes on new meaning in the world of killer apps has to do with the properties of information as a good. Computer hackers chant that "information should be free." The notion that we should give away our valuable property sounds at best irrational, and yet, when that "property" is information, economists have understood the value of doing so at least since the time of Adam Smith. Information is art of a special class of commodities that economists refer to as public goods. Where traditional goods like crops, minerals, and cars can be owned and used by only one person at a time, public goods (e.g., national defense and lighthouses) can be owned and used by everyone simultaneously. Since sharing them with as many people as possible spreads their value with out adding to their production costs, the goal for a producer is to find a way to pay for their development without invoking the pricing system of supply and demand, which works best for traditional goods.

Laws that grant copyrights and patents to writers and inventors for their work are aimed at exploiting the public goods nature of information and suggest how an economy for bits might best operate. These laws grant a monopoly the author can use to maximize the value of his or her investment. While copy right and patent might be thought of as contrary to the idea of a public good, remember that the monopoly granted is a limited one-in the United States the owner of a copyright holds it only for his or her lifetime plus fifty years, and patents are good only for seventeen years. After this period, the work or the invention (including the information necessary to re-create it) goes into the public domain, where it stays forever. Moreover, copyright applies only to the author's actual words-the ideas in a work, like this book, go into the public domain immediately. Motorola recently won a case in which the National Basketball Association claimed that Motorola's sports paging device violated the association's copyright in the broadcast of basketball games. Not so, said the court. Scores-even interim scores-are public information. Everyone can use them, any way they like.

Intellectual property rights are granted solely to encourage the creation of useful information ("To promote the Progress of Science and the useful Arts", as the U.S. Constitution puts it), and the trick has always been to strike the right balance between incentives for creators and the value the public derives from unlimited access and use. It's a balance that is being actively reconsidered in light of the ease with which information in the form of bits can be spread over public networks like the Internet. Many observers (including the authors) believe that large entertainment and publishing companies are trying to shift it in precisely the wrong direction.

Information, like other public goods, is inexhaustible, but information has an additional property that is unique. Information actually increases in value the more people use it, one reason why we think less, not more, protection would benefit everyone, including the owners of copyrights. The latest John Grisham novel-the content, not the actual physical copy we call a book-is a public good in this sense. Everyone can read it at the same time, and the fact that everyone is reading it means that everyone knows what Grisham thinks about the practice of law or the criminal justice system. This collective knowledge creates a context for discussion about these ideas and about Grisham's skills as a storyteller, a phenomenon that becomes increasingly powerful once a critical mass of people has read the novel.

If and when novels can be distributed with little cost over the Internet, a new author might be well served to give away his or her first book to as many people as possible. This would create a ready market for the next book. The cost of the give-away would be much less than in today's publishing business, where the price of a book reflects the author's and publisher's intellectual investment only to a small degree, while the majority of the cost reflects the creation, transportation, and retailing of the physical artifact. Giving away the bits creates a network, and networks are powerful generators of value. Information increases in value as it is used, the economic expression of Metcalfe's Law. As the Electronic Frontier Foundation's John Perry Barlow said insightfully in rewriting the hacker motto, "Information wants to be free."