Wednesday, December 12, 2007

"A Christmas Warning"

Before you ask Santa Claus for a new Windows PC, remember the adage "Be careful what you wish for."

In the best of all possible worlds, we would all benefit from the Microsoft monopolies of MS Windows and MS Office, by enjoying the network effects that result from most people using the same software: Everyone can easily exchange files, and teach each other how to use the software efficiently.

Unfortunately, since Microsoft's goal is to maximize its profits and not its benefits to users, the world Microsoft actually delivers is not the best of all possible worlds -- far from it. Indeed, network effects have become a weapon in Microsoft's arsenal as they are a boon to consumers.

Sidebar: Talking about Micro$oft, have you heard about its "sex-obsessed RoboSanta [spouting] filth at children? [Link via Marc Andreessen].

* * *

So starts A Christmas Warning by Aaron S. Edlin in the latest issue of Economist's Voice. After describing the perverse incentives that makes Microsoft introduce new software that's incompatible with its own older versions, Edlin expresses the hope that "the antitrust authorities [will] give serious consideration to the [following] remedy:

Suppose Microsoft had to allow licensing of old versions of Microsoft software at a reasonable price (perhaps the price of the new version) whenever Microsoft brings out new versions. This would give Microsoft an incentive to make sure that new versions were compatible and significantly better than old versions -- otherwise, the new versions wouldn't sell, or at least wouldn't sell easily. Wouldn't it be great if Microsoft's new software had to compete successfully at least against its old software?