On just compensation of FOSS developers and other public goods creators

This article was first published on medium.com

Summary: In a new work reward mechanism proposed here, an hour of any kind of public good-producing work is rewarded (by the System) with fixed amount of community currency. Creators of such content can allow access to such content for a reward in the currency. The payment is made not to the producers directly, but to the System, which converts it into a reputation reward that is assigned to the producer. Consumers who do not want to earn the currency in the System can buy it from its holders for national currency. Benefits are discussed and some obvious objections addressed. A real-work experiment with ~1000 participants, testing the basic rules of the System is described.

Volunteering — the economic orthodoxy-defying behavior of FOSS developers and other public goods providers — produces massive economic value. It is estimated that more than a billion people worldwide volunteer, while producing over a trillion USD in economic value in a year. This would place a hypothetical Volunteerland among the ten most productive economies in the world. The “volunteer economy” is however not only a powerful global economic force, by placing no constrains on what activity one can choose, it is also the ultimate instrument of individual self-actualization. In this respect, the system can be seen as a paradigm of what a truly human-oriented economic arrangement should look like. It however has a problem that is holding it back — it can’t address the basic existential needs of its workers.

To address this shortcoming a number of mechanisms have been developed for paying the producers, with the bulk attempting to keep the produced goods and services in the public domain (freely available to all), while using sponsorship, advertising, or appeal to the moral sense of consumers to donate money. These schemes however are non-systemic band-aids, with a number of problems. For example, the ads are problematic for various reasons and the donations usually insufficient for subsistence. Donations might also not be allocated fairly, because the most visible projects tend to receive the bulk of such resources, while contributors to smaller projects the visible ones often rely upon, might be not compensated at all. All of the fundraising methods also feel like scrambling for crumbs, given the volunteer economy size.

There however might be a way to solve the free content versus economic compensation dilemma, with a novel reward mechanism (the System), in which the producers are compensated also materially, with a kind of community currency (the “Currency”). The System is founded on the fact, that public goods providers are motivated not by vision of economic gain, but by the prospect of having their psychological needs satisfied. This implies that producers can be rewarded with a virtually equal material reward, as long as the psychological forces that make them motivated to volunteer are undisturbed.

The basic rules of the System

1. the System participants can freely choose any type of activity they might want to engage in, as long as the goods and services produced can be purchased/rewarded in the System,
2. the System rewards every hour of work with a fixed amount of the Currency,
3. the producers make their product available for a payment in the Currency, for any price they feel is adequate, including one determined by the buyer (“pay as much as you want”),
4. the buyer pays not to the producers, but to the System, which converts the payment amount to a non-transferable, non-economic reputation reward, numerically equal to the purchase price and assigns it to the producers (the Currency paid is destroyed in the process),
5. Currency held by the actors can be freely bought or sold for national currencies.

The rules explained

Point 1 — Ability to choose the type of work one might want to perform leads to fulfillment of the fundamental human need for autonomy. This freedom is one of the defining characteristics of volunteer work and leads not only to individual fulfillment, but also frees people to be creative, which leads to production of significant social and economic value,

Point 2 — Public goods providers are not motivated by a vision of material benefit and research shows that time-based (non-performance contingent) monetary compensation does not diminish this motivation. A nice side effect of this rule is that the producers can feed themselves,

Point 3 — Requiring a reward for allowing access to the produced goods enforces reciprocity, by creating pressure on the consumers who might not be sufficiently motivated to also contribute. The big difference here from the capitalist market economy is that consumers in the Systems can reciprocate with their own labor, invested into projects they choose or start themselves (see point 1).

Point 4 — We know that people respond with more effort if they receive some kind of approval from society. In the System, the reputation score is a direct measure of social value of one’s work. No ex nihilo generated “likes,” or stars ratings; the reputation score is a reflection of the fact that somebody was willing to reward the producer with own time — which the Currency represents. Additionally, by converting the Currency to reputation score, emergence of income inequality is impossible, because no one can accumulate material wealth — everybody is becoming better off at the same pace, as the value produced in the economy increases. At the same time, the motivation-supporting reputation scores are allocated by the market (unequally), according to the value of the produced work.

Point 5 — As mentioned in the introduction, volunteers generate massive economic value that is currently harvested by private firms, or is available to consumers in the form of consumer surplus. This means that many products made in the volunteer economy (and the System as well) have value also to people/organizations who do not participate in it, but hold national currencies. Ability to exchange the Currency for national currencies and vice versa at market determined rate thus allows outside actors to buy the Currency and for the producers in the System to access goods and services not available within the System.


The same compensation for different types of labor is unfair

This commonly held belief is the result of a misunderstanding of two functions of reward — economic and reputation. It is true that one’s hour of labor might be more useful today than labor of another person. However, this value is time dependent. For example, scientific (theoretical) work has no economic value “today,” but usually leads to economically valuable applications down the road, at which point — in capitalism — it tends to be impossible to reward the scientists any more (they might be already dead). The same applies to other areas of human activity, like education, or art production. Let’s recall for example that Vincent Van Gogh was living in poverty, only to have work sold for astronomical sums on auctions 100 years later. The only fair solution to the problem is to consider a time unit of individual work activity— regardless of its type — as having the same exchange value. Another way to put this — only under this scenario an hour of human life has (in the “existential” sense) an equal value for everybody. However, both — the value creators as well as the consumers would agree that people should be rewarded for their potentially exceptional contributions with greater reward. This is why the System allocates the for-motivation salient reputation reward unequally, according to market determined prices — just like in the capitalist economy.

People will report fake labor to earn the Currency

This concern is a valid one, but there are ways to mitigate inaccurate work reporting. First, it needs to be said that no society (human or animal) exists that has no free-riders. For example, even in highly developed countries like Germany, estimated 20% of taxable income remains unreported. Regardless, the System can be defended by employing “proof of labor” — a consensus-based mechanism similar to the one used by cryptocurrencies, but instead of wasteful mining, the System can rely on actually performed, human-verified labor. Consequently, the Currency has intrinsic economic value from the get-go.

How does System mitigate Sybil attacks?

A collection of mechanisms can be employed to make mass-creation of fake user accounts impractical, including confirmation emails during registration, captchas and other known techniques. A more substantial defense against multiple accounts creation is that it is meaningless, as work report filed by such accounts have to be approved first by users possessing certain minimal reputation level. In a more closed versions of the System, central authority-issued IDs can be used to associate accounts with real people before they are allowed to participate in the System.

Any hints why this should work?

A five months long experiment on a crowdsourced, outdoors sports portal that sees between 1000 to 2000 visitors a day verified the basic principles of the proposed System. Two types of reward were available — time-based currency (“points”) and a reputation reward in the form of visit counters and star ratings. The content providers could mark their posts as “community content,” which the users could read only if they paid points. Activities like content creation, portal development and terrain work (trail building) were all rewarded with points and it was also possible to buy the points with euros. The primary goal of the experiment was to test, whether the content producers will continue producing with the new reward mechanism in place, or whether they will defect to a similar, competing portal. In this respect the experiment result was positive, as none of the around 120 producers who were producing before the experiment ceased to do so during the experiment, and they continued contributing also after the experiment ended. The new reward mechanism attracted another ~100 new contributors and 130 people purchased points for close to 600 euros total. The number of posts doubled and the number of registered users more than doubled as well, to about 1200 new users. Other measures also improved. The downside was that the visitor counts dropped, as a result of the content being “locked.” This however did not lead to defections of producers, likely because their motivation to contribute was being driven by desire to reciprocate to other contributors, not necessarily to become popular with the consuming public. Defections were non-existent also because the producers perceived the arrangement as fair, considering that anybody could earn access to the content with own work.

When anybody can earn reward for any type of work, the Currency will be weak

First, it should be mentioned that conditions for participation can be made more restrictive, resulting in a more favorable exchange rate, by for example allowing only on-line-verifiable content to be rewarded. This design choice would also make the system hard to game, as on-line content can be much easier to verify than off-line work. The drawback is that — well, not all work types are rewarded. Such arrangement could however be a first iteration, with over time expanding the scope of work types, as the robustness of the system increases.

Without any restrictions, it is likely that the exchange rate will eventually settle down to reflect the current hourly wages of the least compensated workers in the poorest places of the planet. Even in this scenario however, there are mechanisms that could keep the exchange rate higher. For example, foreign aid-providing, or charitable organizations and individuals might recognize in the System an efficient distribution mechanism, one that eliminates corruption and naturally directs funds to the people who need them most. Such actors could buy the Currency just for the sake of improving the exchange rate to make working in the System more attractive to the targeted population, or use the exchanged Currency to reward the types of goods and services the donor cares about. Experiments with community currencies in underdeveloped countries provide evidence that a dollar of outside capital can generate more than 10 times of its value in internal trade. This has the effect of easing pressure on the exchange rate, as goods and services can be purchased within the System.

The effect of potentially low exchange rate on the value creators is hard to predict, but it can be expected that many will not be deterred from participating, as they are motivated not by money, but by psychological reasons. According to Self-determination theory — a leading psychological framework of motivation and well being — in addition to the need for autonomy, we have two other fundamental human needs — the need for competence (feeling of mastery) and the need for relatedness. Considering that the last mentioned is manifested by the concern we as humans have for well-being of other people, motivation of many public goods providers should actually increase, knowing that they are contributing to a fundamental change in global wealth distribution.

Lastly, even though the value / exchange rate of the Currency might not be sufficient to provide subsistence for producers in the developed countries, other factors should support their desire to participate in the System. As the experiment has shown, introduction of the reward mechanism during our experiment increased quantity and quality of its content and similar effect can be expected for any other similar project. In the FOSS domain this should lead to more contributors of patches or pull requests, better documentation, more testers, etc…

How can the System be launched?

It does not take much to get it started. Imagine the following scenario in the FOSS domain: A programmer creates a piece of software that addresses some widespread need. One day, tired of free-riders and chronic complainers, she decides to make it available only to people able to prove own contribution to production of public goods by paying the Currency. A person interested in the software now has some choices: go away, produce something in the System to earn the Currency, or exchange national currency for the Currency. An experiment described above suggests that some people will be put off by the new requirement, but some will earn Currency with their work and others will buy the Currency in order to get the software. Ignoring for the moment the defectors, we can see that the other two types of behavior can start viral chains. The new worker in the economy likely will also make the product of his work available only for the Currency and the exchange rate established by the Currency-purchasing user will increase motivation of folks who really need money. As can be seen, the number of economy participants is growing and it can be expected that eventually also the original defectors will join, attracted either by the prospect of becoming part of the community, lured by the prospect of earning exchangeable Currency, or simply running out of options for getting the desired goods elsewhere.