Currency also has little value (and is relatively easy and cheap to replicate). It's just ink and paper, but we value it as much higher.

If you bought software from me and I sent you random bytes instead, would you be satisfied? According to you, they have the same value.

You aren't paying for the bits that are assorted in a specific order. You are paying for the time, effort, and knowledge it took to assort those bits (which is still unique as the average person can't press a button and create Photoshop with no effort).

"Also, the allegedly common complainers who only want free stuff is unquantified. You will need some evidence to show that most people are conscious freeloaders who complain a lot."

As a simple example, look at some of the startups here on HN. Many have gotten rid of the freemium model. The reason? Freeloaders are taking up resources and they can't afford it.

Freeloaders are driving the cost of software to $0. Because software isn't something tangible, its value is based on what people think it's worth. If anybody can download your app for free (because freeloaders have downloaded it and spread it around), the perceived value will rapidly approach $0.

The general attitude about getting everything for free will just lead to less commercial software. Personally, I'm not selling software anymore. I'm selling SaaS. So Instead of paying a flat-fee for software, my users will now be paying a monthly fee. Business owners aren't stupid. They will eventually realize that piracy is impossible to defend against. The consequences are less freedom for the customer/end user.

My opinion is that commercial software will just change, not be less and less. I also thought some people are too dumb to realize that piracy is impossible to defend against and will be swept away in changes. I just realize that I wasn't looking at the right kind of people. Internet savy and those who are aware of the nature of software economic already realize this. SaaS is exactly the conclusion that I come up for a web application that I was supposed and still angling to complete.

The youth of today are Internet savvy. As time goes on, there will be less and less people that don't know how to find software, music online (for free).

That may be true, but free musics and software are often inconvenient. They might be willing to fork over cash to save time when they're older.

However, it is much possible that free software continue to drive up the standard and decrease inconvenience so long as they have the incentives to, displacing paid software.

That's clearly nonsense. Would you buy a house and expect to show up to move in and you find a vacant lot and a pile of bricks?

There's real, cash value in organizing random stuff into coherent patterns.

Just because something cost a lot of money to produce doesn't mean you get to price it "cost + profit margin". Reality doesn't work that way.

And things does get driven down to zero. Look at pirates who offer download of vista for free on bittorrent. Webcomics are free. Most Asian comics that are available in English are in actual, pirated and scanlated, but are often available in way more convenient format than the legitimate things(which are often not translated and probably never will make it to the shore of foreign countries).

Most stuff on the internet are free anyway, which should be ample evidence for my argument.

What stuff? Stuff that's paid for with advertisement dollars? Do you think this stuff would still be free or marginal cost without those advertisement dollars? I think the fact that so much software and media (probably well over 90%) is paid for in some fashion by consumers (either through advertisers or directly) is evidence to the contrary of what you are saying.

There's no such thing as a free lunch. Econ 101.

There are also non-monetary costs to pirating, which are mostly viruses and time. However, they don't generally count toward monetary price, but they are cost nonetheless.

That being said, most people don't get caught anyway. So the risk is effectively zero.

Microsoft is one of the largest software companies in the world. They can afford to take the hit with piracy. The thousands of other smaller companies that sell software don't have this ability.

"Webcomics are free. Most Asian comics that are available in English are in actual, pirated and scanlated, but are often available in way more convenient format than the legitimate things(which are often not translated and probably never will make it to the shore of foreign countries)."

This is a bad example. Software and Music are exact duplicates.

..and those live performances are also pirated. How exactly is adobe photoshop CS5 all over the bittorrent networks not an exact copy of the one adobe is selling on their website?

Which isn't true. The marginal cost of copying random bits is the same as the marginal cost of copying Microsoft windows.

The piracy culture that has become rampant in the last 10 years is driving the cost down.

You take an example of people stealing a product and giving it away as evidence of the free market at work? wtf?

Most of the "free" stuff on the internet is paid for by advertising (which you pay for when you buy products) or serves as a loss leader.

Copyright is a monopoly right, not property right. People don't steal, they crack and make copies. This is somewhat analogous to me making a bunch of Honda cloning after reverse engineering one. I am not depriving of the car dealership their cars, only made cars exactly like honda more abundant.

Maybe you think people stealing away your profit is unethical, but it doesn't matter to economic forces. You will lose trying to defend yourself from massive piracy.

Most of the "free" stuff on the internet is paid for by advertising (which you pay for when you buy products) or serves as a loss leader.

You don't pay for it. You are the product.

The majority of software development, something like 90%, is already bespoke project work, which doesn't depend on copyright to fund it. In fact, the more freely we can copy software, the more value we can produce in bespoke project work. Django, Linux, Firefox, and SQLite make it possible for me to toss together a simple CRUD web site in 45 minutes.

Sure, if you're trying to alway sell digital goods at a price. However, you could try to sell things that are actually scarce and less likely to be driven down to marginal cost such as your programming services. There are bunch of business that require custom made software and they're not going to get it by pirating software.

Take commercial C compilers. Used to be a thriving industry, but once Gcc got good enough, people stopped paying.

Generally, they act more as advertising and brake to competitor substitute goods that could otherwise gain momentum.

It's interesting because DRM and the "inconvenient access" you speak of were created as a direct result of mass piracy.

People still pay for development tools. Lots of people paid for IntelliJ IDEA even with Eclipse around.

GCC is also a piss poor compiler by any standard, that's why many people have such high hopes for LLVM.

You also have to think about "complementary products" ... Apple is investing in the LLVM/GCC compilers because it helps them sell their hardware with their proprietary OS installed, which is by no means free.

The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state.

For some subset of C compiler users, gcc is an acceptable substitute, and so there's no reason to pay anyone, anywhere, $.01 for a C compiler. Their business is gone forever and it is no longer worth writing a commercial C compiler in order to get these people's money. Your market is now people with needs that gcc can't fulfill, which is smaller but quite possibly still lucrative.

Ditto for Gimp/Photoshop. I crop and scale pictures, so GIMP or Paint.NET work more than fine. Photoshop isn't worth it for me to buy. On the other hand, my wife and I have both bought laptops in the last year and I spent 3x what she did. Her cheap Dell was not an acceptable substitute, so I paid more. Even if the Dell was free, I still would have paid for my bigger faster laptop with 18.4" screen.

If in 10 years, GIMP does everything that a graphic designer or artist could want, it will no longer matter how advanced Photoshop is. Just ask film camera makers.

The book The Innovator's Dilemma (and its underrated sequel, The Innovator's Solution) talk about this extensively.

I think a free product have to be utterly superior to a paid product in order to displace commercial products.

The cost of replication or the lack of substitutes is irrelevant ... people don't use GIMP over Photoshop because a Photoshop substitute is fucking hard to develop ... it took 22 years to reach its current state.

I am not parsing this statement. Do you mean that because it take 22 years to develop Photoshop, that it is impossible for GIMP to be good enough to be a substitute good thus eventually displacing it?

In order to completely displace commercial products, yes. But for any reasonably complex or powerful product, there's a market of customers that are overserved by it and would pay less for less if they could. This is usually handled by product segmentation - think of options in cars. If you don't need the extra power, go for the 4-cylinder instead of the V-6. If cash is more important than comfort, skip the leather seats. If you need the fastest, most luxurious car and money isn't an option, check every box on the list.

I hear this a lot, but when I see places where people have actually done benchmarks GCC usually doesn't come out too bad, and when you look at the correctness of the code (for C at least) its hard to find something better than GCC.

This comes straight from Varian and Shapiro's "Information Rules" by the way - it's not just something I'm making up.