18 October 2006 - 19:52Economics applied to software design

I have picked up economics as a hobby. It is a very interesting field and I think it pertains significantly to software development since it deals primarily with the efficient allocation of scarce resources.
Anyway, I started looking at various applications thru an economists’ glasses. Let’s take a look at various P2P applications. Peers on a P2P network have a weird economic status: they are both consumers and producers (distributors?) of the same good, namely content, a peer downloads content from another peer and then publishes the same content on the P2P network. Well, this is pretty interesting, but what I found more interesting was the differentiation between various P2P networks. BitTorrent emerged as the dominant P2P network primarily because its P2P client distributes the content (the product in our example) as soon as it gets it. The rest of the P2P networks do not do this, they wait for the whole file to be downloaded before making it available to the rest of the network. When you treat a BitTorrent peer as a producer/distributor you see that it makes its product (the content shared by the P2P network) available much sooner than a peer on a competitor’s network, you can say that a BitTorrent peer has a greatly reduced time-to-market than a peer on a competing P2P network. And we all know that companies with reduced time-to-market usually beat the competition ;-), this would explain both BitTorrent’s incredible success as well as the rush to copy its economic model (namely having the peer share content as it receives it rather than at the end of the file reception which translates into a reduced time-to-market) by the competing P2P networks.

Another software design aspect which I tried to treat from an economist’s perspective is the managed environment (EJB containers, IoC containers, AOP-enabled environments, etc…). In the managed environment the developer is focusing exclusively on the business logic that has to be implemented while outside actors manage transparently issues such as concurrency, security, transactions, etc… Such a managed environment ressembles a vertically integrated organization which outsources its tasks (out-tasking is a pretty popular word these days, did you know that ;-)?) to a specialized work-force. Such an environment adapts itself to a changing environment more easily because it is the sum of some loosely coupled entities rather than a rigid entity whose elements are hard-coupled one to another. The modules that make up an application running in a managed environment would be very similar to the resources making up a multi-national: the modules/resources can be loaded/hired or let go according to the application/multi-national’s needs as these needs come or go. The result is a leaner application that responds to changes in the business environment more easily (again similar to a multi-national). The application would be a composition of various modules carried out by different actors, just like a multi-national is increasingly a composition of various tasks carried out by different actors. I’m not sure if I am seriously going off-road…

Anyway, I find mixing software design and economic theory fascinating and I will try to continue to treat various software design issues from an economic perspective. Comments welcome!!!