A simple
application of economic thinking also suggests that there is nothing surprising
here.
Companies
respond to economic incentives and possibly, being made by humans, they can
make systematic misjudgments. The benefit from cheating on some proprietary software
was high, the likelihood of being caught low, of being caught in the near
future possibly very low; and even though in the case of being caught the
economic and reputational costs would have been very high, they easily can
appear low today being somewhat hidden in a far possible future.
High
guaranteed benefit today vs some probability of a cost in a discounted future.
And today you need to pay your rent, your son college etc.
A rational
agent would have probably put more weight into future costs, after all it is
likely that the VW scandal turns out having a negative payoff for the company overall.
But companies are made by humans; and regulators, those who are supposedly
responsible for designing the incentive schemes of the entire market, are humans
as well.
The way
incentives are shaped also matters. And in this case incentives were designed so
that there was a clear immediate benefit from cheating and an unclear future
cost.
Let me make
a comparison.
The use of
proprietary software corresponds to not being able to know the recipe or the
ingredients of the food you buy. Cheating or adding malware to proprietary software
is like adding secret, possibly unwanted or addictive, ingredients to your
food. If you do not have the right to know the ingredients (nor the right to
analyze – reverse engineering), then it becomes extremely difficult to control
what companies do. And the consumer will never have enough information to make
the right choice (which also implies we depart from a fairly competitive market).
In this situation, you are basically pushing a company towards adding secret
ingredients to your food, or malware to the software you run.
There are a
number of issues here related to the use of free software, and I don’t want to
discuss them all here; also because they have been extensively discussed by
others since 1984. However, I think it is worthy stressing a couple of points
that are particularly related to the VW scandal.
First, if
car companies such as VW were forced to use free software, then the government would
be able to run, inspect, share and modify the software. This would allow the
government to truly enforce and control emissions, after all they could easily distribute
their approved version of the software for testing emissions.
Second, if
car companies such as VW were forced to use free software, they would probably
not need to spend much money in developing such software for their cars since
there would be many free versions of that software freely circulating and easy
to modify for their particular needs. Possibly they would not need to develop
the software at all, maybe they could just be required to install the
government approved software. Lower costs for companies, less monopoly power, less
distorted incentives, higher security, more information, more fair competition.
A similar
reasoning applies to the risk of hackers remotely accessing our cars. And I
believe this applies to many other cases.
The first
part of this article was made by using sentences from the following sources:
