Fast forward 30 years, and many software developers and startups actually think that their skills are worth so much. Sigh?
Books cost money because quality authorship is scarce and people are willing to pay for "ongoing support" (sequels and future works)
The same goes for television, limited edition fine art, and financial derivatives. It is quite obvious that these industries make some people extraordinarily rich.
I am sorry for lacking the knowledge about contemporary economics, because this is obviously not something new. I was merely remembering some mediocre high school lessons.
Custom software, or software for a small audience obviously is scarce, but a word processor or operating system with similar complexity that can be used by millions, if not billions of users, should not cost more in total.
Open source (free) software would not even be possible if it were as scarce as, say, oil or apples.
In what world is software comparable to apples or oil? We need a different analogy.
Note that I am referring to commodity software (because that is what this thread is about). The reproduction costs are negligible compared to the software development cost.
Perhaps for a better understanding of my point, consider book publishing, or limited edition prints of art. The scarcity is almost completely artificial.
Microsoft and Oracle, for example, have grown to be extremely large companies due to this possibility of selling the same thing at nearly no extra cost.
If you think this is normal, then that's fine, but commodity software is most certainly (as you hint at yourself) not a good fit for economic models based on scarcity.
An extreme example to make a point.
A less scarce, but still scarce software product is one that sells for $100 or $10 or even $1.
Software can be free (as in free beer) and not scarce. But many software products wouldn’t have existed without customers who pay for it, with the demand level and price setting the scarcity.
Supply < Demand.
That is why developers are paid well. When demand softens, or supply increases even more, what developers are paid will change. The difference between software developers and other highly paid positions is that there is not enforced, artificial scarcity, such as licenses, advanced education requirements or required tests.
Supply can be limited severely by an early mover advantage, as the cost of software development can become extremely high due to the even more extreme demand. In a way this results in artificial scarcity.
Add in open source (free) software as building blocks, and venture capital, and things become even more complicated. I am sure that we need better economic models to avoid some companies to grow excessively big.
Don’t worry, the past year taught at least a few of us the hard way. Unfortunately when I was younger, I drank a lot of the industry kool aid.