That works for digging a ditch, not for writing a computer program or really anything covered by copyright or patents .

Lets say, for example, that there is some piece of software wanted by 1000 companies who would be willing to pay 50 cents each.

It's also wanted by 10000 other entities without the resources to pay a notable amount.

It would cost our programmer $400 worth of time to make it so he could make it and sell it or make it and give it away.

The companies willing to pay would get angry if he took their money then also gave it away for free to everyone who had not paid so they make their offer of 50 cents each conditional on access being restricted to those who have paid.

After all, they don't want their competitors getting it without having to pay and thus getting an advantage over them.

He could make it for free and give it away to everyone generating utility not just for the companies with 50 cents to spare but also for all the ones which don't.

This also eliminates many of the transaction costs for the parties involved. the 1000 companies now don't even have to pay for the bureaucracy needed to decide how much they're willing to pay and to track the payments while the 10000 other entities without resources can get it easily.