 |
 |
Ken, First, an aside: Ricardo's Law suggests that it doesn't matter if you made extremely wonderful wagon wheels, automobile tires, blankets, and pots; things would still be better if you specialized in whatever you are best at and bought these items from people who were best at making each of them. This applies even if you are better at any of them than the specialists are. (The academic version of this analysis is when tenure committees say "He spends time on writing when he should be doing design work" or the like.) This is counter-intuitive so if anyone needs more explanation, let me know. (The best explanation I've see is in P.J. O'Rourke's book -Eat the Rich-.) Coase's work applies in a couple of ways. One is the tendency of economists to fetishize the reduction of transaction costs, claiming that rights should be legally assigned to whoever would find those rights most valuable. (Here, "most valuable" means "cash value in terms an economist can deal with easily.") The other application is the one you discuss. Coase pointed out that firms grow because transaction costs of markets make intra-firm actions cheaper. When firms grow too large and/or clumsy, markets become cheaper and smaller, more specialized firms dominate. I would point people to Yochai Benkler's "Coase's Penguin, or Linux and the Nature of the Firm" for a nice reconsideration of Coase's organizational assumptions. (In case the references in the title are too arcane, the penguin is the mark used by Linus Torvards and the Linux crew thus stands for open source, cooperative design and production. "The Nature of the Firm" was one of Coase's most important articles, from the 1930s. Ronal Coase, of course, did not imagine open source software and the like.) Benkler's opening paragraph gives a good view: "Imagine that back in the days when what was good for GM was good for the country, an advisory committee of economists had recommended to the President of the United States that the federal government should support the efforts of volunteer communities to design and build cars, either for sale or for free distribution to automobile drivers. The committee members would probably have been locked up in a psychiatric ward—if Senator McCarthy or the House Un-American Activities Committee did not get them first. Yet, in September 2000, something like this actually happened. The President’s Information Technology Advisory Committee recommended that the federal government support open source software as a strategic national choice to sustain the U.S. lead in critical software development." Benkler's article has implications for design because it chips away at some of the assumptions behind the intellectual property juggernaut that drives much of the economy today. Benkler's article was in the Yale Law Journal back in 2002 but a version is available at http://www.yale.edu/yalelj/112/BenklerWEB.pdf Gunnar ---------- Gunnar Swanson Design Office 1901 East 6th Street Greenville NC 27858 USA [log in to unmask] +1 252 258 7006 http://www.gunnarswanson.com