Weakly positive on this one overall. I like Coase’s theory of the firm, and like making analogies with it to other things. I don’t think this application felt like it quite worked to me, and trying to write up why.
One thing is I think feels off is an incomplete understanding of the Coase paper. What I think the article gets correct: Coase looks at the difference between markets (economists preferred efficient mechanism) and firms / corporation, and observes that transaction costs (for people these would be contracts, but in general all transaction costs are included) are avoided in firms. What I think it misses: A primary question explored in the paper is what factors govern the size of firms, and this leads to a mechanistic model that the transaction costs internal to the firm increase with the size of the firm until they reach a limit of the same as transaction costs for the open market (and thus the expected maximum efficient size of a non-monopoly firm). A second, smaller, missed point I think is that the price mechanism works for transactions outside the firm, but does not for transactions inside the firm.
Given these, I think the metaphor presented here seems incomplete. It’s drawing connections to some of the parts of the paper, but not all of the central parts, and not enough to connect to the central question of size.
I’m confused exactly what parts of the metaphor map to the paper’s concept of market and firm. Is monogamy the market, since it doesn’t require high-order coordination? Is polyamory the market since everyone can be a free-ish actor in an unbundled way? Is monogamy the firm since it’s not using price-like mechanisms to negotiate individual unbundled goods? Is polyamory the firm since its subject to the transaction cost scaling limit of size?
I do think that it seems to use the ‘transaction costs matter’ pretty solidly from the paper, so there is that bit.
I don’t really have much I can say about the polyamory bits outside of the economics bits.
Weakly positive on this one overall. I like Coase’s theory of the firm, and like making analogies with it to other things. I don’t think this application felt like it quite worked to me, and trying to write up why.
One thing is I think feels off is an incomplete understanding of the Coase paper. What I think the article gets correct: Coase looks at the difference between markets (economists preferred efficient mechanism) and firms / corporation, and observes that transaction costs (for people these would be contracts, but in general all transaction costs are included) are avoided in firms. What I think it misses: A primary question explored in the paper is what factors govern the size of firms, and this leads to a mechanistic model that the transaction costs internal to the firm increase with the size of the firm until they reach a limit of the same as transaction costs for the open market (and thus the expected maximum efficient size of a non-monopoly firm). A second, smaller, missed point I think is that the price mechanism works for transactions outside the firm, but does not for transactions inside the firm.
Given these, I think the metaphor presented here seems incomplete. It’s drawing connections to some of the parts of the paper, but not all of the central parts, and not enough to connect to the central question of size.
I’m confused exactly what parts of the metaphor map to the paper’s concept of market and firm. Is monogamy the market, since it doesn’t require high-order coordination? Is polyamory the market since everyone can be a free-ish actor in an unbundled way? Is monogamy the firm since it’s not using price-like mechanisms to negotiate individual unbundled goods? Is polyamory the firm since its subject to the transaction cost scaling limit of size?
I do think that it seems to use the ‘transaction costs matter’ pretty solidly from the paper, so there is that bit.
I don’t really have much I can say about the polyamory bits outside of the economics bits.