[RRE/DCSB] "Firms"? We don't need no stinkin' "firms"

Rohit Khare (rohit@uci.edu)
Sun, 26 Dec 1999 23:24:19 -0500

>Date: Sun, 26 Dec 1999 21:43:33 -0500
>To: Digital Bearer Settlement List <dbs@philodox.com>, dcsb@ai.mit.edu,
> cryptography@c2.net, cypherpunks@cyberpass.net
>From: "R. A. Hettinga" <rah@shipwright.com>
>Subject: "Firms"? We don't need no stinkin' "firms"... (was Re: [RRE]notes
> and recommendations)
>A Christmas, um, present, from Dr. Phil Agre, below, wherein he pisses,
>rather, heh, pointedly, on the whole notion of whether or not Moore's law
>creates geodesic networks, whether or not geodesic networks reduce
>transaction cost, whether or not reduced transaction cost reduces firm
>size, and, finally, whether or not Ronald Coase really *meant* that
>reduced transaction cost reduces firm size at all. The latter being an
>idea which, the last time I looked, not only got Coase the Nobel Prize,
>but is, more or less, the fundamental theorem of microeconomics. Not that
>an award from a "mass-murdering arms merchant" matters, according to
>people in some Lit/Crit -- and continental philosophy -- departments.
>Instead of throwing a cataclysmic fit about really *hating* it when
>people go to the actual *sources* to prove me wrong, ;-), I'll note,
>instead, that, in, um, passing, Dr. Agre also pisses on "capitalism" (in
>hindsight just more sociocommunist agitprop newspeak for "economics", it
>seems to me), the commercial internet, and, finally, the entire economic
>- -- as opposed to merely political -- premise for doing internet bearer
>settlement at all.
>Ultimately, it seems to me, Phil's pissing on the very aspiration of any
>free person to be rid of the large, hierarchical, "oppressors", currently
>found all spheres of modern life. (To use a little sociocommunist
>agitprop of my own... :-))
>So, I guess I'll have to fold IBUC now, since I've taken such a sound
>theoretical drubbing, and all.
>Though, truth be told, I must admit I *do* love it when a man of such
>clear genius, such elegant education, tells me exactly how wrong I am,
>and in such elegant, and explicit, detail.
>Makes me want to work that much harder to prove him wrong in return, it
>does, being the one-half very stubborn Frisian Dutch, other-half
>zillionth-generation green-grass-over-the-next-hill Reconstructed
>Scots-Irish, dead white American male that I apparently am -- or must be,
>for believing in such genetically-derived behavioral stereotypes to begin
>with. :-).
>So, I guess we'll have to make the locomotives go more than 40 miles an
>hour just to see if us evil capitalist railroad monopolists asphyxiate
>the oppressed working-class passengers or not.
>Meanwhile, Merry Christmas to you, too, Phil.
>PS: Do I get extra credit for "creative, if not ubiquitous, use of
>informal fallacies"? Shall we count Phil's use of same, below? (The "law
>and economics" crowd, are, by the way, if David Friedman is any
>representative of the species, *not* conservative, while we're tossing
>the hoary old ad hominae back and forth. Friedman, in particular, is a
>self-labled anarchist.)
>PPS: Speaking of informal fallacies, according to Rodney Thayer's Law of
>Discoursive Correctness, I *must* be right: All the right people are
>yelling at me. And loudly.
>PPPS: Wasn't it Crazy Horse who said a man is only as good as his
>PPPPS: Oh. Happy Year, as well.

>At 3:35 PM -0800 on 12/26/99, Phil Agre wrote:
>> Where did the association between computer networks and decentralized
> > markets come from? With some authors, such as George Gilder, little
>> in the way of a coherent argument joins them: they observe that modern
>> digital networks put the computer power on your desk, not in the guts
>> of the network, and so they suppose that social power will therefore
>> become equally distributed (see, for example, Life After Television,
>> Norton, 1992, pages 47-48, 126). But this hardly follows; while the
>> basic architecture of the network is surely important in political
>> terms, the architecture of the applications that run on it is more
> > so (see, for example, Larry Lessig, Code and Other Laws of Cyberspace,
>> Basic Books, 2000).
>> A more common, more serious argument is economic. According to this
>> argument, computer networks reduce the costs of doing business, this
>> will improve the efficiency of markets, and as markets become more
>> efficient hierarchical firms will wither away from competition and
>> governments will become both unnecessary and impractical. In more
>> technical terms, computer networks are said to reduce transaction
>> costs: the costs of buying and selling things in the market. These
>> transaction costs are likened to friction, and computer networks
>> are supposed to reduce that friction to zero, thereby perfecting
>> the market and dissolving all of the remaining "islands of conscious
>> power" into a great sea of freely contracting individuals.
>> This argument sounds compelling in the abstract, but it is actually
>> quite false. To see this, it will help to return to the origin of
>> the concept of transaction costs, Ronald Coase's paper "The nature of
>> the firm" (Economica NS 4, 1937, pages 385-405; reprinted in Oliver
>> E. Williamson and Sidney G. Winter, The Nature of the Firm: Origins,
>> Evolution, and Development, Oxford University Press, 1991). Coase's
>> paper asks a deep question: if the market is the most efficient way