In a comments exchange on collaborative government and Web tools on the blog of my site midemocracia.org, I discussed the situation in which political parties are with the emergence and spread of Internet. In his article The Nature of the Firm, Ronald Coase refers to the transaction costs that lead to the creation of the modern organization of the firm outside the market mechanism, when the price (cost) of obtaining a product is higher in the market than through the hierarchical organization of production, or put another way, economic activity will take place within a company when the costs of trading (the market) are higher than with command-and-control.
One factor in the emergence of political parties is the cost of the process of getting votes. With the extension of voting rights – the restricted right to vote based on property, we gradually moved to a universal suffrage in which the entire adult population (18 normally) can vote for their representatives – the cost of obtaining a meaningful vote in the “political market” increases greatly forcing political entrepreneurs, those who wish to gain institutional power to conduct public policy, to organise in hierarchical political institutions to reduce the transaction cost related to the process of obtaining the vote. Those who are not organized in this way disappear from the political market. This process is very similar to the appearance of the company in the market, where the purchasing power of the population increases and companies emerge as the organizational model best suited to produce the offer that the new consumer market needs.
In his book, Here Comes Everybody, Clay Shirky says:
Now that it is possible To achieve large-scale co-ordination at low cost, a third category has emerged: serious, complex work, taken on without institutional direction. Loosely coordinated groups can now Achieve things that were previously out of reach for any other organizational structure, Because they lay under the Coasean floor.
The cost of all kinds of group activity – sharing, cooperation, and collective action – have fallen so far so fast that activities previously hidden beneath the floor are now coming to light. We did not notice how many things were under that floor because, prior to the current era, the alternative to institutional action was usually no action. Provide a Social tools third alternative: action by loosely structured groups, operating without managerial direction and outside the profit motive. (p. 47)
In other words, lower transaction costs of information allow non-hierarchical or unstructured to conduct serious and complex work that before could only be done by hierarchically-managed institutions such as the firm.
Is it possible to transfer this idea to the political arena? Is comparable the production and sale of products to obtaining political support for certain ideas or interests and their implementation to solve collective problems? How are they similar and how are they different? Can we learn something about the future of politics by taking into account the ideas of Coase and the change Shirky is defining?
I do not pretend to answer these questions here. At least not now. Yet I would like to refer to something that Stephen M. Bainbridge, a law professor at UCLA, said in his blog six years ago when commenting on an article in the Washington Post economist Everett Ehrlich, in which he argued that Coase could explain the reduction in size and importance of political party and the emergence of “virtual political parties” (Ehrlich’s article has disappeared from the Washington Post website, but you can find it here). Bainbridge says that:
Information costs are only one of the transaction costs that explain why some economic activity is conducted within firms and some is conducted outside firms. The make or buy decision Malthus is impacted by such things as uncertainty, complexity, bounded rationality, opportunism and shirking, collective action problems, bilateral monopolies, and, especially, asset specificity.
In the light of Bainbridge criticism, is it possible to see a change also in these transaction costs due to Internet usage? Can these costs or others be found in political activity? If so, do they also change because of the Internet?
