Coase, transaction costs and the political party in the Internet age
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.
