Invitations and Becomings

This is the first of what will be a series of posts on the well-known book by Don Tapscott and Anthony D. Williams.

Coase's Law:

"A firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction in the open market. As long as it is cheaper to perform a transaction inside your firm, keep it there. But if it is cheaper to go to the marketplace, do not try to do it internally." (56)

Of course, the prescriptive form of the law in the second sentence is just for show. It expresses what we might call the as-if rule - if there were such a thing as a ideal firm or enterprise, it would behave as if it followed that rule. The real law is the expressed as a descriptive rule in the first sentence.

On first reading, Coase's Law seems to describe a situation in which a firm grows until it reaches an equilibrium point - expanding like a bubble of detergent until it hits its natural size.

However, the point that Tapscott and Williams want to make is that this natural size changes when the cost of external transactions rises or falls. And they argue that the Internet has caused these costs to fall dramatically, with the result that the natural size of a firm has fallen along with it.

In some ways, the rest of the book elaborates on this point, and the consequences it has for innovation, intellectual property and the modern workplace.

Now the Internet is as much a social phenomenon as it is an economic one, and so I'm curious to know what the social equivalent of Coase's Law might be. And it seems to me that Coase's Law is the wikinomical equivalent of Christoph Spehr's conditions of free cooperation.

Spehr argues that cooperation is only free - in a social or political sense of 'free' - if

1. "all rules in this cooperation can be questioned
   by everybody, there are no holy rules that people cannot
   question or reject or bargain and negotiate about"
2. "people can question and change
   these rules by using this primary material force of
   refusing to cooperate, by restricting their cooperation,
   by holding back what they do for these cooperations,
   making conditions under which they are willing to cooperate,
   or leaving cooperations"
3. "the price of
   not cooperating, the price that it costs if you restrict
   your cooperation or if the cooperation splits up, should
   be …not exactly equal …but similar for all
   participants in this cooperation, and it should be affordable"

Things get really interesting if we apply the same sort of reversal to Spehr's conditions that Tapscott and Williams applied to Coase's Law. That is, what if the price of splitting up the cooperation were actually a consequence of participation becoming more free, or perhaps more realistically, a consequence of the expectation that, generally, participation ought to be free (in this social/political sense).

Of course, the price that Spehr is talking about - the price of no longer cooperating in a certain way - and the price that Coase (originally) was talking about - the relative price of external over internal transactions, would seem to be very closely related, if not identical.

Just what this all means, I'm not sure, but what's intriguing about this is that through this notion of the price we can understand the social and economic effects of the Internet as two sides of the same coin. It may be a chicken and egg question of whether the economics drives the social, or vice versa. Wikinomics might be inseparable from a wikipolitics.