Invitations and Becomings

Inspired by his comment on this interesting piece by John Quiggin, I've been reading some of Jed Harris' posts on his Anomalous Presumptions blog [1,2] about the significance of the rise of peer production.

Two points stand out:

1. The rise of peer production is the consequence of an historic split between the interests of Capitalists (seeking a return on ownership) and those of Entrepreneurs (seeking to create a self-sufficient entity of some social value - e.g. an institution). This is historic because, while we call our free market economy "capitalism", capital is just one factor of production, and given the financial system collapse, it's becoming much easier to imagine exploring other means of allocating resources other than through capital markets.
2. Peer production becomes inevitable when the cost of coordinated production falls low enough not to require initial capital investment. Harris also points out that, at around this point, the cost of enforcing a particular sort of coordination -  through monetary incentives or contractual arrangements - starts to seem excessive, and a potential impediment to creativity and innovation.

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)