In The Eternal Inferno, Fiends Torment Ronald Coase With The Fate Of His Ideas – The Yorkshire Ranter


21 bookmarks. First posted by robertcottrell january 2018.


As often happens, the first half of this insight was more successful than the second. Since the 1980s, there has been a global trend towards replacing organisations with networks of contracts. The idea that a firm could be considered as a network of contracts was taken up by the management consulting industry, and strengthened from a positive observation to a normative statement that firms should become more so. In as much as anyone bothered with Coase’s corollary, it was simply to say that there was some sort of “core business” in there – presumably it was thought to be the zone in which transactions costs got high enough to demand organisation – and everything else must be contracted out.

In many ways, we’ve lived through a giant experiment in proving Ronald Coase wrong, which has now failed.
business  economics  politics  argument  people  reference 
april 2018 by kmt
This had important consequences. First of all, the claims-management process was itself costly. This is Coase’s basic argument. Second, because the prices of services exchanged between the component firms were often determined after the event, through the claims process, they were no longer informative about the marginal costs involved, but rather about the contract-management process. As a result, costs overall rose substantially although nobody could put their finger on who was coining it. Thirdly, it simply became enormously complex. A contract, after all, is executed between parties. The number of pairwise interactions within an organisation rapidly becomes very large – in fact, it increases by the factorial of the size of the organisation.
contracts 
april 2018 by JordanFurlong
did you see this recent pöst https://t.co/pFLGII0hbB

— 𝕄𝕚𝕜𝕖 𝕃𝕪𝕟𝕔𝕙 (@bombinans) March 20, 2018
twitter 
march 2018 by mikelynch
I imagine this as a chapter in a book called "How the Modern World Works", which would make you go, "Ohhh, yes, that explains that mess."
ronaldcoase  business 
march 2018 by philgyford
One very large, and especially purist, example of this was British railway privatisation. This did not just transfer a firm from the public into the private sector. Much more importantly, it transformed one large firm into a large number of smaller ones that interacted on a contractual basis. This system further interacted on a similar basis with the government.

When a management problem arose – for example, a train was late – a claim would be raised by one actor on another. For example, the Department for Transport might invoke a contractual penalty because the trains were late. The train-operating company would immediately claim against the infrastructure operator, which might counterclaim. Because the train leasing company might have guaranteed a certain on-time service level under a total outsourcing arrangement with the operating company, it too would then try to claim against anyone else it could think of.

This had important consequences. First of all, the claims-management process was itself costly. This is Coase’s basic argument. Second, because the prices of services exchanged between the component firms were often determined after the event, through the claims process, they were no longer informative about the marginal costs involved, but rather about the contract-management process. As a result, costs overall rose substantially although nobody could put their finger on who was coining it. Thirdly, it simply became enormously complex. A contract, after all, is executed between parties. The number of pairwise interactions within an organisation rapidly becomes very large – in fact, it increases by the factorial of the size of the organisation.
infrastructure  privatization  business  economics  tairg 
march 2018 by debcha
Re last rt: https://t.co/3RAvWPiabs

— together we can beat blephartis (@JoeTheDough) March 10, 2018
IFTTT  Twitter 
march 2018 by joethedough
What have US healthcare, British railways, the shipwreck of Carillion plc, and the F-35 got in common?
from twitter
february 2018 by alexhern
The perniciously flawed concept of government outsourcing (via )
from twitter_favs
february 2018 by mattedgar
"In many ways, we’ve lived through a giant experiment in proving Ronald Coase wrong, which has now failed." -- On privatization [as state transformation].
via:xmarquez  econ:theory  soc:organizations 
february 2018 by phnk
via The Yorkshire Ranter http://ift.tt/1HI8d3H
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january 2018 by xmarquez