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Organization, Olson and the Red Queen Effect

November 16, 2009

This is another post from our guest Max Borders. You can find his earlier posts here.–Editor

“It takes all the running you can do, to keep in the same place.” – The Red Queen, from Lewis Carroll’s Through the Looking Glass.

Remember Ronald Coase’s The Nature of the Firm? It’s pretty hard reading. But if I understand it right, Coase poses a really important question: why do folks organize into firms? Why isn’t there a totally “free” market in labor? Why do organizations take on scales that result in relatively costly forms of order? Coase’s answer is “transaction costs.” It actually costs more to coordinate actions among scattered people with disparate skill sets—all of whom would have to contract with one another and hammer out details of said contracts. And then they have to get themselves all together somehow to divide labor and accomplish something profitable. So, up to a certain point, organizations arranged like hierarchies have just been less costly to organize. Simply said: it’s cheaper for some people to give orders and some to take them (the former pay the latter for the privilege of being the boss). But that’s changing—and fast.

Enter technology. Lest this starts to sound like one of those Fast Company “new media are revolutionizing everything” columns, suffice it to say technology is lowering the costs of organizing without the need for firms (transaction costs). Clay Shirky does a great job describing the phenomenon in his book Here Comes Everybody. He offers a solid overview of this transformation in progress. So what does all this mean for slowing Leviathan and growing voluntary community?

The Special Interest State

Turn now to Public Choice 101. Mancur Olson nailed it. The idea is pretty simple: our Republic – most any republic – will turn into a corporate state due to the problem of special interests. If you can pass a regulation or subsidy, some small group is going to win. The small group that stands to benefit most from a reg or subsidy also has the greatest incentive to organize and has the lowest organizing costs. The benefits are concentrated (on the interest group), but the costs are diffuse (we all pay marginally higher taxes and marginally higher prices.) We the People have neither the incentive nor can we afford to organize against every group behind this little legislative tweak or that. But the tweaks add up. The costs mount, but go largely unseen. Special interest groups almost always win. The result is tremendous deadweight loss. Democracy ends up serving them, not “the public interest” (whatever the hell that means). Rational apathy, rational ignorance and/or rational irrationality rule.

Glass Half Full

But here’s the optimism: If people like Shirky are right, it’s getting cheaper both to monitor and to organize against special interest groups—at least select ones. I’m not saying we’re anywhere near being able to fight them at parity. Perhaps we’ll never be. Nor are we likely to see the immediate effects of our new distributed, organization tools. But we may soon be equipped at least to slow the process of “demosclerosis.” We may already be. And as long as our collective productivity gains outpace the growth of the deadweight state, we’ll be okay—at least in some less-than-savory utilitarian sense. We’re also going to be better equipped to drive creative destruction and out-compete the government in some of its historic monopoly areas, such as education. (We might even unleash the forces of social entrepreneurship if you believe folks like Michael Strong.)

The Red Queen Effect

Optimism over. Offer a glimmer of hope and just as quickly dampen it at its source? What can I say? You see, the enemies of voluntary association and advocates of expanded state power have all the nifty tools at their disposal, too. So the costs of organization are going down for them. And I’m not just talking about organizing for those titanic tug-o-wars we call elections. I’m talking about organizing more rapidly to form Bootleggers and Baptists coalitions, which obscure all the corporatism that’s really in the works. I’m talking about new instruments that make controlling and pilfering from us lower-cost propositions. Hence the Red Queen Effect. My guess is that until we find THE disruptive innovation to dismantle the state, we will be engaged in this strange, destructive form tit for tat for quite some time.

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