Remember Coase's The Nature of the Firm? In it, Coase asks a really important question: why do people organize into firms? In other words, why isn't there a totally "free" market in labor? Why do organizations take on scales that result in higher costs? Coase's answer is "transaction costs". It costs more to coordinate actions among people who have disparate skill sets, live in different locations, have various levels of abilities, need to contract with each other and hammer out details of these agreements, etc.... then get them all together to accomplish something profitable. Simply said, it becomes worth it for people to give and take orders. So up to a certain point, organizations with major components of hierarchy are simply less costly to organize. But this cost structure is changing rapidly due to Web 2.Whatever.
Check out Here Comes Everybody. Yes, Shirky's is another "look how new media are revolutionizing everything" book. But among other things - I'm only on Chapter Three - Shirky has been able to articulate the revolutionary change in the structure of transaction costs when it comes to organizing. If you can organize without organizations at increasingly lower costs, the world is a very different place. The nature of the firm is going to change--perhaps not utterly, but considerably. I take away from this a kind of techno-optimism not only about seismic shifts in the nature of human organization, but in the nature of government and our ability to rein it in. For example, if new media are changing things for firms and orgs, will it also change the logic of collective action a la public choice theory?
Ironically, I've been asked to write a review of Here Comes Everybody for a print journal.
