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Earlier Version Presented to EEA Law & Econ. Workshop, NYC, Feb 28, 2009 James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology.

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Presentation on theme: "Earlier Version Presented to EEA Law & Econ. Workshop, NYC, Feb 28, 2009 James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology."— Presentation transcript:

1 Earlier Version Presented to EEA Law & Econ. Workshop, NYC, Feb 28, 2009 James Stodder, (Ph.D., Economics, Yale 1990) Lally School of Management & Technology Rensselaer Polytechnic Institute at Hartford Hartford, Connecticut, USA 1

2 2 “The Nature of the Firm,” Economica, Firms exist to minimize “transaction costs” “The Problem of Social Cost,” Journal of Law and Economics, Property Rights evolve to allocate property when transaction costs are too high

3 3 The Common Law is “an attempt to increase the value of the resource by assigning property rights to those parties … in whose hands the rights are most valuable.” - Richard Posner, The Economic Analysis of the Law, 1972 Without flexible property rights, “the only way we thought we could test out the value of the pollution was by the only liability law we thought we had.” - Guido Calabresi and Douglas Melamed, “Property Rules, Liability Rules, and Inalienability”, Harvard Law Review, 1992

4 Now we have “Coase’s Penguin, or Linux and The Nature of the Firm” by Yochai Benkler (Harvard) Now we have “Coase’s Penguin, or Linux and The Nature of the Firm” by Yochai Benkler (Harvard) 4 -or,-linux-and-the-nature-of-the-firm/

5 Wikipedia Apache WebServer MIT Open CourseWare Google EBay Apple Firefox Linux Amazon MySQL (Sun) Travelocity 5

6 6

7 Copyright Creative Commons Public Domain 7

8 Dual Licensing (MySQL) Attribution (96% of licenses) Attribution + No-Derivatives CC 8

9 9 Table 1: Ideal Organizational Forms as a Function of Transaction and System Costs Function of Transaction and System Costs

10 Information Problems in Pervasively Networked Environments (PNEs): 10 1.Accounting – Multiplicity of information, many kinds and sources. 2. Cooperation / Coordination – ‘Publicness’ of Consumption and Production. Important externalities (+/-) are public (Coase). 3. Complexity – Fundamental Non-Convexity of Negative Externalities (Starrett).

11 Table 2: Ideal Forms as function of Major Informational and Organizational Problems 11 ORGANIZATION INCENTIVIZECOORDINATECOOPERATE INFOR- PROBLEM Money,Power,Status, MATION PROBLEM PowerMoney ACCOUNTINGMarketsPublic GoodCommons > Cooperation or Non-Convexity (Stock, Commodity, Books) (Roads, Environment) (Public Radio, Ideas) COOPERATIONFirmsTeamsClub Goods > Non-Convexity or Accounting (Automobiles, Shoes) (Police, Military, Research) (Swiss Pastures, Students) NON-CONVEXITYPatents‘Open Source’Peering > Accounting or Cooperation (Drugs, Microsoft, Biz Methods) (Google, Faculty, Artist) ( Clickworkers, Wikis) Clickworkers

12 Non-Convexity & Reversibility 12

13 Total, not just Marginal Conditions 13

14 14 My Firm

15 15 US v. Europe Google v. Yahoo Linux v. Microsoft Apple v. Microsoft Guerilla Bands v. Central. Army

16 The Economist, “The Next Society,” November Agriculture => Manor, Plantation Feudalism Feudalism Industry => Family Firm, Corporation Capitalism Capitalism Research => Scientific Circles, Universities, Firms New Forms of IP New Forms of IP

17 17 As the flow of water is determined by the earth Military force has no constant formation, as water has no constant shape.changing and adapting to the opponent “As the flow of water is determined by the earth, so the victory of military force is determined by the opponent. Military force has no constant formation, as water has no constant shape. To gain victory by changing and adapting to the opponent is called genius. - Sun-Tzu, The Art of War, 500 B.C. great uncertainty of all data in war planned in a mere twilight, like the effect of a fog or moonshine — talent must discover “… the great uncertainty of all data in war is a peculiar difficulty, because all action must …be planned in a mere twilight, which … like the effect of a fog or moonshine — gives to things exaggerated dimensions and an unnatural appearance. What this feeble light leaves indistinct to the sight, talent must discover, or must be left to chance.” - Von Clausewitz, On War, 1874


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