1 Concatenate Coordination and Mutual Coordination By Dan Klein and Aaron Orsborn Feb 2009 Link to paper

2 Let’s check the dictionary  Two definitions of the verb to coordinate Transitive - verb takes a direct object  A businessperson coordinates factors of production to make profits  Concatenate Intransitive - no direct object  Coordinating with one another, to a focal point Japanese drive on the left  Mutual

3 Two usages: Concatenate and Mutual

4 Mutual Coordination  The mutually intermeshing of behavior  Usually manifest, the actors can be made aware of their mutually coordinated action  Depicted as a coordination game

5 A coordination game with two coordination equilibria

6 Concatenate Coordination  Concatenation – chain, pattern, arrangement  Concatenate coordination may refer to a concatenation that is coordinated top- down, or a concatenation lacking top-down direction.  Better coordination means more pleasing to the mind imagined to behold the concatenation.

7 The Interrelation of the two The big picture view from the boardroom is the aspirational concatenation - the plan There are myriad instances of mutual coordination within the firm The referent concatenation subsumes many instances of mutual coordination

8 Golfing facilities  Suppose there is an owner of a golf course and an owner of a golf school.  From the Schelling point of view, each has his individual interests, and each mutually coordinates his own plans and actions with those of the other.  However, there is also a sense in which the two form a cooperative unit that coordinates the set of golf facilities in the concatenate sense.  But such “isomorphism” between the two coordination occurs only when the mutual coordinators are also the “chiefs” of the referent concatenation.

9 In the Beginning:  Herbert Spencer, First Principles  He compared society to an organism.  He wrote of complexity as higher levels of coordination of functions within the organism.  Concatenate coordination.

10 The Beginning in Economics: Concatenate Coordination in the Firm  Simon Newcomb’s Princeton Review paper “The Organization of Labor” (1880)  Others: John Bates Clark, Thorstein Veblen, Frank H. Knight, …  Focused on entrepreneur/owner/manager as the coordinator within the firm

11  Coordination within the firm was a quality of the concatenation. It invoked a judgment imputed to a mind imagined to behold the referent concatenation.  It is natural for the beholder to correspond to the owners, and to assume that the criterion behind coordinativeness was honest profits – a fairly precise and accurate rule.

12 From the Firm to the Economy  But when Hayek, Coase, etc. took the idea of coordination beyond the firm, the precision and accuracy melted away.  For the vast concatenation, the imagined beholder is much less clearly defined.  That did not stop them, however, from talking about coordination of the vast concatenation.  Concatenate coordination invokes a Smithian sort of beholding, a figurative being.

13 Coordination and the LSE  Hayek’s 1933 lecture at the LSE  Extended the idea to the entire economic system.  Beyond that of an actual coordinator.  Not entirely novel, but LSE brings it to the center of Anglo-American economics Ronald Coase “The Nature of the Firm” (1937) Arnold Plant W.H. Hutt

14 Mutual Coordination Emerges  Things started to change with the advent of Thomas Schelling and game theory  Schelling’s The Strategy of Conflict (1960)  Coordination is something we hope to achieve in our interaction with others  David Lewis developed the idea of coordination equilibrium in his book Convention (1969)

15 Mutual is now dominant  JSTOR search of QJE, EJ, JPE, AER, and Economica for “coordination” in 2001 and 2002  75 articles found 6 concatenate 40 mutual 11 ambiguous 19 not applicable

16 Reversal

17 Quiz: Mutual or Concatenate?  “Phil Wiest coordinated the schedule of classes with the everyone’s stated preferences in mind.”  “I need to coordinate with her to pick up my Craigslist items.”  “By playing according to the sheet music each musician coordinates with the other musicians.”  “The decorator has beautifully coordinated colors and patterns.”

18 Cooperation defined in terms of the two coordinations  Cooperation = the mutual coordinating of each’s actions in a context in which each cooperator perceives, however fuzzily, to be making a contribution to the same referent concatenation— a good team performance, a clean neighborhood, a productive bread factory. There is a mutual awareness of cooperating in the achieving of the concatenation.  The spirit of cooperation is especially pronounced when there is not only mutual awareness but mutual sentiment in the experience. “We did it together!”

19 Central direction vs spontaneous action  Both concatenate and mutual coordination have spontaneous manifestations to go along with centrally directed ones Spontaneous order  The vast concatenation that produces a woolen coat Spontaneous emergence of conventions  Languages, monies, and norms

20 Reasons to care  Helps us appreciate concatenate coordination  The grand concatenation: What satisfies the mind imagined to behold it?  The matter is not only instrumental, but also what the aesthetic sensibilities are.  Adam Smith said of the rules of elegant and sublime writing: “loose, vague, and indeterminate.”  The decline of concatenate coincides not only with the rise of mutual, but the rise of “efficiency” and “optimality,” and modernist and positivist images of science.

21 Mutual shouldn’t overshadow concatenate  Concatenate came first and must not be overshadowed by mutual  The two typically interrelate in experience.  But the two are distinct.  Both should be understood and utilized.  The big issues are about the big concatenation.

22 Does Efficiency make Concatenate Coordination Nugatory? Let’s admit the vagueness of “efficiency”  diminishing marginal utility of wealth  The hypothetical nature of propositions, giving rise to ambiguities in, for example, the time-to-adjustment  The collective action problems that might matter to the individual’s contemplation of how much he would be willing to pay  The issue of deeper, truer preferences  Identity factors  Future preferences  The Smithian distinction between passive experience and moral agency  Economists do not have good data

23  And when “economic efficiency” is confined to make it relatively precise and accurate, it really is a lower-level criterion for overall judgment.  That is, narrower, more precise notions of economic efficiency are not a final arbiter of the social good.

24  I.M.D. Little A Critique of Welfare Economics (1957): “Economic welfare is a subject in which rigour and refinement are probably worse than useless. … It is satisfying, and impressive, that a rigourous logical system, with some apparent reality, should have been set up in the field of the social sciences: but we must not let ourselves be so impressed that we forget that its reality is obviously limited; and that the degree of such reality is a matter of judgement and opinion.”

25  Behind our judgments are sensibilities that are sometimes better explored by openly aestheticized terms, such as concatenate coordination.

26 The End