Re: <nettime> Nobel laureate in economics aged 102 endorses the human economy approach

[Brian Holmes <bhcontinentaldrift@gmail.com>]

On 01/18/2013 08:05 AM, Keith Hart wrote:

> A century ago, Alfred Marshall, author of Principles of Economics (1890)
> and Keynes' teacher at Cambridge defined economics as "both a study of
> wealth and a branch of the study of man". But, in a manifesto published in
> the Harvard Business Review last month, "saving economics from the
> economists"http://hbr.org/2012/12/saving-economics-from-the-economists/ar/1,
> Coase argues that "The degree to which economics is isolated from the
> ordinary business of life is extraordinary and unfortunate."

All of this is both fascinating and encouraging.

In his book The Long Twentieth Century, Arrighi made Coase's idea of the 
internalization of transaction costs into the key feature of the 
vertically integrated corporation. Rather than engaging in complex 
market operations to assemble its raw materials and component parts, 
then handing off the finished product to equally tangled chains of 
wholesalers and retailers, the firm would do it all in-house, realizing 
huge economies which it could then plow back into production. In this 
way, Arrighi explained, corporations like DuPont or General Motors 
propelled the US to its dominant position in the world, while at the 
same time eroding the powers of government and the rights of citizens by 
going multinational. What Coase identified is still practiced in its 
pure form by companies like Exxon or BP (and, I'd argue, in a modified 
form by Walmart and other distribution companies, which have figured out 
how to toally controll their suppliers without ownership). The 
internalization of transaction costs was the foundation for both the 
overabundant wealth and the environmental devastation that we see all 
around us today.

I think we will only survive as a species if our economic institutions 
succeed in internalizing the costs of care: care for each other, care 
for the social peace and care for the environment. That would be the 
human economy. It can be glimpsed in the "informal" practices that Keith 
and his many collaborators write about. But how to get the "formal" 
institutions on board?

Maybe Coase's young Chinese collaborator will have an idea!

best, Brian


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