APR 06 2011

Shirky’s Here Comes Everybody

Clay Shirky, Coase theorem, Ronald Coase, Social Sciences, Transaction cost

Clay Shirky on the Folksonomy panel. This phot...Image via Wikipedia
Clay Shirky
The Internet and Web 2.0, in particular, are revolutionizing how nonprofits can organize. High-speed grassroots activism and ultra-quick publishing methods are transforming the possibilities, speed, and impact of nonprofit activities. Clay Shirky explores the merger of the Internet’s promise, some new and effective tools, and an emerging, new type of market in his readable, interesting book, Here Comes Everybody: The Power of Organizing Without Organizations (Penguin, 2009).
Ronald Coase @ 2009 Coase Conference (Day 1), ...Image by k-ideas via Flickr
Ronald Coase
In 1937, economist Ronald Coase considered the questions, “Why do organizations exist? and Why not just buy and sell individual services and goods in an open market?” Coase answered, that, in markets, there are transaction costs—these are the extra costs that buyers and sellers incur in order to meet one another and to negotiate.   The Coase theorem states that, if transaction costs are low enough, direct markets of individuals make sense. But, if these costs are too high, it makes more sense to organize in order to seek economies of scale.
A corollary concept is Coase’s ceiling, the point above which organizations collapse under their own bureaucratic weight.
Shirky identifies a new market, the Coasean floor, a place wherein activities and markets whose value may not be worth the organizational transaction costs of performing them via the traditional marketplace may occur.  These are the types of things suited for Internet activities. When organizational costs are close to zero and where ad hoc, loosely connected groups can form, many other possibilities, including nonprofit opportunities, emerge.  The future may find more self-organization lacking formal hierarchies. Such “nonorganizations” would allow for contributions from a wider group of people.  The aggregation of millions of actions that were previously below the Coasean floor have enormous potential.
There are potential problems, though. These involve people making poor choices of groups, for examples, teen anorexics, and groups that present security issues, for example, hate groups.  Isolation is also a potential problem.  If we self identify too much, then there is less likelihood of exposure to alternative ideas.

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