The Economics of Economic Organization
A Communications-Cost Approach to Optimum Economic Cooperation
by
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If you work for, invest in, or are a customer of an economic organization, the chances are that you think that the organization’s policies and practices are stupid and wrong for you, wrong for the organization itself and wrong for society as a whole.
Also, the chances are that you are surprised and concerned about the financial crisis of the fall of 2008
You read that we need “transparency” but you can’t find the word anywhere in your college economics textbook.
You’re probably right to be concerned,
But, it’s not your organization’s fault.
It’s not your fault either.
It’s my fault, because….
….I’m an economist and we economists have failed to develop a rigorous theory of optimum economic organization. Yet, such theory is much needed as a basis for rational, persuasive and ethically defensible ideologies and business practices for a modern economy. In particular, economic theory has failed to recognize that economic organizations at levels between the individual and the nation-state exist to reduce the costs of communication. Economic theory also largely ignores the natural links from truth and open information to the communication that shapes and ultimately limits economic cooperation. And while the business and political worlds have newly discovered the importance of “transparency”, the word remains ill defined and rarely found in rigorous economic theory and economics textbooks. In consequence, important and long admired elements of our economy, especially in finance, are loaded with secrets and lies about those secrets. The changes needed in economics are at the level of basic postulates and may at first seem trivial. However, after the almost complete failure of monetarist economics and market fundamentalism in the worst recession since the Great Depression, major changes at the core of economics could be essential to the survival of economics, both as a guide to national and international prosperity and as a rational academic discipline.
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About the Book
This book presents an extension of economic theory to economic organization. It argues that "economic man" seeks to better his lot through a combination of market maximization and cooperation with others, in contrast with the prominent view that self-seeking in markets must be compromised or society will become "a war of all against all". In Chapter 1, the book presents the basics of a unified economic theory that erases the numerous conflicts between microeconomics, the study of individuals acting in markets and macroeconomics, the study of nation-state economics as a whole. Chapter 2 looks at related other schools of thought in economics, including most notably Law and Economics and Catholic economics. While some others schools of economic thought do treat economic organization, none recognizes that economic organizations exist fundamentally to reduce the costs of the communication that makes possible inter-individual economic cooperation. Chapter 3 tells the story of selected utopian communities, which from the economic point of view were attempts to keep economies small enough so that communications in economic matters were essentially costless. Chapter 4 discusses examples of models in microeconomics that require revision to incorporate a more adequate treatment of communications costs and of the economic organizations created to contain them. Chapters 5 and 6 do the same for macroeconomics and international economics, respectively. Chapter 7 discusses the basic failures of the securities markets, which have degenerated so far from their rational function that secrecy and lying, rather than truth-based economic cooperation is the principal source of profits for securities fims.
About the Author
The author combines a lifelong commitment to the study and teaching of economics with a wide variety of organizational experience in the military, academia, private industry and government at Federal, l, State and local levels. In terms of subject areas, there has been some emphasis on finance, including research and supervision of banking, savings and loan, insurance and real estate. He has served extensively as an NASD securities arbitrator and as economist expert witness in over 200 cases in courts or regulatory bodies, bringing to the proceedings the burden of applicable economic theory. In respect to economic theory, the author has long noted the inadequacy of the treatment of economic organization in economic theory and recognizes that he is especially qualified to suggest relevant new and persuasive theory.