Coase and Dean
By Arnold Kling
Everett Ehrlich invokes Nobel Laureate Ronald Coase as Ehrlich interprets the success of Howard Dean in terms of reduced transactions costs in setting up a political organization.
the Internet has changed all that in one crucial respect that wouldn’t surprise Coase one bit. To an economist, the “trick” of the Internet is that it drives the cost of information down to virtually zero. So according to Coase’s theory, smaller information-gathering costs mean smaller organizations. And that’s why the Internet has made it easier for small folks, whether small firms or dark-horse candidates such as Howard Dean, to take on the big ones.
On the other hand, in Montgomery County, Maryland, the Gazette writes,
Against a backdrop of a fiscal crisis for the county and strong sentiment against raising taxes, the County Council and the Duncan administration are looking for ways to trim expenses. The teachers believe their health benefits might be a prime target.
The Nov. 3 newsletter of the Montgomery County Education Association, which represents the school system’s 11,000 teachers in contract negotiations, took on the issue.
I’ll believe that the structure of politics has changed the day that someone can get elected to the local School Board or County Council without the endorsement of the teacher’s union.
UPDATE: Professor Bainbridge correctly points out that Ehrlich failed to demonstrate a connection between the Coase theory of the firm and politics.
For Discussion. Is a reduction in communication costs the critical factor in Dean’s success?