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Re: <nettime> Markets, Hierarchies, Networks: 2 questions
Felix Stalder on Fri, 14 Apr 2006 12:16:26 +0200 (CEST)

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Re: <nettime> Markets, Hierarchies, Networks: 2 questions

On Thursday, 13. April 2006 16:51, Brian Holmes wrote:
> First let's try to figure out what's really being talked
> about. Felix seems to be referring to the theory of economic
> organization, and probably to three landmark papers:
> -Ronald Coase, "The Nature of the Firm" (1937)
> -Walter J. Powell, "Neither Market Nor Hierarchy" (1990)
> -Yochai Benkler, "Coase's Penguin" (2002)

Mostly. The field I'm speaking about is organizational theory, located between 
economics and sociology. Institutionally, organizational theory has been 
connected to economic and management departments, hence they used to see only 
markets and firms (hierarchies) and, since post-fordism, networks. This 
really is very standard. However, for the present discussion, I think it's 
important to add a fourth type, communes (NOT commons) or co-operatives. They 
represent attempts to combine explicit planning and decision-making (like 
hierarchies) while working against a hierarchical division of labor, so 
typical for firms and bureaucracies. However, since their economic impact 
used to be relatively small, and, more generally, they were regarded poorly 
by the proponents of 'free markets' that make up these departments, they were 
ignored by organizational theory. We should not do the same mistake.

I am, and I think Ned is too, interested in networks as governance mechanisms 
that are different from other institutional structures. Hence, I think it's 
not useful to argue that any type of connection is a network, as Shannon 
Clark did. I know that's how the concept is used in a technological context, 
or within complexity theory, but since these field are not concerned with 
issues of power, i.e. governance, I don't think their approach is useful 

> So my first question is this: How justified is it to think
> of FOUR different forms of productive organization - market,
> hierarchy, network and commons? Aren't the last two just
> variations on each other? 

As already mentioned, I meant communes (or cooperatives) and not commons. I 
think the difference between cooperatives and networks are important, in as 
much as cooperatives have explicit decision-making structures and means to 
enforce their decisions, but do not function as hierarchies.

> If the aim is to examine 
> large-scale organizations in the real world, isn't it best
> to establish the distinctions and hybridizations between
> THREE broad sets of rules or structures of governance -
> based on competition, subservience and reciprocity, or on
> market, hierarchy and network? 

Perhaps, in this view, a commune would be a close-kit type of network. But I'm 
not sure how far this really gets us. If you look at how power works, there 
are real differences between these different sets. In markets, power is based 
on money, since the coordination takes place through price signals. In 
hierarchy, power is based on position, since decision-making authority is 
hard-coded into the structure of the organization. In a network, power is a) 
based on the ability to define the network protocol, and b) on the ability to 
contribute to the overall goal of the network on the basis of that protocol. 
In cooperatives, power is based on the ability to create consensus.

> And finally, is "network" 
> really the best possible name for the last form of
> structuring and governance, or does it just lead to
> confusion because of the connection to ICT hardware and the
> associated diagrams? Why not talk about market, hierarchy
> and cooperation?

Somehow, I think 'cooperation' is located on a different, normative, level. I 
have a hard time to think of cooperation in negative terms, and I have less 
problems thinking of networks as, say, being set up for exploitation. 

> The second question springs from that last point, and has to
> do with social network analysis. As far as I can tell, this
> is a science - or branch of inquiry, anyway - that's mainly
> driven by innovations in graphic representation,
> particularly the Pajek software developed by a couple of
> Slovenian researchers, but also the stuff by Valdis Krebs,
> etc. The question is, does social network analysis have a
> theory? Because in effect, you can REPRESENT anything as a
> network, once you have defined nodes (and categories of
> nodes) plus connections (and quantities or qualities of
> connections). Those analytic representations take the form
> of fascinating pictures. But what kinds of theoretical
> synthesis come after the analysis? Does social network
> analysis make specific contributions to our understandings
> of the ways people structure and govern their relations to
> each other? Or does it just subsume every kind of relation
> under the picture of a network?

As far as I know, social network analysis (sna) is a method, not a theory. 
it's basically a mapping technique, a method to measure communicative 
interaction between a set of people, primarily quantitatively. For sna, any 
set of connections is a network. For a long time, sna was limited because of 
the real-life difficulties of measuring interaction. Since electronic 
communication has taken off, sna has had some kind of renaissance, because 
it's now every easy to gather data on communicative interaction. 

Up to this point, I've seen very little that is interesting in this field, but 
perhaps with larger data-sets, things might become interesting. However, like 
all mapping techniques where one groups maps another one, much of the 
non-academic impetus behind it is one of control, hoping to find non-obvious 
connections between people which can be exploited for this or that end.

In the late 1990s, I was doing research on electronic money, and I met David 
Chaum, who was doing digicash at the time. I asked him why he had become 
interested in anonymous e-cash. The story he told me sounds credible, even 
though I don't know if it's true. He said that before the overthrow of the 
Allende government in 1973, the CIA has done extensive analysis of the 
communication pattern among senior officials of the administration. They were 
not interested in what they were taking about. What they were really 
interested in were the communicative networks and in understanding who are 
the key nodes, connecting one part of the administration to another. These 
were the people they were taken out first, thus seriously crippling the 
ability of the government to coordinate its response to the events. He was a 
afraid that online such techniques would be even more powerful if we did not 
have anonymous communication, including financial communication.


----http://felix.openflows.org------------------------------ out now:
*|Manuel Castells and the Theory of the Network Society. Polity, 2006 
*|Open Cultures and the Nature of Networks. Ed. Futura/Revolver, 2005 

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