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Re: <nettime> Nobel laureate in economics aged 102 endorses the human ec
Brian Holmes on Sun, 20 Jan 2013 21:29:59 +0100 (CET)


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


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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