Brief Thought on Arrow's The Limits of Organization

tap, tap...cloud of dust...feeeeeeeedback whiiiiiiine, VU meters peg

Still works, so at least that much is right with the world. 

The world turns apace even in a COVID-19 shutdown. As part of my research (into interfirm collaboration in relatively complex B2B markets) I'm reading Arrow's The Limits of Organization (1974, ISBN10 0393055078). I wish to post some early-draft impressions here.

Arrow takes an economist's perspective on organization (the "why do organizations form?" question, for one example). On page 22 he makes the following assertion: "The price system (emphasis mine) then does not provide within itself any defensible income distribution, and this is a key drawback."

At first blush I'm not sure the price system per se is supposed to perform the function Arrow seems to wish it to do. Rather than reject the assertion out of hand, though, let us try to unpack it (bounded by the limits imposed by the angle of my forehead).

The price system provides information about underlying supply, demand, and preference/utility. The factors acting on supply, demand, and preference/utility (enduring or ephemeral circumstances in the external environment, including the presence or absence of coercion) are not part of or a product of the price system.

It is arguable that the price system cannot distinguish easily among what we might call undistorted and distorted supply, demand, and utility/preference information. Further, it may well be fair to characterize that condition as a drawback. The next question is: what would constitute distortion? We may argue that coercion is the chief -- perhaps the sole -- source of distortion in the price system. Absent coercion actors are free to transact or not.

When I teach pricing in my marketing courses, I offer the following to my students in the early going (following Wroe Alderson, more or less): We don't truly know what the price of a thing is until both parties say "okay, you got a deal." Until then we have competing opinions about what the price of the thing under consideration is. If the parties can't come to a satisfactory agreement they walk away and the market doesn't clear.

If the thing is more scarce or less scarce or one or both parties have more or less utility/preference for the thing, the agreed-upon price will be different than it would be at another time, place, and situation. Each of these might be amplified or attenuated by conditions in the external environment which may be ephemeral (temporary) or enduring (permanent). Coercion distorts price system information by changing supply (quotas, for example) or demand. Coercion can mandate or prohibit consumption (and therefore exchange), or it can incentivize (via subsidy) or disincentivize (via tax or penalty) consumption.

To explain all this better, I'll have to read more Mises and reread Hayek. More soon.

Another season, another helmet

Just a practice helmet for my new UFL team, the Daytona 500s. I'll do a better helmet soon.

A few (more) brief thoughts on Tolstoy

I finally read War and Peace back in 2010 (and previously posted brief thoughts in this space), and am presently reading Anna Karenina. Both works feature Russian aristocrats beset by debts and the need to raise money to support their accustomed lifestyles (and if I remember my Dostoevsky, there was something of the same sort in The Brothers Karamazov). As Anna Karenina opens, Stepan Arkadyevitch Oblonsky is contemplating the sale of a forest on his wife's property in order to pay his debts.

In other words, he seeks to mortgage tomorrow, by disposing of a productive asset, for the comfort and amusement of today. Has a...familiar ring, doesn't it?

Another holiday, another battle

General E____ claimed victory this afternoon, as he turned General G____'s right flank, occupied a key hill in the left center of the field, and blunted General G____'s attempt to turn his right. The hill in the left center was the real key to the action, and General E____'s deft use of his light infantry (the Rafiki Rangers) helped him hold his position while General G____'s aggressively handled cavalry wore itself out.

Figures were 1:72/20mm Crimean-era (mostly), rules based on Joe Morschauser's How to Play War Games in Miniature. As the young gentlemen return to the whirl of skating lessons and online schooling on the morrow, a miniatures game seemed a good way to close the holiday season. Time permitting, we'll do some painting this weekend on their next regiments (and Dad's army of 19th-century Scandalusia).

General E____ insists the next clash of the armies to be recreated will be the Battle of Schrute Farm. Perhaps I ought to set about getting the hedgerows and farmhouse done.

...and what may come next

"The village had its one poor street, with its poor brewery, poor tannery, poor tavern, poor stable-yard for relays of post-horses, poor fountain, all usual poor appointments. It had its poor people too. All its people were very poor, and many of them were sitting at their doors, shredding spare onions and the like for supper, while many were at the fountain, washing leaves, and grasses, and any such small yieldings of the earth that could be eaten. Expressive sips of what made them poor, were not wanting: the tax for the state, the tax for the church, the tax for the lord, tax local and tax general, were to be paid here and to be paid there, according to solemn inscription in the little village, until the wonder was, that there was any village left unswallowed."

Charles Dickens, A Tale of Two Cities, p. 87 (tip o'the tricorne: gutenberg.org)

Wait.

It even sounds like a man's team

This brief post is an excuse to post the helmet I designed for the Detroit Dukes, my team in the Playmaker Football online league known as the United Football League. The less said about my performance as a coach the better, though I have managed to put together a pretty talented roster, particularly on defense (star players: DEs John Strickland and Barry Burton, LB DaVondrious Green, and CB Marzelle House) and on the offensive line.

I picture our uniforms being like the Detroit Lions of the 1960s and 1970s, no black trim, just Honolulu blue and silver. The Duke himself there I adapted from the old Duke Beer (Duquesne Brewing Co.) logo.

Done for the heck of it.

Inkblot!

Saw a reference to the passing of Arlen Specter (the reference is not in the linked article; I saw it elsewhere) that mentioned Specter helped "bork" Robert Bork.

Maybe, but I think Judge Inkblot borked himself, for anyone who was paying attention. The Ninth isn't that hard to understand, unless one is not quite bright or is planning mischief against the liberties of the individual. In either case, one ought to be disqualified from the Court (oh, if only).