Comments on: Wilco and Coase http://www.kieranhealy.org/blog/archives/2002/08/20/wilco-and-coase/ Sociology and other distractions Fri, 31 Oct 2008 10:33:43 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Lukas Bergstrom http://www.kieranhealy.org/blog/archives/2002/08/20/wilco-and-coase/comment-page-1/#comment-65 Lukas Bergstrom Wed, 30 Nov -0001 00:00:00 +0000 http://www.kieranhealy.org/wordpress/?p=63#comment-65 Isn't the relevant point here that at this point no one -- not music critics, not record executives, not record store owners -- has any idea what will sell? This isn't a failure of the market to shuttle good information around; the good information doesn't exist. Maybe the public's taste is changing in a way that makes predicting blockbusters much more difficult, if not impossible. The record companies used to have a monopoly on the channels for recording, distributing and promoting music. Digital technology has leveled the field, and I'd bet this has something to do with why it's so much harder to predict buyers' behavior. Of couse, if I'm right, and Lindsey is also right, the mega-sized record companies should eventually die out. We'll see. Isn’t the relevant point here that at this point no one—not music critics, not record executives, not record store owners—has any idea what will sell? This isn’t a failure of the market to shuttle good information around; the good information doesn’t exist. Maybe the public’s taste is changing in a way that makes predicting blockbusters much more difficult, if not impossible. The record companies used to have a monopoly on the channels for recording, distributing and promoting music. Digital technology has leveled the field, and I’d bet this has something to do with why it’s so much harder to predict buyers’ behavior.

Of couse, if I’m right, and Lindsey is also right, the mega-sized record companies should eventually die out. We’ll see.

]]> By: Kieran Healy http://www.kieranhealy.org/blog/archives/2002/08/20/wilco-and-coase/comment-page-1/#comment-66 Kieran Healy Wed, 30 Nov -0001 00:00:00 +0000 http://www.kieranhealy.org/wordpress/?p=63#comment-66 This isn't a failure of the market to shuttle good information around; the good information doesn't exist. I'm not sure. You're right to say that there's no one place where that information exists, and so executives, record owners and critics don't know for sure (or at all) what will sell. But Hayek (and economists in general) would say that the information does exist: it's in people's heads, distributed across everyone's preferences. The market mechanism is supposed to aggregate that information efficiently. That's supposed to be the magic of it, the reason why it beats bureaucracy. A corporation could never gather all the needed information, or analyse it fast enough. But the distributed nature of the market mechanism is supposed to be able to do that job. Thus, one puzzle for people like Lindsey is, if the market can do this better than firms, then why is the music industry organized in giant conglomerates that try to control every aspect of music production, consumption and distribution? Where do they come from? Why do they persist? We might be tempted to argue that they come from people preventing the market mechanism from operating. But another possibility is that they arise out of the market and its workings. Lindsey, I think, would not like this idea. Beyond that, the general point I wanted to make is that the market vs hierarchy dichotomy does not map well onto the way firms and markets are actually organized. This isn’t a failure of the market to shuttle good information around; the good information doesn’t exist.

I’m not sure. You’re right to say that there’s no one place where that information exists, and so executives, record owners and critics don’t know for sure (or at all) what will sell. But Hayek (and economists in general) would say that the information does exist: it’s in people’s heads, distributed across everyone’s preferences. The market mechanism is supposed to aggregate that information efficiently. That’s supposed to be the magic of it, the reason why it beats bureaucracy. A corporation could never gather all the needed information, or analyse it fast enough. But the distributed nature of the market mechanism is supposed to be able to do that job.

Thus, one puzzle for people like Lindsey is, if the market can do this better than firms, then why is the music industry organized in giant conglomerates that try to control every aspect of music production, consumption and distribution? Where do they come from? Why do they persist? We might be tempted to argue that they come from people preventing the market mechanism from operating. But another possibility is that they arise out of the market and its workings. Lindsey, I think, would not like this idea.

Beyond that, the general point I wanted to make is that the market vs hierarchy dichotomy does not map well onto the way firms and markets are actually organized.

]]>