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December 16, 2003

Everett Ehrlich, writing in the Washington Post, attempts to apply Coase to political parties. Ehrlich's attempt is interesting, but his main premise needs to be sharply qualified and his predictions are questionable.

Premise: "So the end result of the Internet revolution on companies has been exactly what Coase's theory predicted: Cheap information has allowed firms to shrink. Size is now less of an advantage in organizations, and that means more competition in the global marketplace."

Yes, cheap information has allowed some firms to shrink. But is has also allowed some firms to grow and to become huge. Case in point: Wal-Mart.

Predictions: "First, if Dean loses the nomination, he will preserve his organizational advantage and reemerge as a third-party force four years from now. He has done with technology what Ross Perot could not do with money alone. Second, the evangelical right will become a separate political party in the near future, and will hold its own conventions and primaries. Like the Conservative Party in New York state, it will usually endorse Republican candidates. But evangelicals will use their inherent party-ness to make the Republican candidate stand in front of them and give a separate acceptance speech. And finally, in the next six or eight presidential elections, a third-party candidate will win the presidency."

Right now it looks like Dean will win the nomination, so we probably won't get to check the first prediction. I make the odds of the second one at least 5 to 1 against. And the third--well, smart guys have been predicting big things for third parties for decades. Hasn't happened. Almost surely won't happen. If successful, or about to be successful, a third party will be either 1) coopted by one of the two major parties, or 2) replace one of the two major parties.

Accuracy guaranteed, or your money back.

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» The information diffusion from QandO
Everett Ehrlich writes an interesting column on the effect of the internet on politis. Specifically, he suggests that Ronald Coase's insight - "The cost of gathering information determines the size of organizations" - when added to the explosion of the... [Read More]

» The information diffusion from QandO
Everett Ehrlich writes an interesting column on the effect of the internet on politis. Specifically, he suggests that Ronald Coase's insight - "The cost of gathering information determines the size of organizations" - when added to the explosion of the... [Read More]

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