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Author Topic: The effects of bitcoin on firm structure?  (Read 806 times)
carbonpenguin
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May 06, 2011, 07:12:33 PM
 #1

My thoughts: http://cuhistory.blogspot.com/2011/05/coming-micro-ownership-revolution.html

What are yours?
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abyssobenthonic
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May 07, 2011, 02:41:17 AM
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Very interesting post with a lot of truth in it.  Particularly liked this:

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In a perfectly competitive market, the margin of profit trends towards zero, with consumers obtaining products at cost. In such a situation, the motivation for shareholders who do not use the firm's products to retain ownership is fairly low, while the only tool left for a firm to attract customers away from its competitors would be to offer them an ownership stake in the business, which would guarantee that they would continue to receive the firms products at cost in the future.  As such, it would be reasonable to expect the gradual transition of the ownership of many companies in the coming years from absentee shareholder to consumers.

A possible objection to this scenario would be to inquire as to why such a transition has not already occurred? The answer, I believe, lies in the relative cost of ownership. In 1800, owning a share of a London blacksmith's shop while living in New York would have been prohibitively expensive, due to the fact that the transaction costs necessary to receive the benefits of ownership would eat up most, if not all, of the profits. However, once the underseas telegraph cable was in place, such costs were reduced to the point that such ownership became possible. It seems there is a similar dynamic at play with co-operatives.

I would argue that an answer that is at least as likely to be true is that various barriers to entry (e.g. licensure requirements ("to ensure the safety and uniformity of services provided"), regulations requiring minimum standards of service (e.g. all healthcare plans offered must cover...), and perhaps even regulatory burdens in general (which often have the feature that compliance costs are trivial for a large enterprise but killing for a small enterprise)) are put into place by governments (most often at the behest of those they regulate, despite the presentation of such regulations as a means of keeping the targets of those regulations under control) and thus prevent any semblance of a perfectly competitive market from forming.  In short, the answer to the objection is to argue that markets have in general come nowhere near the level of perfect competition.

On a related note, I've always kind of found it interesting that Marx more or less wrote that the free market system would eventually turn into worker control of the means of production as the capitalists' race to the bottom drove profit to zero; meanwhile a large number of alleged Marxists seem to support actions that have the effect (if not the obvious design) of making such a transition to worker control of the means of production vastly more difficult than it has to be.

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carbonpenguin
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May 08, 2011, 01:20:04 PM
 #3

You make a good point; my sense is that its not "either/or," but both dynamics are, in fact, at play. The way I could see them connecting is as follows. Initially, ownership structures are determined by the cost of information; however, when that cost changes as a result of innovation, owners of property that is devalued by the shift are incentivized to defend that property's value (i.e. the corn laws in Britain). Since their economic status under the old regime is a source of political clout, they use the state to dampen the effects of the changes so as to protect their privilege (which takes the form of many of the government interventions you mention). However, as technologies like bitcoin allow the circumvention of such privilege safe-guards and create truly integrated markets, the developments I pointed out in my piece follow logically, methinks Smiley.
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