Firm, Market, and Social Organization

The central insight of Coase’s Penguin was that peer production is form of economic organization on par with the market (first explained by Adam Smith) and the firm (first explained by Ronald Coase). Benkler expands on this tripartite classification of organizational structures in The Wealth of Networks. He spends quite a lot of time pointing out that non-market, non-firm methods of social organization account for a substantial fraction of our economic lives. We carpool, have dinner parties, give directions to strangers, help each other move, etc. These activities generate goods and services (meals, rides to work, information) that could also have been obtained via the market, but for a variety of reasons we sometimes find that non-market organizational methods meet our needs better.

I think this is a point that libertarians tend to under-appreciate. In college, I dated a left-of-center girl who liked to shop at the local grocery co-op rather than a commercial grocery store. It was a topic of frequent argument. I’d point out the relative efficiencies of commercial grocery store organization, she’d stress fuzzier, more community-focused advantages: the sense of community, the superior treatment of workers, the closer connection between customers, employees, and management, etc.

I still shop at a commercial grocery store. But I also think my criticism of the co-op was a little bit off base. In the first place, there’s no reason that libertarianism, as such, should quarrel with co-op shoppers. It’s a peaceful, voluntary form of social organization, and anyone who doesn’t appreciate it is free to take their business elsewhere. And I think it’s a mistake for libertarians to deny that many people find the market and firm forms of organization alienating. If they want to structure their lives so that more aspects of it are organized like a big tribe or family, we ought to say more power to them.

The reason libertarians often find themselves as critics of these sorts of arrangements is that in many cases people advocate using the coercive power of the state to impose communal forms of social organization on people against their will. We frequently see this in labor law, for example, where the state will force an employee to join (or at least contribute dues to) a union. We also see it prohibitions on paying money for organs. We see it in arguments against school choice, in which people argue that government schools create a sense of community that is missing from private schools. (Incidentally, this argument is false on its face–private schools contain communities every bit as diverse and vibrant as public ones)

Progressives often think the state can convert market forms of organization into non-market, non-firm, social organization. But they’re wrong. When the state gets involved, it almost always imposes a centralized, bureaucratic structure–a “firm” form of organization, in Benkler’s parlance. A lot of progressive may laud the potential of public schools to create communities, but in practice, the public school system is every bit as soulless and alienating as the largest corporations. Folks on the left should hate the New York public school bureaucracy for all the same reasons they hate Wal-Mart.

Libertarians are right to criticize policies aimed at accomplishing communal goals via coercive means. But too often, I think we do so by presenting the market or the firm as superior to communal forms of organization. Instead we ought to talk about the fact that politics is just as corrosive to communal forms of organization as it is to market forms. When communal forms of organization cease to be voluntary, they lose most of the characteristics that make non-market social organization attractive in the first place.

But if we want this argument to be taken seriously, we need to abandon the notion that the free market is not the be-all and end-all of social organization. Libertarianism is about reducing state coercion. It’s not necessarily about increasing the role of the market in every aspect of our lives. Of course the market is one alternative to statism, and an extremely important one. But other decentralized, voluntary forms of organization are important too. Peer production is one such example. But there are many others, including co-ops, private universities, think tanks, unions (providing membership is voluntary), churches, and charities. Libertarians should be celebtrating these institutions as alternatives to the state, not attacking them as threats to the free market.

What are some other non-market, non-state forms of social organization that libertarians ought to be promoting?

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