Organizations and Markets

Newspapers as Coasian Firms

| Peter Klein |

The hunter-gatherer model of journalism is no longer sufficient. Citizens can do their own hunting and gathering on the Internet. What they need is somebody to add value to that information by processing it — digesting it, organizing it, making it usable.

This is why we still need newspapers — or something like them. Ronald Coase, the British economist, once asked why we need business firms. Why can’t all their activities be coordinated by individuals contracting with one another instead of working in a bureaucratic, command-and-control environment? The answer, he said, is transaction costs. If a manager had to negotiate with a free-lancer for every task, the cost in time would be unbearably high.

Searching for information on the Internet involves something like transaction costs because we have so many varied sources to evaluate. We need somebody we trust to organize them for us. That can be the task of the new journalism.

That’s from the retirement speech of UNC journalism professor Philip Meyer. Here is more. I like the attempt to characterize information intermediaries — which would include not only newspapers but also directories, databases, organized financial exchanges, ratings agencies, books, universities, and the like — as coordinating agents in the Coasian sense. But they needn’t include the fiat, or authority, that characterizes the Coasian firm. Instead they are probably better regarded as loosely structured networks or some other “hybrid” that combines elements of market and hierarchy. Your thoughts?

31 March 2008 at 8:43 am Peter G. Klein 2 comments