In Q: What will happen when a national political machine can fit on a laptop? A: See below, Everett Ehrlich applies one of economist Coase’s insights to modern, Internet-era politics:
Back in 1937, an economist named Ronald Coase realized something that helped explain the rise of modern corporations — and which just might explain the coming decline of the American two-party political system.Coase’s insight was this: The cost of gathering information determines the size of organizations.
It sounds abstract, but in the past it meant that complex tasks undertaken on vast scales required organizational behemoths. This was as true for the Democratic and Republican parties as it was for General Motors. Choosing and marketing candidates isn’t so different from designing, manufacturing and selling automobiles.
But the Internet has changed all that in one crucial respect that wouldn’t surprise Coase one bit. To an economist, the “trick” of the Internet is that it drives the cost of information down to virtually zero. So according to Coase’s theory, smaller information-gathering costs mean smaller organizations. And that’s why the Internet has made it easier for small folks, whether small firms or dark-horse candidates such as Howard Dean, to take on the big ones.
For contrast, Ehrlich shares this anecdote:
Consider, for example, the first “modern” political campaign — the Whig campaign for William Henry Harrison in 1840. Apart from some success as an Indian killer, Harrison had minimal credentials, but the Whigs figured out how to use the tremendous organizational apparatus of their party to promote him. They fabricated the image of Harrison as the “log cabin and hard cider” candidate, despite his more patrician roots, and used the party organization to enforce discipline around the fabrication — to get everyone to say the same thing at the same time. In America’s first political mass media stunt, they constructed a 10-foot-high ball of twine, wood and tin, covered it with Whig political slogans, and rolled it first from Cleveland to Columbus and then from town to town across the country (hence the expression “Keep the ball rolling”).