Economics 486
The Economics of Organization
Spring
2004
Mondays 2-4:30
Monteith 311
R. N. Langlois
322 Monteith X63472
Office
hours MW 9-12 and 1-2 or by appointment
Assignment 5
In "Where Do
Transactions Come from?" (Working Paper,
Langlois (2002) makes a similar argument. His emphasis, however, is on the bundling and
unbundling of property rights to reduce externalities: "T]he creation of 'new' rights and rebundling of existing rights
are really manifestations of the same underlying process... In all these cases,
the driving objective is to internalize externalities subject to the costs of
setting up and maintaining the rights ... [One strategy is to place] all the
interactions within a single module, where presumably they could be dealt with
more cheaply. " What
Langlois labels "externalities"
or "interactions,"
we call "transfers"
that generate causal "dependencies"
in a T&T network. Thus "internalizing externalities" is equivalent to "encapsulating
blocks of transfers."
We have arrived at the same place by
somewhat different routes.
Explicate
this claim and criticize or defend it.
What do they mean that "internalizing
externalities"
is equivalent to "encapsulating
blocks of transfers"? Do you agree that they "have
arrived at the same place by somewhat different routes."
The
paper they refer to (Langlois
2002) is on the syllabus. Other
readings in the section of the syllabus on modularity should also be of use. (Remember that you have a couple of readings
available to you on your CD that are not on the web.)
Due: April 12.
