Monday, December 15, 2003

Worst. Article. Ever.

This Washington Post article is so bad, so extremely bad, so incredibly bad, that I don't even know where to begin describing it's extreme badness. I don't use words like "idiot" lightly, but, well, here I feel really really tempted.

First, the summary:
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 all Dean's talk about wanting to represent the truly "Democratic wing of the Democratic Party," the paradox is that he is essentially a third-party candidate using modern technology to achieve a takeover of the Democratic Party. Other candidates -- John Kerry, John Edwards, Wesley Clark -- are competing to take control of the party's fundraising, organizational and media operations. But Dean is not interested in taking control of those depreciating assets. He is creating his own party, his own lists, his own money, his own organization. What he wants are the Democratic brand name and legacy, the party's last remaining assets of value, as part of his marketing strategy. Perhaps that's why former vice president Al Gore's endorsement of Dean last week felt so strange -- less like the traditional benediction of a fellow member of the party "club" than a senior executive welcoming the successful leveraged buyout specialist. And if Dean can do it this time around, so can others in future campaigns.
Let's begin with Coase. Coase's primary insight on "The Size of the Firm" was that costly transactions may be easier to do in a centrally planned economy (a company) instead of a market economy. Note that the Internet means smaller companies -- lower information transaction costs do just as much for a large company's internal efficiency as it does for a small company's ability to compete. Ron Coase understands things that remain perfectly opaque to Everett Ehrlich, who perpetrated the article.

Secondly, the article is on crack regarding the viability of third party candidates. In the US, because of the winner take all nature of the presidential contest, there will only be two political parties, and if an independent does run, it will hurt the major party that most closely aligns with his ideology. Perot hurt Bush, just as Nader hurt Gore. The notion that "finally, in the next six or eight presidential elections, a third-party candidate will win the presidency" imagines that a Nader type candidate will grow stronger and stronger as he runs again and again (leading to ever more dramatic Republican victories each time) until he suddenly breaks through and swings the Presidency far left is hallucinatory. A vote for Nader was a vote for Bush in 2000, and will be again in 2004 if Nader chooses to run as an independent again. (Note to Ehrlich -- this will be true FOREVER).

Thirdly, while it is certainly true that the Internet allows more special interest groups to coordinate, it is not clear how this is a good thing. Special interest groups expend resources vying for government favors that benefit them but harm society as a whole. Having more of them may mean that each group is individually weaker (which may be good) or that there are simply more pigs at the trough (which is probably bad) but special interest groups are not going to Save America, and anyone who thinks that they are has not been paying close attention to the corrosive effect that lobbying has on good governance, which is to say has not looked at the functioning of normal government at all.

The core idiocy in the entire article is the belief that somehow The People are just not being listened to, and if they were listened to then everything would be All Better, and the Internet will force people to Listen To The People. Here on planet earth, the two party system is a result of extremely careful arithmetic, which results in third party candidates hurting the party they are affiliated with by dividing their vote, and politicians respond to the demand of their local constituents who happen to be in swing districts and so need to be listened to, and the Internet will not to anything to change that.

So, who is Everett Ehrlich? The byline says he is senior vice president and director of research for the Committee for Economic Development, and that he was undersecretary of commerce for economic affairs under President Bill Clinton. *Phew*. No one consequential.


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