The Network Economy

1. The Network Economy The Role of information in Providing Coordination & Control

2. Cognition & Coordination (Courtesy of Joisyshowaa)

3. Beniger’s Conceptual Metaphor & Social Mechanisms (Courtesy of Retinol Entropy & the Second Law of Thermodynamics. Systems must be open if they are to prevent entrophy Information allows systems to survive & maintain control. Information technologies increasingly provide the means.

4. What Does Beniger Mean by Control? A system that provides communication and a feedback mechanism.

5. Where does Beniger Stand on the Social Constructivist Scale? • Somewhere in the middle! • Technology was created to fill a need. • Technology solved the problem but in so doing increased the crisis of control. • Hence, a dialectical relationship exists between the two. Courtesy of J. Leighberry

6. How is Beniger’s Work Similar to that of Shumpeter, Veblen, & Freeman’s? • An emphasis on historical evolution. • Incorporation of cumulative factors. • A reasoned history, comparing variables across time & circumstances. • Technology clusters & uneven development. (Courtesy of Webjoy)

7. How Does Beniger Differ? • Emphasis on shared characteristics. • Although economies are diverse, they share a need to coordinate activities and maintain control • Coordination requires information & an effective way of communicating it. • Networks—both social as well as technological—serve as a means for such communication and control. • Social ties are a function of a lack of communication. Ie. the traditional vs. the associational community.

8. How Does His Perspective Compare to Marx? • Social behavior is purposive. • Change takes place in a structural, dialectical fashion. • Technology plays a key role. (Courtesy of AlveroHarrais)

9. How Does His Perspective Compare to That of Adam Smith? • Although economic growth depends in part on the size of the market, it also depends on what Durkheim described as moral density. Lacking moral density, uncertainty in the market gave rise to the first information industry—in the form of all type of information ‘middlemen.’ It was these middlemen that allowed the ‘market’ to rule throughout the period of commercial capitalism. Title: Middle Man; Artist: Adam...
from Bear and Bird

10. In What Tradition Can We Locate Beniger? • Classical Sociology • Emile Durkheim (social facts) • TalcottParsons (structural functionalism) • Both were concerned with the problems of increasing complexity, and the need for greater integration. Courtesy HamidBohloll (Courtesy Juan Pardo)

11. Harking Back To Durkheim—Beniger Explains the Industrial Revolution “Resolution of the crisis demanded new means of communication, as Durkheim perceived, to control an economy shifting from local segmented markets to higher levels of organization—what might be seen as the growing ‘systemness’ of society. This capacity to communicate & process information is one component of what structural-functionalists following Durkheim have called the problem of integration, the growing need for cooperation of functions that accompanies differentiation and specialization in any system (Beniger: 11)

12. Beniger Follows a Functionalist Approach • Society has a direction—it is increasingly complex. • To coordinate requires a means of control. • The problem is ongoing & dialectical in nature. • Technology is viewed as the solution as well as the cause. Courtesy of B Tal)

13. What is a Functional Argument? • A specific type of ‘social mechanism.’ • Entails the notion of an agent functioning to achieve an implicit goal. • The consequences of some kind of behavior or social arrangements are considered essential elements of the causes of that behavior.

14. A Structural/Functional Model (h)omeostatic variable (s)tructure (t)ension

15. When Are Functional Arguments Appropriate? • Difficulty in achieving a goal leads to increased effort, as well as a variety of means. • If the desired end is achieved, despite considerable resistance. • When selection/rewards take place according to consequences (courtesy of Survival of the Chillist)

16. Applying Functional Imagery to Beniger • The goal sought (H) is control over information to coordinate the economy. • The tension (T) in the equation is the growth in the size and complexity of the economy. • The structure (S) refers to the various structures or behaviors that are adopted to provide the requisite control. Source: A. Sinchcomb

17. By What Means Do Societies Increase Control? • Differentiation & specialization. • Programming. • Standardization and preprocessing. • Enhanced information processing. • Communications & feedback.

18. Some Examples Include: • Structural differentiation: specialization of city merchant into retail shoppers and their wholesale suppliers; general merchants into ship owners, managers, and traders; interior jobbers into more specialized middlemen. • Innovations in programming: establishment of bankruptcy, commercial and corporation laws, & regulation of interstate commerce. • Standardization & preprocessing: fixed prices, commercial credit ratings, standard means of sorting, grading, etc. • Information processing: the auction and the commodity exchange, commercial bills of lading and warehouse receipts. • Communications: commercial newspapers, trade journals, mercantile libraries.

19. What Thesis is Beniger Contesting? How? • The sector approach to economic development is inappropriate. • The information revolution is not a new phenomenon—and information infrastructure was essential to every phase of social and economic history. • The information revolution is part of the larger and on-going Control Revolution. • The state of IT determine the level of economic growth.

20. What Constitutes Collin Clark-Daniel Bell’s 5-Stage Growth Model • The primary sector—extraction and cultivation of primary resources. • The secondary sector—processing primary goods as in construction and manufacture. • The tertiary sector—providing the economic infrastructure as in utilities, transportation & communication. • The quaternary sector—trade, finance, and parallel processes for collection, processing, and distributing information. • The quinary sector—social program in the form of socialization, law, and education.

21. How Were Bottlenecks Overcome in the Commercial Economy? • Decentralization of Activities—to provide information function. • Factors • Commissioned merchants • Auctions • Jobbers • Storekeepers. • Importance of social networks & traditional relationships. .

22. What Was the Role of the Tertiary Sector? • Common carriers and companies to build overland rights of way. • Allowed for specialization by reducing information and transaction costs. • Complex network of specialized middlemen. • But the system lacked regularity and predictability, so the market governed. • Preceded the exploitation of the primary and secondary sectors.

23. What Was the Role of the Quaternary Sector? • Pooled capital—joint stock companies. • National banking system with distributed branches, allowing for circular exchanges. • Insurance companies, which not only reduced risks but also provided investment capital. • Were required for the exploitation of the primary and secondary sectors.

24. The Industrial Revolution—Random Events or Clustered Technologies? • Coal • Iron • Railroads • Machine tools • Telegraphs • Standards (Courtesy of Let Me Be Mobile

25. What Caused the Crisis of Control? = The need for communication, information processing and decision-making to move the entire system at the increased speed.

26. How Did These Crisis Manifest & Resolve Themselves? • Transportation--the railroads (safety/efficiency). • Distributed processing. • Standardization. • Bureaucratization. • Communication feedback and control.

27. Crisis Resolution (cont) • Production (controlling inputs, economies of speed). • Preprocessing with standardized, interchangeable parts. • Standardized processes with mass production—scientific management, continuous processing, assembly line. • The vertically integrated firm—control for inputs, quality control, statistical control via market feedback from dealers. Control flow from production to consumer. • Wholesale jobbers, department stores & retail catalogs. • Postal service. Rural Free Delivery.

28. Crisis Resolution (cont.) • Consumption (matching supply and demand) • Product differentiation through packaging, trademarks, and branding. • Emergence and specialization of advertising. • Use of mass media to foster mass consumption. • Retail credit. • Supermarkets—process people past merchandise. • Chambers of Commerce. Consumer protection.

29. Blogging Question How are Toyota’s problems related to Beniger’s control revolution. How might they be resolved. What role will networks (social and otherwise) play? What solutions would you suggest?