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Economic Organization in the Knowledge Economy Some Austrian Insights

I critically discuss recent claims about economic organization in the emerging “knowledge economy,” specifically that authority relations will tend to disappear (or at least become radically transformed), the boundaries of the firm will blur, and coordination mechanisms will be much more malleable than assumed in organizational economics, resulting in various “new organizational forms.” In particular, the price mechanism will be used inside hierarchies to a much greater extent. In order to obtain an analytical focus on the knowledge economy, I assume that it may be approximated by “Hayekian settings” (after Hayek 1945), that is, settings in which knowledge is distributed and where knowledge inputs are relatively more important in production than physical capital inputs. I then argue, drawing on organizational economics as well as Mises’ insights in property rights and comparative systems, that the presence of Hayekian settings does not mean that authority will disappear, etc., although economic organization will in fact be affected by the emergence of the knowledge economy. This suggests that Austrian economics has an important contribution to make to the study of economic organization.Economic organizations, Austrian economics

Regulatory Status of VoIP in the Post-Brand X World

During the past several years, the Federal Communications Commission has engaged in a series of rulemakings to determine the regulatory status of Voice over Internet Protocol (VoIP). The Supreme Court’s Brand X decision clarifies that even if the FCC’s determination conflicts with that of a court, the FCC’s judgment holds sway as long as the decision is reasonable. We believe that VoIP should be classified as an information service, rather than a telecommunications service, for several reasons. First, the Internet Protocol nature of VoIP technology means that it functions like an information service, rather than a telecommunications service. Second, in the Telecommunications Act of 1996, Congress clearly sought to bring competition to all communications markets; encouraging the development of VoIP by classifying it as an information service comports with congressional intent. Third, economic analysis demonstrates that subjecting VoIP to the full panoply of regulation under Title II of the Telecommunications Act would significantly reduce consumer welfare. Fourth, the FCC’s own experience shows that, if the FCC believes that some selective regulation is necessary, it has ample authority to impose targeted regulation without subjecting VoIP to all regulations that affect telecommunications services

Effects of Compensation Strategy on Job Pay Decisions

Previous research has revealed wide variations in pay for the same job, even within a single locality. To date, however, the sources of such pay differentials are not well understood. The present research investigates how compensation managers from a wide variety of organizations combine infonnation about current job pay rates, market rates, and job evaluation points to arrive at new pay rates for jobs. In addition, it examines the role of two pay strategy variables (pay leadership position and external versus internal orientation) in job pay decisions, controlling for differences in organizational demographic characteristics (e.g., size, industry). Results suggest that pay strategies affect assigned pay levels, with higher pay being assigned by managers from fmns with market-leading strategies and internal pay orientations. In addition, pay strategies appear to influence the relative weights attached to market survey versus job evaluation infonnation in pay-setting for jobs. Specifically, although market survey information consistently explained more variance in assigned pay than did job evaluation, this effect was more pronounced among managers from finns having an external orientation. Organizational demographics also affected assigned pay levels, but to a lesser extent than pay strategies

Regulatory Failure: Time for a New Policy Paradigm

Regulation is presumed to be designed to avoid (potential) market failures,usually because of firms' market power, the consequence of which leads to a decrease in economic welfare. However, the cost of regulation may outweigh any effects policy makers have on the firm due to administrative costs, regulatory capture and other effects that have been addressed by others. More importantly, policy makers have been using the wrong models to guide their decisions, with a major impact on the investment incentives of firms, a misallocation of resources and a lowering of social welfare. As policy makers misread economic theory, they produce results worse than those they are attempting to correct. Thus, these distorting effects are equally as bad, or worse than, the market failure regulators hoped to ameliorate. However, this need not be the case. By concentration on dynamic models, rather than the simple static models on which policy makers have focused, it is possible to improve economics welfare and obtain results that at least are better than the costs associated with current regulatory practices. Ofcom appears to be moving in this direction. Will other policy makers learn from Ofcom? This paper shows some of the failures of the current model and sets forth some of the necessary steps to make improvements. However, it is unclear whether the institutional structures will allow for such a departure from the current paradigm.competition; economic dynamics; neoclassical economics; pricing policy; regulation

Principles & Dimensions of Market-Based Management® (MBM)

The foundations, principles and dimensions of Market-Based Management® (MBM), a management system that allows organizations to be successful by applying the principles that enable free societies to become prosperous, is analyzed and reviewed. Pioneered and trademarked by Charles G. Koch, Chairman of the Board and CEO of Koch Industries, MBM seeks to adapt the principles of a free society and market economy to improve management practice in organizations

EU Competition Policy, Vertical Restraints, and Innovation: An Analysis from an Evolutionary Perspective

The EU competition policy in regard to vertical restraints is mainly based upon neoclassical efficiency-oriented reasonings, leading to a neglect of the innovation dimension. This paper analyses to what extent evolutionary theories of competition and innovation economics can be used to derive additional, new criteria for the assessment of vertical restraints. It is shown that Neo- Schumpeterian and Hayekian approaches to competition and innovation economics as well as knowledge-based theories of the firm are capable to provide a basis for a different framework for analysing the impact of vertical agreements. Specific evolutionary arguments, such as subjective and local knowledge, the heterogeneity of knowledge bases of firms, communication and learning problems, and the complementarity of knowledge (systemic innovations) can be used for deriving additional, new assessment criteria for vertical restraints. The analysis is made against the background of the most recent reforms of EU competition rules in regard to vertical restraints. It also shows how evolutionary approaches to competition and innovation might be used for competition policy.European competition policy, vertical restraints, evolutionary economics, innovation economics.