Monday, March 30, 2020

A quick thought on the size of the firm

In times of war, pandemic, or other emergency, particularly when there are quick shifts in the environment, it seems that the sorts of coordination that are amenable to top-down approaches on a large scale become more significant, while the sorts of coordination that they're bad at, or that lower-level coordination is good at, don't change.  In Coase's framework, this suggests that the optimal firm size has suddenly gotten larger.  (It obviously has other, more political/legal implications as well.)