Vive Le Canada

Explaining the Coming Decline of the Two-Party System
Date: Friday, December 12 2003

"Back in 1937, an economist named Ronald Coase realized something that helped explain the rise of modern corporations -- and which just might explain the coming decline of the American two-party political system.

Coase's insight was this: The cost of gathering information determines the size of organizations.

It sounds abstract, but in the past it meant that complex tasks undertaken on vast scales required organizational behemoths. This was as true for the Democratic and Republican parties as it was for General Motors. Choosing and marketing candidates isn't so different from designing, manufacturing and selling automobiles.

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 companies or dark-horse candidates such as Howard Dean, to take on the big ones."

Explaining the Coming Decline of the Two-Party System

Explaining the Coming D...

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