Referring to Hayek’s claim that local knowledge favors decentralized decision processes, Handle comments,
IT and increasingly capable and sophisticated management information systems, which themselves benefit from massive economies of scale, and the management techniques they enable, has invalidated this argument. If anything, big companies now seem to have a clear advatange with regards to acquiring and leveraging ‘local knowledge’, and combined with the other advantages of brand recognition, size and sophistication and capacity for, e.g., rent-seeking and bearing the burden of compliance overhead, that leaves “the little, genuinely-independent guy” with zero chance in the long run
1. I wonder if this applies to government. If the U.S. federal government took advantage of Big Data, could we be as well-run as Singapore or Norway? I tend to doubt it. Perhaps someone wants to argue that we could be that well-run if we had an epistocracy.
2. Once again, I am reminded of a Diamond Age world. Technology can allow giant enterprises to meet everyone’s needs cheaply. By the same token, luxury consists of goods and services provided by small artisan craftspeople.
3. This is another instance in which the Internet vision of the 1990s, the days of the “hippie Internet,” is turning out to be wrong.
4. Will there be sufficient dynamism in this big-firm economy? Where will competition come from? From small firms that can suddenly get big and unseat big incumbents? From big incumbents trying to encroach on one another’s turf?