Coasean Floor and Ceiling

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Description

Wikipedia, describing Clay Shirky's argument in Here Comes Everybody:

"In Chapter Two, "Sharing Anchors Community", the author uses theories from the 1937 paper The Nature of the Firm by Nobel Prize winning economist Ronald Coase to access the various challenges that Transaction Costs pose to institutions. From these theories, Shirky derives two terms that represent the constraints under which institutions operate: Coasean Ceiling and Coasean Floor.


  • Coasean Ceiling

The point above which the transaction costs of managing a standard institutional form prevent it from working well.


  • Coasean Floor

The point below which the transaction costs of a particular type of activity, no matter how valuable to someone, are too high for a standard institutional form to pursue.

The author argues that social tools drastically reduce transaction costs, allowing loosely structured groups with limited managerial oversight to operate under the Coasean Floor. As an example, he cites Flickr, which allows groups to organically form around themes of images without the transaction costs of managerial oversight." (http://en.wikipedia.org/wiki/Here_Comes_Everybody)


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