Comment by abtinf | Hacker News Reader

Comment by abtinf | Hacker News Reader

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"Communist" is a loaded word, but it gets at the idea.

One of the thorniest problems in business economics is this: we know free markets produce extraordinary results, but why is it that even in the absence of regulation, so little of the economy is structured as a free market? Very few businesses of any size operate internally as a market, instead they usually operate under hierarchical command and control. Markets generally exist only at the interfaces between organizations.

Why don't teams bid competitively within a company? How do individuals decide on the teams to form? Why are managers allowed to rise to the point of failure? Why do we pay people salaries instead of hourly wages? Why do we hire hourly wage labor as if though its was permanent?

The number of questions raised by this topic is endless.

The most general explanation is this: yes, companies adopt inefficient structures, but they more than make up for this through significantly reduced transaction costs.

I have always thought that it was because the level of planning required to run a small to medium sized company is just able to be handled by the human mind. Economy level planning is just too complex for humans and we have to fall back on the next most efficient structure - free markets.

In highly competitive environments, humans tend to adopt a "single executive" type organizational structure. In short, there needs to be a single decision maker who can set strategy, make decisions, approve direction and so on at at least the rate of the competition. Committee systems work fine when things are more steady state and there's less existential threat.

Nations almost all adopt an executive system because nations compete. The U.N. doesn't because Earth doesn't have to compete with anything else. Imagine a competitive interplanetary situation and you can bet the Secretary General of the U.N. would quickly gain significant decision making powers.

Collectivist market philosophies tend to be built on the assumption that there will be no competition internally and thus can be run by various committees. However, even countries trying to follow various types of collectivist ideologies ended up with single executive-types at the top, again because countries compete.

On the small scale, many indigenous tribal systems rely on a council during times of peace, and elect an executive (sometimes called a "war chief") during times of war.

The phrase "business is war" is particularly appropriate since most businesses operate like they're at war.

> On the small scale, many indigenous tribal systems rely on a council during times of peace, and elect an executive (sometimes called a "war chief") during times of war.

That's how the Roman Republic operated, too: the Senate would elect a dictator for six months to handle certainly irregular situations. Unlike any other Roman official, he had no colleague who could countermand his orders, and he was not legally liable for any act he committed in office.

"Why do we hire hourly wage labor as if though its was permanent?"

Could you give an example of this? Are you talking about using contractors to get through a project, and then keeping them on indefinitely after the project is over?

"Why do we hire hourly wage labor as if though its was permanent?"

At the current cost of hourly labor if you made it even more like temporary labor than it already is the quality of worker you could obtain at that price would be terrible.

It's also interesting that we know opening up to external markets helps in some ways. For example, the app store.

Some regulation is necessary to even define a free market.

If you believe current US (at least for most of the population) law theory, all employment relationships are completely at-will. They may be terminated at any time for any reason. I would argue that is all that is required for a free market. This would seem to contradict the claim that most companies to not internally operate as a market.

I know there exist serious breaches of this freedom (ie. slavery), but it is not supposed to be the norm anymore.

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