Saturday, December 4, 2010
Organizational Economics: The Formation of Wealth
In this blog, I will present ideas and concepts from the of economics, coupled with history, geography, enterprise architecture, religion, political science, and ecology/evolution. Most of the ideas and concepts come from my book Organizational Economics: The Formation of Wealth (c) 2009. However, I will post other ideas and concepts for thought and comment.
As for the book, the introduction to Chapter 30, is a good start on the overall concept:
"In his book, Dragons of Eden, Carl Sagen, defined a concept called the hopeful dragon. The hopeful dragon is an outcome of a mutation. Many times organisms—beasts—mutate. Most of these mutations are dead ends; complete monsters that quickly die. Occasionally, though, the mutation becomes a hopeful dragon. A hopeful dragon is a beast that has mutated in some way that gives it the potential to be superior to other beasts currently inhabiting the territory. He calls the beast a dragon, because it is different from the other beasts. It is hopeful, because it is potentially superior in some way. Nevertheless, hopeful also means that it has not reached anywhere near its full potential; it is only a start.
Currently, economic theory is a polyglot of many models and concepts. The hopeful dragon of organizational economic model reduces this cacophony of competing models to the order of an evolutionary economic ecosystem, the knowledge-based organization. Organizational economics is about the transformation of the traditional exploitive organization, throughout history into knowledge-based organizations.
There may be many holes remaining as it is intended that the knowledge-based organizational model presented is only as a theoretical framework, not a complete and elegant theory. It probably suffers from the problems of the first instance. That is, “The first instance of a superior principle is always inferior to a mature instance of an inferior principle." The organizational economic model has the potential to create a much more realistically representation of the way its domain works. By opening up the “black box” of the organization and process, and by clearly defining the types of value and showing how the organization can grow value, the model has integrated a disjointed field of research. It works both at the micro-economic level and at the macro-economic level.
This book has attempted to unify macro and micro-economics into a single useful theory by modeling both the internal and external components of the organization, organizational economics replaces the short-term metrics of return with longer-term metrics of the value of the organization. By getting to the core of the value-producing engine, the process, the model focuses on the how to increase or optimize the organization’s ability to produce value. In the process of unifying micro- and macro-economics, it has integrated economics with geography and history, that is, time and space. Additionally, it has integrated diverse abstract concepts like consumer behavior models, organizational governance, exploitation, and scarcity versus abundance mentality. Finally, it has looked at economics through the lens of a major shift from data storage on paper and using hand calculation methods to the use of automated systems interlinked through the Internet, that is, the coming “information age.”
The shifts in culture and business are incalculable at this time, though a great number have been put forth by “The World is Flat, Megatrends, etc. in popular literature. Yet, the organizational cultural shift will be much more dramatic and pronounced than this literature hints."
 Carl Sagen, Dragons of
, (New York: Random House, 1977). Eden
 Anonymous, this is call the Law of Superiority