The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [125]
Still, a more realistic avenue for achieving wider participation will have to go with the grain of behavior. More likely to contribute to a new public space are the more motivated: political bloggers; activists organizing through social networks; participants in public consultations that now take place online and tend to attract therefore many more comments; individuals supplementing traditional media through the creation of what’s known in the media business as “user-generated content,” that is videos, pictures, and comments created by individuals and sent to social network sites and to the traditional media for onward broadcast. Although still a minority interest, all of these forms of engagement are made easier by the Internet, and so the sphere in which public debate occurs is far wider than was possible only ten or twenty years ago. The impact of the Internet and social networking on politics and voter engagement in general is limited still, but the technologies are making it easier for the interested and engaged to take part in a more active and deliberative political process. Without wanting to fall for any hype about the impact of the new technologies on politics, we can speculate that ultimately they will alter how people perceive and engage with the political and policymaking processes.
THE IMPORTANCE OF INSTITUTIONS
This chapter has argued that markets and governments alike, along with businesses and other organizations, should be considered as different kinds of economic institution, all of which are needed for an economy consisting of millions of individuals to function effectively and sustainably. The Nobel Committee’s note on the 2009 prize to Ostrom and Williamson puts this concisely: “Institutions are sets of rules that govern human interaction.” It continues:
One important class of institutions is the legal rules and enforcement mechanisms that protect property rights and enable the trade of property, that is the rules of the market. Another class of institutions supports production and exchange outside markets. For example, many transactions take place inside business firms. Likewise governments frequently play a major role in funding pure public goods, such as national defense and the maintenance of public spaces. Key questions are therefore: which mode of governance is best suited for what type of transaction, and to what extent can the modes of governance that we observe be explained by their relative efficiency?27
The two economists were honored, in short, for spelling out that different kinds of transactions in the economy call for different kinds of institutions. If the basis of the transactions changes, so must the governance.
There is much research confirming the importance of good institutions for growth.28 Earlier Nobel prizes were awarded to economists who had explored this, to Herbert Simon (in 1978) and Douglass North (in 1993), and the idea has been eagerly taken up by economists trying to explain why some developing countries seem to remained trapped in poverty. It is one thing to accept that good quality institutions matter, but another to describe what makes them “good.”
What principles can guide us toward ways of organizing the economy to adjust to the deep structural changes under way due to new technologies and also help us address the challenges of Enough? What are the proper roles for markets, government, firms, and other collective institutions? I will save specific suggestions for the next chapter, but set out some general guidelines here.
First, and most important, there is no “right