Economic Coordination in Environments with Incomplete Pricing

Abstract

Simple observation presents two stylized facts that call for integration into a single explanatory framework. One fact is that societies reflect generally though certainly not perfectly coordinated patterns of activity. The other fact is that only a subset of those activities is coordinated with the direct assistance of market prices. Price-theoretic explanations of how prices serve to secure economic coordination are incomplete because contemporary environments feature large expanses of territory where market pricing has little presence. We refer in this respect to territory occupied both by nonprofit enterprises and by political enterprises. In this paper we explore how societal coordination can occur when market pricing covers but a subset of the range of economic activities within a society. A key feature of our explanation is the network architecture of enterprises within a society.

Keywords: coordination as state; coordination as process; price proxies; network architecture; sympathetic mind-reading

JEL Classification: B25, D01, D23, D83