The Human Version of Moore-Shannon's Theorem: The Design of Reliable Economic Systems

29 Pages Posted: 24 Jun 2007

See all articles by Michael Christensen

Michael Christensen

University of Southern Denmark - Department of Marketing & Management - Strategic Organization Design Unit (SOD)

Thorbjorn Knudsen

University of Southern Denmark - Department of Marketing & Management - Strategic Organization Design Unit (SOD)

Date Written: June 2007

Abstract

Moore & Shannon's theorem is the cornerstone in reliability theory, but cannot be applied to human systems in its original form. A generalization to human systems would therefore be of considerable interest because the choice of organization structure can remedy reliability problems that notoriously plaque business operations, financial institutions, military intelligence and other human activities. Our main result is a proof that provides answers to the following three questions. Is it possible to design a reliable social organization from fallible human individuals? How many fallible human agents are required to build an economic system of a certain level of reliability? What is the best way to design an organization of two or more agents in order to minimize error? On the basis of constructive proofs, this paper provides answers to these questions and thus offers a method to analyze any form of decision making structure with respect to its reliability.

Keywords: organizational design, reliability theory, decision making, project selection

JEL Classification: D70, D71, D80, D81, D83, L22, M10

Suggested Citation

Christensen, Michael and Knudsen, Thorbjorn, The Human Version of Moore-Shannon's Theorem: The Design of Reliable Economic Systems (June 2007). Available at SSRN: https://ssrn.com/abstract=996311 or http://dx.doi.org/10.2139/ssrn.996311

Michael Christensen

University of Southern Denmark - Department of Marketing & Management - Strategic Organization Design Unit (SOD) ( email )

Campusvej 55
Odense, DK-5230 M
Denmark

Thorbjorn Knudsen (Contact Author)

University of Southern Denmark - Department of Marketing & Management - Strategic Organization Design Unit (SOD) ( email )

Faculty of Social Sciences
Campusvej 55
DK-5230 Odense
Denmark

HOME PAGE: http://www.sdu.dk/sod

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