Coase’s “Nature of the Firm” on Polyamory

It occurred to me that Coase’s views on The Nature of the Firm might help explain why polyamory in its modern form is not particularly common or popular.

That sentence might be enough for you to grok what I’m getting at, and honestly that’s the form in which the thought first came to be, but nevertheless let me try to explain what I mean.

Coase’s original essay—and the whole body of thought proceeding from it—seeks to answer why coorporations /​ firms emerge. That is, it seeks to ask where people are hired for indefinite periods of time, for less-precisely-defined work rather than contracted for definite amounts of time, for precisely-defined work. If you believe in a strong version of efficiency of markets, you might expect it to almost always be cheaper to contract than to hire, because the allocation of resources by a market should be more efficient than the allocation of resources within a non-market organization. Why wouldn’t my software company just hire a contractor for everything they needed to be done, rather than relying on me, a non-expert in many things they would like me to do?

The answer, of course, is that there are transaction costs to using the market. There’s a cost to searching for and finding a trustworthy contractor, which is avoided by keeping me around. There’s the cost of a stronger asymmetry of information and asymmetry of benefit in the case of the contractor, which makes me a little more trustworthy because I’m going to be stuck with the code I write for a longer period of time. And so on and so forth.

Polyamory seems like an attempt to unbundle a group of frequently-bundled relationship goods in a way analogous to how contracting different workers can be an attempt to unbundle a group of frequently-bundled commercial goods. Vis, in polyamory you frequently unbundle from each other the following:

- Sexual satisfaction

- Intellectual companionship

- Long-term companionship and dependency

- Childbearing and rearing

Or even decompose these further: i.e., different flavors of sex and different flavors of companionship. But finding someone for each of these involves transaction costs. So you have the costs of searching for and finding trustworthy people in all these roles. And you have the stronger asymmetry of information and of benefit because of the more ephemeral nature of the relationships.

This is really just a rephrase of things I know other people have said about the disadvantages of polyamory. But it was satisfying to me to realize that it looked pretty clearly like an instance of a larger phenomenon.