This seems believable; but losses compared to what is the question.
It’s hard to maintain “actually trying” levels of effort to achieve objectives in a large organization, simply because it’s hard to communicate across large numbers of people what the objectives are.
However, large organizations are still economically efficient for some uses. An economy consisting only of five-person startups would, I’m pretty sure, be poorer than the one we live in today.
It seems that we trade off “degree of honest goal-alignment” with “returns to scale” to some extent.
The new research also shows that monopolists typically increase prices by using political machinery to limit the output of competing products—usually by blocking low-cost substitutes. By limiting supply of these competing products, the monopolist drives up demand for its own. Thus, in contrast to conventional theory, the monopolist actually produces more of its own product than it would in a competitive market, not less. But because production of the substitutes is restricted, total output falls.
He says that this is because, contrary to the standard view of monopolies as homogeneous and rational actors, they are actually composed of many subgroups vying for power. Sometimes this is within a single organization, or sometimes a similar effect can be created by large groups of independent practices banding together. Lawyers band together to uphold legislation keeping people from offering legal advice without passing the bar exam. Construction unions prevent the use of prefabricated parts.
This seems believable; but losses compared to what is the question.
It’s hard to maintain “actually trying” levels of effort to achieve objectives in a large organization, simply because it’s hard to communicate across large numbers of people what the objectives are.
However, large organizations are still economically efficient for some uses. An economy consisting only of five-person startups would, I’m pretty sure, be poorer than the one we live in today.
It seems that we trade off “degree of honest goal-alignment” with “returns to scale” to some extent.
Arguably, monopoly power artificially makes organizations larger than they would naturally be, which makes a higher share of the economy into signaling/makework than it optimally would be. See https://www.minneapolisfed.org/publications/the-region/the-costs-of-monopoly-a-new-view, and, like, all of Gabriel Kolko.
404: File Not Found. I think LW added the comma to the URL. This link should work though, for anyone interested:
https://www.minneapolisfed.org/publications/the-region/the-costs-of-monopoly-a-new-view
TL;DR:
He says that this is because, contrary to the standard view of monopolies as homogeneous and rational actors, they are actually composed of many subgroups vying for power. Sometimes this is within a single organization, or sometimes a similar effect can be created by large groups of independent practices banding together. Lawyers band together to uphold legislation keeping people from offering legal advice without passing the bar exam. Construction unions prevent the use of prefabricated parts.