210
Technology
and the New Economy.
“It should be noted that most inventions will change both the costs of
organising and the costs of using the price mechanism. In such cases, whether the
invention tends to make firms larger or smaller will depend on the relative effect on these two
sets of costs. For instance, if the telephone reduces
the costs of using the price mechanism more than it reduces the costs of organising,
then it will have the effect of reducing the size of the firm.” (Coase 1937, p. 397n.)
But the division of
labor is cumulative not comparative static.
Internet increases extent of the market as well as reducing transaction costs
Internet increases extent of the market as well as reducing transaction costs