- (inspired by but not directly taken from Kappel) Part of the benefit of trust is its lowering of transaction costs around assessing the evidence of reliability. If trust does this without enhancing reliability, then it seems like the question of whether trust or reliability is more worthwhile just depends on the relative cost of errors of omission vs commission. If errors of commission are more costly, then reliability is better, and vice versa if errors of omission are more costly.
- Errors of omission are more costly when the distribution of potential benefits is heavy-tailed, while the distribution of potential harms is not. These environments should be high trust. This suggests that Silicon Valley startups should be high trust environments. What would the inverse incentive structure, a high reliance environment, look like? Idk I worry this doesn’t separate reliance and trust well enough maybe.
- This relates to Coasian theory of the firm stuff, from wikipedia:
- Other things being equal (ceteris paribus), a firm will tend to be larger:
- the less the costs of organizing and the slower these costs rise with an increase in the transactions organized.
- the less likely the entrepreneur is to make mistakes and the smaller the increase in mistakes with an increase in the transactions organized.
- the greater the lowering (or the less the rise) in the supply price of factors of production to firms of larger size.
- How to respond to Cowen and other’s anti-Coasian critique that firms aren’t centrally planning, like Amazon and Singaporean public hospitals seem to be doing. I.e. what they’re doing isn’t what Hayek means by central planning, because they’re plugged into the I/o channels of the market at enough different points, e.g. hiring contractors. Idk they really do seem to be doing lots of cybernetic command and control stuff, e.g. Toyota.