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Re-Intermediation and Deferment through E-Commerce: Neo-Austrian Interpretation of Capital and TimeFiled Under: General

It is commonly believed that electronic commerce (Ecom) reduces intermediation and the time in a business circuit. Several authors have argued that dis-intermediation resulting from the use of Ecom increases economic efficiency and reallocates resources better. Alternatively, transactions cost economics (TCE) theorists argue that electronic commerce decreases transactions cost by way of reducing the distance between the producers and the customers. Proponents of increasing economic efficiency through dis-intermediation in electronic commerce have employed TCE as well. We argue from a Neo-Austrian perspective contrary to this efficiency theory of dis-intermediation and of quickened money that this efficiency perspective is limited to technological changes alone (Baumol, Panzar & Willig, 1986). In so far as Ecom is purely technological there would be gains in economic efficiency arising out of changes in technological relations.However, mediation in the market is only limitedly technological. Mediation refers more to the market microstructure. Moreover, Ecom can affect efficiency through means other than dis-intermediation.

In contrast, we argue that efficiency fails to increase rate of profit or the pace and spread of innovations. For us, intermediation refers to not just a certain value chain, such as a typical SIC industrial segment. Contrarily, intermediation goes beyond a market segment to the depth of market microstructure (O’Hara, 1997) to provide for coordination (Richardson, 1960, 1972, 1998) in two modes; first, amongst the competitors (including potential competitors and complementors), and second, between the producer and its consumers. Efficiency perspective refers to the continuation of the same basic structure of intermediation but accentuated and hastened through elimination of several mediatory links. We argue contrarily from the Austrian perspective that Ecom transforms the intermediation structure in order to afford higher coordination, higher capital and increased rate of profit—and all this by virtue of a new market microstructure of intermediation.

Taken From : Digital Economy – Impacts, Influences and Challenges