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Re-Intermediation and Deferment through E-Commerce: Neo-Austrian Interpretation of Capital and Time (2)Filed Under: General

Ecom is an innovation in trade and linkages in an economy and we would argue that it substitutes the previous intermediary-based value chain by a new coordination across several value chains and specifically along the scope dimension (North, 1989). It appears that this commerce ushers the economy to a new institutional mooring. This innovative coordination is afforded by generation of new and novel cybermediaries (Sarkar, Butler & Steinfeld, 1995). Further, Ecom brings in several layers of possible intermediaries such as the virtuals and the aggregators, and as a result tends to keep transactions incomplete. This significant departure from transactional completeness to incompleteness forces deferment of consumption and consequently increases capital and the period of production. It extends the completion of transaction indefinitely and thereby Ecom, instead of shortening the business circuit, the proverbial value chain, would extend such a circuit indefinitely along both vertical and horizontal dimensions.

Indefinite extension of business circuits, that is, the lengthening of business transactions, increases effectively the period of production. We argue that the lengthened circuit or the period of production necessarily demands more intense cooperation than what could be provided by the simple value chain intermediation. Noticing that Austrian theory recognizes capital as time that is as the period of production, we can recognize that Ecom enhances capital twice, first by lengthening the period and second by deepening coordination. This theory argues that a longer period of production implies a potentially higher rate of profit and an increase in capital. Based on this theoretical stance we argue that Ecom enhances capital and increases the rate of profit by lengthening the circuit of transaction through a mechanism of deferment of consumption, known otherwise also as the period of production. Lengthening of period comes through re-intermediation and through increased deferment of consumption.

Taken From : Digital Economy – Impacts, Influences and Challenges