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

Abstract

Contrary to the common belief that e-commerce disintermediates—or even while reintermediation takes place the economic circuit fails to get lengthened—this chapter argues following the Austrian perspective,  that through e-commerce consumption gets deferred and the economic circuit lengthens. Inappropriate use of transaction cost theory, in particular, has often weakened the received theory. This implies that ecommerce increases capital because capital is time according to the Austrian theory. Consequently the efficiency-focus of received theory is replaced by a capital-enhancing theory of this new commerce. Several novel functions of intermediaries including coordination have been utilized to support the departure from the efficiency perspective. Citing several well-known examples from the literature has adumbrated this argument.

Introduction

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.

Taken From : Digital Economy – Impacts, Influences and Challenges