TRANSACTION COSTS AND WARFARE

Synopsis: Here is a theoretical model for social network disruption (a compliment physical systems disruption -- as in the disruption of critical infrastructure).

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Why are organizations formed?  What keeps them together as a cohesive whole and what drives them to breakdown/fragment?  All of these questions are important from the perspective of warfare, particularly as warfare moves from a state controlled enterprise to one that includes a long tail of participants (from corporations to gangs/militias/etc.).

John Boyd's (arguably, America's greatest strategist) approach to these questions assumes that organizations form and operate to increase freedom of action -- they allow the accomplishment of actions that aren't possible through the actions of individuals.  Organizational breakdown in Boyd's models, occur when the disruption of moral, physical, and psychological connectivity within the organization creates non-cooperative centers of gravity (each aimed at achieving incompatible goals and unable to work together due to distrust, menace, etc.).  

An alternative approach is to use the transaction cost model of Ronald Coase.  In his model, organizations form to lower the costs of the transactions required to accomplish a task or objective.  Organizations lower these transaction costs by reducing the informational overhead required for a transaction -- by replacing an informationally expensive spot pricing mechanism with long term contracts that front load information discovery.  The natural tension between the benefits of each model (spot pricing) and long term contracts dictates whether an organization should be formed or dissolved.

This alternative explanation for organizational formation and cohesion suggests new forms of disruption.  Specifically, disruption aimed at increasing the information costs of transactions within and around the target organization may yield dissolution and breakup. A model for how to accomplish this includes:

• Existing measures and projections of external performance must become uncertain or risky.
• Internal transactions must be called into question by reducing confidence in long term contracts that bind the organization together -- distrust of internal reporting, employees, etc.
• The process of information discovery, for both internal and external transactions, must be slowed and or made prohibitively expensive to accomplish.

NOTE:  A transactions model might be more applicable to the many vs. many conflicts of the 21st Century than the approach advocated by Boyd, since the disruption to achieve success is lighter/easier to accomplish.  It also provides an upgrade to crude symbolic targeting for social network disruption.