ORIGIN Contract Economics

Internal coordination theory

ORIGIN is an organization that enables and implements significant shifts in applying economic theory. This transformation can be expressed in the following way: In the digital economy, the economic forces of supply and demand are summarized as the forces of internal coordination and price coordination. Supply and demand are only related to price coordination, whereas entrepreneurship/self-organization (not part of neoclassical price theory) is related to internal coordination. The internal coordination theoretical framework can explain economic productivity and intrinsic value in the digital economy as distinct from the more specific physical economy.

Internal coordination remains undervalued as a form of economic productivity, especially with the digital economy. Internal coordination summarizes needs by blending labour value, utility value and focus into digital productivity. Internal coordination is a generalization of demand as it balances or regulates supply and demand. It is, therefore, the driving force behind the natural self-correction and self-governance of market participants themselves from within the market. The market requires an entrepreneur to recognize and solve existing coordination problems outside of the price mechanism. This is achieved through the negotiation of social norms. Markets self-regulate and self-correct only to the extent that everyday participants negotiate and share common sense norms through internal coordination.

The relationship between the material economy and the digital economy

In the material economy, goods that are tangible, discrete, and of limited supply are produced. The price mechanism can determine the optimal allocation of material goods because price-quantity criteria adequately measure these goods.

What is generated in the digital economy are ideas, incentives and infrastructure. Price is not a sufficient criterion for measuring these goods because these goods are not purely tangible, discrete, or finite and, therefore, cannot be measured quantitatively. Price is one of many competing forms of coordination generated by the digital economy and is not the most decisive.

The economic goods produced by the material economy are material, and those produced by the digital economy are core goods. Without direct communication, contact points are the best solution for fewer and fewer coordination problems. This means that communication must be largely tacit or implicit. The optimality of a focus is measured by the criteria most relevant to the specific problem it is trying to solve. However, all specific coordination problems and their specific standards are aspects of the overall, objective coordination problem of human affairs.

The digital economy is a focus market. This is hardly the same market as a meme (an imitation of passing behavior) or a viral market. Quite the opposite. A meme is defined by imitation — the effectiveness of its imitation, simulation, and replication. Focus, by contrast, is defined by originality — how effectively it builds a unique shared organization without direct communication capabilities. The focus is on the ORIGINs of memes; the latter are temporal derivatives of the former.

The digital economy is related to the physical economy in that the former produces a distributed autonomous layer of the latter. An efficient material economy with an optimal distribution of goods would not be possible without the self-regulation of the internal market. Without adequate, good corporate governance, a company can’t function. This is only possible through distributed negotiation of objective social norms that serve as focal points.