Friday, November 04, 2011

Cooperation in a Distributed Network

I found the following image on wikipedia a few months back. I thought it was from an article on Distributionism. I had a computer crash and lost my database of references.

The graph shows a centralized, decentralized and distributed network.

In the centralized network, you attempt to have one centralized force in control of the whole system. This is the direction of socialism.

The decentralized network has multiple centers of authority. Bureaucracies often use a hybrid system with a hierarchical system of authorities distributed through the system. in feudalism there was a chain of being with the emperor at top followed by kings and lords leading down to the serfs.

In looking at this model, I realized that a free market is likely to take the form of the distributed model. With people free to choose their associations, one will end up with a very complex, but robust distributed network.

I've been writing about the paradoxes associated cooperation and the free market. In a free market, people are free to choose their associations and tend to make associations that better their lot. People compete on their ability to cooperate with others.

This is opposite of what I learned about the free market in school which painted the free market as a system of base competition driven by greed.

It dawned on me that our academic institutions and financial institutions have been trying to impose a dececentralized model onto what should be a fully distributed network.

For example, I discovered that wikipedia defined collusion as "cooperation among competitors."

But in a free society, people should be able to work with whoever they wanted to work with.

Doctors are apt to hang out with other doctors. Web designers like to hang with other web designers and so on.

In a truly free society, people would have mutually beneficial relations with others in the same market. I define true collusion as any group activity designed to limit the access that others have to the market. Price fixing limits the ability to negotiate prices, etc.

Labeling all cooperation among people in the same industry as collusion cuts the necessary mutually beneficial links needed in a truly free market.

It think the graph that contrasts centralized and distributed markets starts an interesting conversation on the type of structures that one should see in a free market.

In my opinion, a truly free market should end up looking like the distributed model. What we have today is a decentralized hierarchy.

This tells me that there is something going wrong with our markets today.

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