Limited Liability and Economies of Scale

Within the mechanics of structured ontologies, we look for culpability. To reduce errors (risk), there is a natural tendency to find fault with the actors that structure the system and work within it.

Continuous improvement is a coefficient in which errors are reduced over time to achieve the intended effect. There is a cause (the organized structure and its actors) and an effect (the intended result). Of course, the result may not be generally desireable or self-determinant (a differential equation that results in an arguable coefficiency). The coefficient is then reduced to the ability to organize and apply power to the intended outcome which includes responsibility for the outcome.

The argued economic efficiency of the "economy of scale" is a means of limiting liability to the benefit (the utility) of that efficiency. Whatever tendency there is to an abuse of the power accumulated--what a free-market system prevents by not allowing for this consolidation of power--is forgiveable because the actors are the elite that organize expansion the pie.

Economic growth is, then, the coefficiency of power. When it is not achieved, but results in contraction, like we have now, the argument is still maintained for a limited liability; and this limited liability is achieved through an economy-of-scale efficiency that presents as "too big to fail" (i.e., big enough to avoid the alpha risk and the process of continuous improvement that reduces error and achieves the fully intended consequences of a free-market ontology).

Forgiving the liability of a negative coefficient is considered to be a necessary correlative, falsely argued as the "paradox" of thrift. The negative coefficiency is best achieved, with as little sacrifice as possible, through organized economies of scale both micro and macro.

Nothing is more forgiving than a free-market pluralism, however. The real truth to be found in the paradox of thrift is the contradiction of the negative coefficient inherent to systematic consolidation of power.

Where consolidation results in expensive litigation and regulation, which presents a barrier to both entry into the marketplace and sanction within it by the consumer (the alpha risk), fraud and abuse is likely to fail a free-market in priority. Bad behavior must be modified in order to stay in business rather than encouraged with an organizational model that defeats free-market mechanics in order to be "competitive."

Consolidating industry and markets not only increases the probable risk of an abuse of power, but reduction of the "competitive," free-market effect causes the need for government authority.

Ensuring that the direct and facile accountability of a free-market mechanism is not defeated by economies of scale, the ethic of forgiveness is most fully exercised and the ethic of "government that governs least" realized.

There is an ethical coefficiency of markets that is not to be ignored with economy-of-scale efficiencies. Competition for power freely pursues a competitive advantage, and despite how we may try to consolidate to an advantage, it is ultimately a free market.

Striving for a competitive advantage is easily structured for provision, rather than deprivation, of the general welfare.

Progress does not render free-market mechanics passe'. Progress recognizes the problems we face are perennial. They are algorithmically recurrent, and if not so properly recognized and managed, we are condemned to a self-determined recurrency of crises in pursuit of a competitive advantage.

Progress is not linear, but recognizably dynamic. It moves forward with a differential dialectic that at times seems to be moving back, but is the momentum for change that propels us forward. It is the inexorable pursuit of liberty that is the truly progressive force that transforms competitive advantage into a process of continuous improvement and reduction of systemic risk.

Realization of an organized ontology that operationalizes pursuit of competitive advantage (the distribution of risk and liability) with the natural pursuit of the general welfare is an enlightenment we should continue to share with our founders.