Q: What will happen when a national political machine can fit on a laptop?
A: See below

By Everett Ehrlich
Sunday, December 14, 2003; Page B01

Back in 1937, an economist named Ronald Coase realized something that helped explain the rise of modern corporations –– and which just might explain the coming decline of the American two–party political system.

Coase's insight was this: The cost of gathering information determines the size of organizations.

It sounds abstract, but in the past it meant that complex tasks undertaken on vast scales required organizational behemoths. This was as true for the Democratic and Republican parties as it was for General Motors. Choosing and marketing candidates isn't so different from designing, manufacturing and selling automobiles.

But the Internet has changed all that in one crucial respect that wouldn't surprise Coase one bit. To an economist, the "trick" of the Internet is that it drives the cost of information down to virtually zero. So according to Coase's theory, smaller information–gathering costs mean smaller organizations. And that's why the Internet has made it easier for small folks, whether small firms or dark–horse candidates such as Howard Dean, to take on the big ones.

For all Dean's talk about wanting to represent the truly "Democratic wing of the Democratic Party," the paradox is that he is essentially a third–party candidate using modern technology to achieve a takeover of the Democratic Party. Other candidates –– John Kerry, John Edwards, Wesley Clark –– are competing to take control of the party's fundraising, organizational and media operations. But Dean is not interested in taking control of those depreciating assets. He is creating his own party, his own lists, his own money, his own organization. What he wants are the Democratic brand name and legacy, the party's last remaining assets of value, as part of his marketing strategy. Perhaps that's why former vice president Al Gore's endorsement of Dean last week felt so strange –– less like the traditional benediction of a fellow member of the party "club" than a senior executive welcoming the successful leveraged buyout specialist. And if Dean can do it this time around, so can others in future campaigns.