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Ethics in the Network Economy

Laszlo Fekete published a paper on “The Ethics of Economic Interactions in the Network Economy” in Information, Communication & Society, Vol. 9, No. 6, December 2006, pp. 737–760.

Laszlo Fekete argues that the emergence of the network economy made the original implications of Coase and the economy of transactional cost and contracts even more seasonable. The new forms of economic organizations whose emergence and operation were made possible by the communications network justified the accuracy of Coase’s definitions. It seems that these new forms of economic organization – often called network, modular, virtual, horizontal or boundless organizations – can really be interpreted as networks of contractual relations.

In these organizations the economic interactions are based on network communication, and the contracts have a coordinating role in every single economic transaction. In other words, the order and operating ability of these flexible organizations with elusive boundaries are maintained by the formal and informal agreements born from the continuous negotiations of the participants, and not from the identification with mutual aims or the coercive power resulting from hierarchical relations. The contractual coordination of economic interactions has brought about especially conspicuous changes in the segment of the electronic economy (B2C) where the contracts are made between the economic corporations and their consumers, users or clients. As opposed to the practice typical of the earthly economy, the corporations of the network economy tend more and more to prefer contractual coordination instead of (or besides) market coordination.

Every single economic transaction – often of little value – involves the making of written, carefully elaborated contracts that contain long-term rights and obligations between economic corporations and their consumers, users or clients. This business practice, which has become almost general, also undoubtedly argues for the fact that the system of relations of the actors of the network economy has to be described as a network of contracts, where for all participants the rights and obligations that result from the economic decisions are designed by normative rules and not by a self-regulating market.