Just as scarcity can’t be fully conquered, the economic coordination problems that give rise to firms won’t disappear.

The idea that artificial intelligence could usher in a “post-money” world — and that such a world would also render firms obsolete — rests on a misunderstanding of what firms are and why they exist. Even if, for the sake of argument, we accept the highly implausible premise that money would disappear beneath an AI/robotics explosion of superabundance, it does not follow that firms would disappear with it. Firms are not artifacts or by-products of monetary exchange; they are organizational responses to coordination problems, uncertainty, and the costs of markets.

The classic insight comes from British economist Ronald Coase, whose theory of the firm begins not with money, but with transaction costs. Costs do not necessarily connote prices. Markets are not frictionless arenas in which individuals seamlessly contract for every task. Searching for counterparties, costs of instantaneity, negotiation, enforcement, and adapting to unforeseen changes all impose costs. Firms arise precisely to economize on these costs by internalizing certain transactions. Instead of navigating every step of production through the price system, firms substitute managerial direction for repeated market exchange.

Nothing in that logic depends on money per se. One can imagine a world in which prices are denominated in some non-monetary unit, or — in the scenario that Musk and others like him are envisioning — a world in which advanced AI systems coordinate resource allocation without explicit prices.

...read more at thedailyeconomy.org