Coase comes to Ambridge

Ronald Coase has come to Ambridge. In last night's Archers, Adam Macy was talking to Brian about plans to install an anaerobic digester on Home Farm. Adam said:

You seem to have this idea of the AD as an entirely separate project...That's not how it's going to be. We're in this for the long-run, and for all that time the farm will supply most of our feedstock and be the major customer for our heat energy. So if anything Debbie and I need to be more involved in the farm management, not sidelined as a separate entity.

This is a great example of the economics of property rights. Complementary assets (the farm and the AD) need to be run by the same management, to minimize transactions costs , the haggling involved in setting prices of energy and feedstock.
Equally, though, this episode reveals the problem with enacting this idea in practice. The politics involved in deciding who the single manager should be - the farm owner/manager (Brian) or AD manager (Adam and Debbie) - can cause wasted resources as both parties fight for position.
Herein, though, lies my fear. I suspect transactions costs economics might be better understood at Home Farm than they are in larger businesses. Are there really such big complementarities between, say, RBS and ABN Amro as there are between the AD and Home Farm, for example? Could it be that one benefit of the credit crunch will be that it'll stop value-destroying mergers, ones between non-complementary assets?

Comments

[dearieme]

Rumpty, tumpty, tumpty, tum
Rumpty, tumpty, tump, tump
Rumpty, tumpty, tumpty, tum
Rumpty tiddle eye poo

[chris]

I once heard a doctor claim that the ideal rhythm for giving someone CPR after they've had a heart attack was the Archers theme tune. Was he right?

[Scratch]

I'd favour the syndrum pattern at the start of the Eastenders theme.

[kinglear]

As ever the Archers is ahead of it's time. Pip sorted global warming, the rape laws will probably be changed because of Sid's wife's little problem, and badgers have long been down for annilhilation.
The only thing I'm NOT happy about is it must surely be time for Brian to have another affair - but I would like to see it with his first love of 40 years ago, who is now 60. That would show 'em.