Geoscience Reference
In-Depth Information
However, the probability of finding solutions close to the global maximum is
vastly increased if different decision agents are simulated to be experimenting in
different ways with their organization of production. Competitive search will then
(if started at some ridge to be defined below) in the long run reveal the agent with
superior organization in terms of profitability.
An evolutionary procedure mimicking a competitive, evolutionary search in
problems like (
5.8
) has been developed by Stuart Kaufmann and his associates
(
1996
). They called it the
Patch Procedure,
where a patch can be a predetermined
team of employees with some given equipment. The computation experiences were
summarized as follows:
The results hint at something deep and simple about why flatter, decentralized
organizations may function well: contrary to intuition, breaking an organization
into “patches” where each patch attempts to optimize for its own selfish benefit,
even if that is harmful to the whole, can lead, as if by an invisible hand, to the
welfare of the whole organization. The trick, as we shall see, lies in how the patches
are chosen. We will find an ordered regime where poor compromises for the entire
organization are found, a chaotic regime where no solution is ever agreed on, and a
phase transition between order and chaos where excellent solutions are found
rapidly
(Kauffmann, p. 147)
.
He concludes:
Therefore, as a general summary,
it appears that the invisible hand finds the best solution if the coevolving system of
patches is in the ordered regime rather near to the transition to chaos
(Kauffman,
p.264).
It is clear that the evolutionary search must start in a rather special position on a
ridge between order and chaos that might be hard to find. However, if it would be
found, at the end of such an evolutionary process the superior firms with their
structure of teams will have a capital value far above what would be indicated by
their book-value of purchased machines and human capital.
The part of the capital value that cannot be easily accounted for as book value is
often in accounting practice called Good Will Value. That value is always included
in the valuation of the competing firms in the stock market.
...
5.8
Durability of Products and Patterns of Location
of Production
The problem of the spatial structure of production is determined by the sustainable
scale of firms and the total and spatial distribution of demand for their products. The
sustainable scale of a firm is determined by the minimum of long term total average
cost, including capital, transaction and transport (or logistics) costs. A long term
equilibrium of the firm requires the price that can be charged to correspond to this
minimal long run average cost.
Durability of the goods and the duration of production processes will have an
important impact on the spatial structure of production. In order to determine the
impact of durability of duration on the spatial structure of production we need to
specify the long run average production cost function (C) and dependence on the
