Information, Bounded Rationality, and the Complexity of Economic Organization

Arthur DeVany
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Arthur DeVany: Department of Economics and Institute for Mathematical Behavioral Sciences, UCI.

Working Papers from University of California at Los Angeles, Center for Computable Economics

Abstract: An economic organization represents order and information. I define an economic organization to be a coalition of consistent multilateral contracts and develop measures of its complexity. I show that when a new organization is formed, information is created. I find there are information economies of scale to organizations and that the institutions of property rights and contracts underlie these economies. I also show that organizations that are optimal must contain unbounded information. This suggests that optimal organizations must be boundedly rational or formed by processes that are.

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