[Aghion & Tirole 1997] Formal and real authority in organizations


Note: I am not sure just how close to an equivalent binary this is to the stake-work distinction, and being motivated to post this here by seeing the length of the Reddit “Proof of Authority” thread is probably club good [G]Marxism as far as membership in groups goes.

Given intersecting sets of mods, asymmetric computing power, and distributed incentives to prioritize information processing tasks of uneven difficulty, posting this here - before trying to take the idea of PoA seriously, or even get a sense of the common knowledge as to the estimated value of the idea (space?) - seemed like appropriately filtered effort from the substance of that thread.

I am not sure how constructive it is to relate back to the issues of “formal realizability” (“verification” is maybe a bit too much, but I’m no expert in error codes) as manifested in the Breitman “thesis,” or to hand-wave about type systems and “calendar time” τ [Milgrom & Roberts 1990, 1995] from the perspective of a transactional VM.

For the moment, readers may find this useful enough for what it is.


ABSTRACT: This paper develops a theory of the allocation of formal authority (the right to decide) and real authority (the effective control over decisions) within organizations, and it illustrates how a formally integrated structure can accommodate various degrees of “real” integration. Real authority is determined by the structure of information, which in turn depends on the allocation of formal authority. An increase in an agent’s real authority promotes initiative but results in a loss of control for the principal. After spelling out (some of) the main determinants of the delegation of formal authority within organizations, the paper examines a number of factors that increase the subordinates’ real authority in a formally integrated structure: overload, lenient rules, urgency of decision, reputation, performance measurement, and multiplicity of superiors. Finally, the amount of communication in an organization is shown to depend on the allocation of formal authority.