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In a famous 1937 essay, the economist Ronald Coase argued that the reason Western economies are organized like a pyramid, with a few large producers at the top and millions of passive consumers below, is the existence of transaction costs – the intangible costs associated with search, bargaining, decision-making and enforcement.Indeed, in the United States and across Europe, vertically integrated value chains controlled by large companies are already being challenged by new consumer-orchestrated value ecosystems, which allow consumers to design, build, market, distribute and trade goods and services among themselves, eliminating the need for intermediaries. This bottom-up approach to value creation is enabled by the horizontal (or peer-to-peer) networks and do-it-yourself platforms that form the foundation of the "frugal" economy.By enabling ordinary people to do at home what, a decade ago, only scientists in large labs could do, the Internet economy is lowering the costs of research and development, design and production of new goods and services in many sectors.Together, the maker movement and peer-to-peer sharing platforms are empowering once-passive customers to become active "prosumers," thereby spawning a frugal economy that can create value in a more efficient, cost-effective, socially inclusive and environmentally sustainable way.The transition to a frugal economy is happening.
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