The Economic Nature of the Firm

A reader Edited by Louis Putterman Brown University and Randall S. Kroszner University of Chicago Cambridge University Press 1996

"After decades of neglect, economics has once again focused its attention on the central role of the firm in organizing productive activity. Putterman's updated reader, comprised of both classics with the best modern literature, reflects the best thinking, old and new, on this important topic. My students found the first edition terrifically useful. The new edition, with its of excerpts from the best modern literature, is even better."

--Paul Milgrom, Stanford University

"This reader was an inspired idea when it was first issued in 1986. There having been many subsequent developments, an update is greatly needed today. The editors have done another superlative job."

--Oliver E. Williamson, University of California, Berkeley

The Economic Nature of the Firm brings together classic writings on the economic nature and organization of firms, including works by Ronald Coase, Armen Alchian and Harold Demsetz, Michael Jensen and William Meckling, George Akerlof, and Oliver Williamson, as well as more recent contributions by Paul Milgrom and John Roberts, Samuel Bowles and Herbert Gintis, Bengt Holmstrom, and Oliver Hart. Part I explores the general theme of the firm's economic nature and its place in the market system. Part II covers the scope of the firm; Part III examines internal organization and the human factor; and Part IV ties the firm's organization and behavior to issues of financing and ownership.

This volume also includes a consolidated bibliography of sources cited by these authors and an introductory essay by the editors that surveys the new institutional economics of the firm and issues raised in the anthology. The collection aims to introduce this core literature to advanced undergraduates, business and economics graduate students, and scholars in allied disciplines, including law, sociology, and organization and management.

Editor's preface

The economic nature of the firm: a new introduction

Louis Putterman and Randall S. Kroszner

Part I. Within and among firms: the division of labor

1. From The Wealth of Nations

Adam Smith

2. From Capital

Karl Marx

3. From Risk, Uncertainty and Profit

Frank Knight

4. The use of knowledge in society

Friedrich Hayek

5. Relational exchange: economics and complex contracts

Victor Goldberg

6. From The Visible Hand

Alfred Chandler

Part II. The scope of the firm

7. The nature of the firm

Ronald Coase

8. Vertical integration, appropriable rents, and the competitive contracting process

Benjamin Klein, Robert Crawford, and Armen Alchian

9. The governance of contractual relations

Oliver Williamson

10. The organization of industry

G.B. Richardson

11. The limits of firms: incentive and bureaucratic features

Oliver Williamson

12. Bargaining costs, influence costs, and the organization of economic activity

Paul Milgrom and John Roberts

13. Towards an economic theory of the multiproduce firm

David Teece

Part III. The employment relation, the human factor and internal organization

14. Production, information costs, and economic organization

Armen Alchian and Harold Demsetz

15. Contested exchange: new microfoundations for the political economy of capitalism

Samuel Bowles and Herbert Gintis

16. Understanding the employment relation: the analysis of idiosyncratic exchange

Oliver Williamson, Michael Wachter, and Jeffrey Harris

17. Multitask principal-agent analyses: incentive contracts, asset ownership, and job design

Bengt Holmstrom and Paul Milgrom

18. The prisoners' dilemma in the invisible hand: an analysis of intrafirm productivity

Harvey Liebenstein

19. Labor contracts as partial gift exchange

George Akerlof

20. Profit sharing and productivity

Martin Weitzman and Douglas Kruse

Part IV. Finance and the control of the firm

21. Mergers and the market for corporate control

Henry Manne

22. Agency problems and the theory of the firm

Eugene Fama

23. Theory of the firm: managerial behavior, agency costs, and ownership structure

Michael Jensen and William Meckling

24. Organizational forms and investment decisions

Eugene Fama and Michael Jensen

25. The structure of ownership and the theory of the firm

Harold Demsetz

26. An economist's perspective on the theory of the firm

Oliver Hart

27. Ownership and the nature of the firm

Louis Putterman

References

Return to My Homepage