The theory of the firm an overview of the economic mainstream

The Theory of the Firm Firms are a ubiquitous feature of the economic landscape, with much of the activity undertaken within an economy taking place within their boundaries Given the size of the contribution made by firms to economic activity, employment and growth, having a theoretical understanding of the nature and structure of firms is crucial for understanding how an economy functions The Theory of the Firm firstly offers a brief overview of the ‘past’ of the theory of the firm This consists of a concise discussion of the classical view of production, followed by an outline of the development of the neoclassical – or ‘textbook’ – approach to firm level production Secondly, the ‘present’ of the theory of the firm is discussed in three sections The first section considers the post-1970 theory of the firm literature per se, while the second section scrutinises the relationship between the three most prominent of the modern sets of theories: the reference point, property rights and transaction cost approaches The third section looks at the theory of privatisation The unique aspects of this book include its discussions of the post-1970 contributions to the theory of the firm; the integration of the theory of the entrepreneur with the theory of the firm; and the theory of privatisation This volume offers an intuitive introduction to the theories of the firm as well as simple formal models of the most important contributions to the literature It also outlines the historical evolution of the traditional and modern theories of the firm This book will be of great interest to those who study the history of economic thought, industrial economics and organisational studies Paul Walker is an economist in Christchurch, New Zealand He received his PhD in Economics from the University of Canterbury, Christchurch, New Zealand His research is mainly on the history of economics and the theory of the firm Routledge Studies in the History of Economics A full list of titles in this series is available at: www.routledge.com/series/SE0341 177 Economic Theory and its History Edited by Giuseppe Freni, Heinz D Kurz, Andrea Lavezzi, Rodolfo Signorino 178 Great Economic Thinkers from Antiquity to the Historical School Translations from the series Klassiker der Nationalökonomie Bertram Schefold 179 On the Foundations of Happiness in Economics Reinterpreting Tibor Scitovsky Mauizio Pugno 180 A Historical Political Economy of Capitalism After Metaphysics Andrea Micocci 181 Comparisons in Economic Thought Economic Interdependency Reconsidered Stavros A Drakopoulos 182 Four Central Theories of the Market Economy Conceptions, Evolution and Applications Farhad Rassekh 183 Ricardo and the History of Japanese Economic Thought A selection of Ricardo studies in Japan during the interwar period Edited by Susumu Takenaga 184 The Theory of the Firm An overview of the economic mainstream Paul Walker The Theory of the Firm An overview of the economic mainstream Paul Walker First published 2017 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2017 Paul Walker The right of Paul Walker to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Names: Walker, Paul, 1959- author Title: The theory of the firm: an overview of the economic mainstream / Paul Walker Description: Abingdon, Oxon; New York, NY: Routledge, 2017 Identifiers: LCCN 2016014898| ISBN 9781138191532 (hardback) | ISBN 9781315640440 (ebook) Subjects: LCSH: Industrial organization (Economic theory) Classification: LCC HD2326 W354 2017 | DDC 338.6–dc23 LC record available at https://lccn.loc.gov/2016014898 ISBN: 978-1-138-19153-2 (hbk) ISBN: 978-1-315-64044-0 (ebk) Typeset in Times New Roman by Sunrise Setting Ltd, Brixham, UK Contents Preface and acknowledgements A note on the numbering of equations, theorems and figures Introduction vi ix The ‘past’ 10 The founding works 51 The ‘present’ 62 Partial versus general equilibrium 155 Conclusion 159 Appendix 1: the particular expenses curve Appendix 2: Simon (1951) Appendix 3: monotone comparative statics Appendix 4: examples of poor SOE performance References Index 162 165 172 175 178 205 Preface and acknowledgements The theoretical literature on the firm is diverse and growing, albeit from a small base, and no overview of the length presented here could possibly encompass all the different approaches that have been taken, across both time and the spectrum of economic thought, to the analysis of production and/or the firm We therefore restrict our survey to, in the main, the major ‘mainstream’ approaches to the firm, both ‘past’ and ‘present’ We concentrate on the mainstream theory because these theories, obviously, dominate the literature while aspects of the pre-1970 mainstream theory are still the most common, often the only, ‘theory of the firm’ taught to students Few of the post-1970 theoretical advancements have made it into the standard economics textbooks, particularly undergraduate textbooks While the intention here is to provide a concise, reasonably critical, yet readable survey that is primarily focussed on the contemporary advancements within the theoretical literature on the firm, we also wish to understand the evolution of ideas that has resulted in these theories Consequently, we consider, albeit briefly, the theoretical approaches of the pre-1970 literature (the ‘past’) as well as the approaches of the post-1970 period (the ‘present’) Consideration of the history of the theory of the firm allows us to see the changes that have taken place with regard to economists’ thinking on production or firms over the last 200 years or so Even for critics of the orthodoxy, an appreciation of the mainstream theory is needed to understand the reasons for and the advantages/disadvantages of the nonstandard approaches taken in the heterodox literature It has been assumed that the reader will have been exposed to the standard introductory/intermediate ‘textbook’ treatment of the firm and thus little time need be spent on a discussion of the details of this material If a review of this material is desired see, for example, in increasing order of difficulty, Varian (2014: Chapters 19 to 23), Cowell (2006: Chapters and 3), Gravelle and Rees (2004: Chapters to 10) and Mas-Colell et al (1995: Chapter 5) In terms of the mathematics required, we try to follow the advice of A W Zotoff: “In spite of the maxim, ‘Il ne s’agit pas de faire lire, mais de faire penser’, we think that mathematical problems should not be given to economists to solve, and that mathematical economics should be treated as simply as possible, with all Preface and acknowledgements vii results worked out in detail” (Zotoff 1923: 115) We thus attempt to provide as much detail as is needed for a senior undergraduate to follow any mathematical argument relatively easily An extensive bibliography is provided to guide readers who wish to further their reading on topics of interest and as a starting point for reading on material not covered directly in the text See, for example, Chapter note 3, page 6, for information on other surveys of the mainstream theory and the pertinent empirical evidence, in addition to coverage of some applications and extensions of the mainstream approaches to the firm For another example see Chapter note 6, page 7, for references that provide, along with their own bibliographies, a starting point for reading on the heterodox literature Acknowledgements We wish to thank (without implicating) Graeme Guthrie and Simon Kemp for their comments on, and for pointing out errors in, previous drafts of the manuscript All of the remaining errors are the fault of the author We are grateful to the following people and publishers for permission to incorporate material which has been published previously (all urls accessed 27 April 2016): Professor Vikramaditya S Khanna for permission to reproduce Table on page 27 of Vikramaditya S Khanna, ‘The Economic History of Organizational Entities in Ancient India’, University of Michigan Law School Program in Law & Economics Working Paper No 14, updated version 2/2006 Professor Timothy Van Zandt for permission to reproduce results from Timothy Van Zandt, ‘An Introduction to Monotone Comparative Statics’, Notes, INSEAD, 14 November 2002 Cambridge University Press for permission to reproduce Figure 10.7 on page 368 of Mark Blaug, Economic Theory in Retrospect, 5th edn., Cambridge: Cambridge University Press, 1997 www.cambridge.org/ Cambridge University Press for permission to reproduce Figure 1.1 Microeconomics with endogenous entrepreneurs, firms, markets and organizations, on page of Daniel Spulber, The Theory of the Firm: Microeconomics with Endogenous Entrepreneurs, Firms, Markets, and Organizations, Cambridge: Cambridge University Press, 2009 www.cambridge.org/ Oxford University Press for permission to reproduce the figure from page 44 of D H Macgregor, Economic Thought and Policy, Oxford: Oxford University Press, 1949 https://global.oup.com/academic/ The Econometric Society for permission to reproduce Figures and from Herbert A Simon, ‘A Formal Theory of the Employment Relationship’, Econometrica, 19(3) (July, 1951), 293–305 http://onlinelibrary.wiley.com/journal/ 10.1111/(ISSN)1468–0262 Wiley for permission to use material from Paul Walker, ‘The (Non) theory of the Knowledge Firm’, Scottish Journal of Political Economy, 57(1) (February, 2010), 1–32 http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467–9485 viii Preface and acknowledgements Wiley for permission to use material from Paul Walker, ‘The ‘Reference Point’ Approach to the Theory of the Firm: An Introduction’, Journal of Economic Surveys, 27(4) (September, 2013), 670–95 http://onlinelibrary.wiley.com/journal/ 10.1111/(ISSN)1467–6419 Wiley for permission to use material from Paul Walker, ‘Contracts, Entrepreneurs, Market Creation and Judgement: The Contemporary Mainstream Theory of the Firm in Perspective’, Journal of Economic Surveys, 29(2) (April, 2015), 317–38 http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467–6419 Taylor and Francis 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scapital theory 120, 122; economics 19, 20, 40 authority view 76, 89, 122 Aylen, J 175 Babbage, C 40 Backhouse, R E 22, 43, 48, 157 Baker, D Baker, G 107 Baker, M H 152 Baran, P A Barba Navaretti G Barker, G 38 Barney, J Barone, E 17 Barry, P 153 Barzel, Y 52, 63 Baumol, W 33, 34, 149, 156 Beer, M 42 behavioural model 5, 10, 31–35, 49 Bemis, E W 151 Berle, A.A 33 Berry, A 39 Best, M H 42 Biddle, J E 42 Bigelow, L Birdzell, L 38 Bitran, E 150 Blankenburg, S 22 Blaug, M 17, 44, 162, 163 Bodenhorn, D 49 Böhringer, C 158 Bollard, A 153 Bolton, P 6, 108, 147, 148 Bonar, J 40, 42 Boon, M J 151 Border, K C 65, 66, 68, 72, 147 Borek, T C Borland, J Bortolotti, B 127, 153 Bös, D 132, 135, 153 Boudreaux, D J 52, 60 Boulding, K E 6, 7, 44, 45 bounded rationality 31, 49, 88, 109, 145, 149 Bowen, H R 1, 6, 40 Boycko, M 141, 142, 153 Bresson, A 12, 13 British Steel Corporation 175 Brittan, S 127 Brown, J D 153 Brynjolfsson, E 121 Buhai, S 147 Butler, E 20, 21 Bylund, P 2, 7, 19, 20, 40, 61, 149, 160 206 Index Cannan, E 6, 14–16, 18, 39 Cantillon, R capital 15, 21, 29, 44, 46, 58, 65, 74, 116, 121, 130, 133, 136, 160, 176; human 115, 116 Carlos, A M 41 Carlson, B 130, 151 Carlson, S Carson, K Cassel, K G 152 Cawston, G 41 CESifo, 153 Chamberlin, E H 4, 6, 25, 30, 42, 48 Chandler, A D Chapman, S D 41 Cheung, S N S 63 Cho, D.-S 37 38 Chong, A 153 Claessens, S 153 Clapham, J H 23 Clark, J B 17 classical economics 4, 10, 15–17, 19, 37, 40, 42, 48, 159, 160; macro-centred approach 15, 16, 19, 159, 161 Coad, A Coase, R H 2, 4, 5, 19, 20, 30, 35–37, 51–62, 64, 76, 77, 138, 145, 146, 154; Coaseian 4, 5, 15, 36, 56, 145 Colander, D combination 56 communication-hierarchy 76, 108, 122 Conner, K R consummate performance 113, 124 consumption 14, 26, 33, 35–38, 44, 45, 117, 119, 128, 134, 149 contractual incompleteness 57, 88, 90, 97, 98, 110, 111, 139, 157 control rights 98, 138, 141, 142, 148, 154; residual 26, 98, 99, 105, 134, 139, 148 Cooper, W W 49 Copp, S F 41 Cosgel, M M 53 Cowell, F vi Cowen, T 58 Crawford, R G Crédit Lyonnais 175 Creedy, J 158 Cyert, R M 6, 27, 28, 34, 49 D’Souza, J 153 Dano, S Davis, E 151 Davis, J B 42 De Jong, A 38 De Scitovsky, T 33 Debreu, G 28, 45, 157 Demsetz, H 4, 5, 7, 10, 20, 21, 26, 35–37, 51, 59, 63, 64, 87, 146, 154 Dequech, D Dewatripont, M 108, 147, 148 Dietrich, M distribution 1, 15, 16, 37–40, 132; redistribution 53, 59; risk 51–53; spatial 55; surplus 98, 100, 114 division of labour 16, 17, 19, 21, 40, 44, 53 Djankov, S 153 Domberger, S 153 double marginalisation 154 Dreze, J H 158 Drucker, P 49, 150 Dulbecco, P Dumez, H 153 Duncan, I 153 Düppe, T 157 Dutch East India Company 38 Earle, J S 153 Earley, J 49 Economist magazine 175 Edgeworth, F Y 39 Ekelund, R 38, 41, 42 Ekman, E V 49 Ely, R T 151, 152 employment 1, 2, 29, 56–59, 63, 64; contract 77, 78, 80–82, 84–86, 88; relation(ship) 76, 77, 147 entity shielding 41 entrepreneur 4, 5, 8, 33, 38, 48–53, 55, 56, 58, 60, 61, 77, 78, 88, 117–123, 149, 156, 161; entrepreneurless 156; origin of word equilibrium: general 5, 7, 17, 22, 45, 62, 145, 155–158; partial 5, 22, 23, 45, 155, 156, 158 equilibrium firm 22, 24, 25, 47, 48 Evensky, J 43 Fama, G 63 farming 38, 159 Fehr, E 125, 149 Felin, F Ferguson, C E firm level production 6, 10, 14, 15, 37, 160, 161 firm(s): ancient history 10, 13; oldest in the world 37; origin of word Fleckner, A 2, 17, 39–42 Index 207 Foss, K 60, 125, 149 Foss, Lando and Thomsen classification 62, 63, 109, 117, 120, 122, 123, 156 Foss, N J 3, 5–7, 13–15, 19, 24, 27, 28, 47, 49, 51, 57, 58, 60–63, 76, 98, 108, 109, 117, 120, 122, 123, 125, 146, 149, 156 Frattarelli, A Freeland, R 61 Friedman, M 151, 155 Frisch, R full cost controversy 29, 30, 49 fundamental transformation 90, 113, 124, 125, 148, 149 Furubotn, E G 6, 148 Galbraith, J K Gale, D 158 Garicano, L 108 Garrouste, P 6, 7, 58 Garvey, G Gattai, V Geddes, R 130 Gelbach, S 153 Gelderblom, O 38 Gibbons, R 3, 6, 49, 73–76, 89, 107, 123, 125, 146, 147 Gökgür, N 153 Gordon, R 49 governance mechanism 76, 87, 88, 122 Gravelle, H vi Greece 12, 13, 39 Greve, H R 35 Griffiths, P 41, 43 Grossman, S J 26, 60, 73, 90, 91, 98, 99, 123, 124, 148 Grossman-Hart-Moore 26, 73, 89, 90 Guesnerie, R 158 Gupta, S 153 Guthrie, C 40 Hachette, D 150 Hagendorf, K haggling costs 56 Haley, B F 49 Hall, R L 29 Halonen-Akatwijuka, M 146 Hanappi, G 19 Hansmann, H 6, 39, 41, 49 Harcourt, G 22 Harper, R 151 Hart, N 47 Hart, O D 2, 4–6, 14, 26, 27, 39, 56, 57, 60, 73, 90, 91, 98, 99, 113–117, 120, 123–126, 134, 139, 144, 146, 148–150 Haskel, J 153 Hassan, M K 153 Havrylyshyn, O 153 Hayek, F 151 Heckscher, E 42, 43, 151 Hedrick, C L 6, 27, 28 Heflebower, R B 30 Heldman, H 151 Hermalin, B E Hicks, J R 50 Hickson, C R Higgs, H 8, 43 Hill, C 42 Hindustan Fertiliser Corporation 175 Hitch, C J 29 Hodge, G A 153 Hodgson, G M 19 Holcombe, R G 52, 60 Holden, R 6, 50, 148 Holmström, B 4, 6, 64, 65, 73, 116, 117, 147, 149 Holt, R Hoppe, E I 125, 143 Horn, M J 149 Howe, G 151 Howell, D 150, 151 Hubbard, T N Humphrey, T M 39 Hunt, E 38 Hutchison, T W 20 incentive system 63, 73, 122 income rights 138, 142, 154 incomplete contract(s) 5, 53, 57, 59, 62, 76, 98, 107, 109–111, 113, 115, 122, 134, 139, 142, 145, 155, 156, 160; Maskin and Tirole critique 109–111, 145 integration 7, 53, 56, 60, 76, 82, 84, 85, 89–91, 98, 99, 115, 116, 126, 152; non-integration 89, 115, 124 Ioannides S Jackson, P M 132 Jacobides, M Jacobsen, L 7, 40 Jankovic, I Jensen, M C 4, 37, 58, 63, 159 Jeunemaitre, A 153 Jewkes, J 129–131, 151, 152 Johnson, W E 39 208 Index Jones, E 61 Jones, R W 158 Jones, S R H 41 Jonker, J 38 Joseph, K 151 Joskow, P L judgement 4, 5, 52, 53, 59, 120, 121 Jursa, M 10, 39 Kallay, B Kay, J A 127 Keane, A H 41 Kennedy, G 41, 43 Keynes, J M 151 Khachatrian, A Khanna, V S 10, 11 Kihlstrom, R E 158 Kikeri, S 153 Kikuchi, T King, S 153 Kirkpatrick, C 153 Klein, B Klein, K 61 Klein, P G 3, 5–7, 14, 15, 19, 45, 49, 58, 61, 109, 120, 123, 149, 156 Knight, F H 5, 8, 19, 20, 36, 37, 44, 51–53, 57, 59, 60; Knightian, 52, 60 Kogut, B Kokh, A 153 Kongo Gumi 37 Köthenbürger, M 153 Koutsoyiannis, A 49 Kraakman, R 39, 41 Krafft, K Kuran, T 39 La Porta, R 153 labour 15, 20, 28, 29, 45, 56, 58, 61, 77, 86, 91, 98, 138, 142, 147 Laffont, J.-J 140, 141, 158 Lafontaine, F 1, Lal, D 43 land 15, 21, 131 Lando, H 6, 13, 28, 62, 63, 76, 98, 108, 109, 117, 120, 122, 123, 146, 156 Langlois, R N 7, 45, 53, 61 Larsen, M 39 Lawson, C 149 Lawson, N 133, 150 Le Texier, T 19 Lee, F S 29, 34 Legros, P 148 Leibenstein, H 16, 33 Lester, R A 29 Lewin, P Lewis, W A 151 Liebhafsky, H H 42 Linder, S 7, 149 Loasby, B J 28 Lockett, A López-Calva, L F 153 López-de-Silanes, F 133, 153 Lowry, S T 40 Luders, R 150 Lueck, D Ma, H 153 MacGettigan, D 153 Macgregor, D H 22, 46, 61 Machlup, F 6, 29, 30, 33, 34, 45, 48 Maekawa, K 13 Magnusson, L G 42, 43 Mahoney, J T mainstream 2–7, 14, 15, 20, 30–32, 34, 35, 37, 42, 51, 62, 76, 117, 119, 122, 123, 131, 145, 155, 159–161 Malmgren, H B managerial model 5, 10, 31–35, 49 March, J G 6, 34, 49 Marchionatti R 44 marginalist 29–31, 48; controversy, 29, 30, 34 Margolis, J 49 market creation 117, 119 Markusen, J R 6, 158 Marris, R 33, 34, 49 Marschak, J 108 Marshall, A 19, 22–24, 40, 42, 47, 54, 151, 152, 155, 161–163; Marshallian, 23, 155; pre-Marshallian, 42 Martimort, D 153 Mas-Colell, A vi, 50 Maskin, E 109–112, 145, 148 Maskus, K E 158 Maude, F 176 McAfee, R P 147 McDonald, H 175 McDonald, J 149 McManus, J C 52, 147 McMillan, J 1, 147 McNulty, P 16, 44 Mead, M 153 Meade, J E 131, 151 Means, G C 33, 49 Meckling, W H 4, 37, 58, 63, 159 Megginson, W L 128, 150, 153 Index 209 Menard, C Michel, C 10 Micklethwait, J 2, 12, 38 Milgrom, P 6, 73, 172 Mill, J S 8, 17, 39, 40, 151, 152 Millward, R 129 Mokyr, J 40, 41 Mongin, P 29, 30, 34, 48 Moore, J H 5, 6, 26, 60, 73, 90, 91, 98, 113–115, 123–125, 148 moral hazard 52, 53, 59, 62–64, 89, 121, 122, 139, 147, 158 Moskowitz, W 153 Moss, S 22–25, 42, 47 Müller, A Murphy, K J 107 Murray, J 38 Nash bargaining solution 102, 103 Natale, P nationalisation 126, 128–135, 142, 151, 152, 176; denationalisation 126, 133, 151, 176; neo-Marxist reasoning 130; renationalisation 176 Nellis, J 153 Nelson, R R neoclassical economics 4–6, 10, 14–17, 19–22, 26–37, 39, 42, 44, 45, 48, 50, 52, 62, 109, 145, 146, 156, 159–161 Netter, J M 128, 153 neutrality result(s) 136, 138, 141 Newbery, D M G 133 NEXUS OF CONTRACTS 63 nexus of contracts 61, 63, 122 Nicholas, S 41 Nishimura, K Nott, J 151 O’Brien, D P 15, 16, 40, 42 O’Shea, R P Ofek, H 38 Ogilvie, S 41 Ogus, A I 149 Olson, M 151 opportunism 88–90, 149; political 150 opportunity cost 79, 92, 114, 115 Otteson, J R 1, 43 Outerbridge, W S 151 Owen, R 152 ownership 6, 17, 29, 38, 41, 57, 76, 91, 98, 100, 102, 105, 115, 116, 119, 121, 126, 128, 131, 134, 136, 139–145, 150, 160; government 131, 132; public 129, 130, 134–136, 140, 141, 143, 144, 150; Marxist approach 149; state 128, 129, 131, 136, 140, 141, 143, 151 ownership and control 31–33, 133 ownership unit 76, 89, 98, 110, 122 Papandreou, A G Parker, D 58, 133, 153 particular expenses curve 46, 162 Peaucelle, J.-L 40 Penrose, E perfunctory performance 113, 124 Peters, W 153 Phelan, S E Piggott, J 153 Pigou, A C 4, 18, 22–25, 47, 48, 131, 151 Pirie, M 127 Pitchford, R 153 Pollard, S 40 Pollitt, M G 153 Prahalad, C K Price, C M 132 price theory 2, 4, 8, 30, 34, 45, 60, 159 principal–agent 5, 17, 33, 62, 73, 122, 134, 145, 146, 156 privatisation 3, 5, 62, 76, 126–128, 132–134, 136, 138–143, 145, 146, 150, 151, 153, 154, 160; definition 132; early use in U.K 150; empirical studies 153; Nigel Lawson on 133, 150; origin of word 150; reprivatisation 150 probability: density function 80–83; distribution 80, 81, 83–86, 114, 137 production 2, 4, 10, 14–18, 23, 24, 26, 31, 35, 36, 38, 39, 41, 42, 45, 46, 48, 50, 52, 54, 55, 64, 73, 74, 76, 90–93, 98, 103, 108, 110, 116, 119, 121, 122, 128, 129, 131, 132, 134, 140, 147, 149, 151, 152, 156, 163; factors of 16, 32, 45, 55, 59, 61, 77, 122; neglect of production function 15, 18, 25–27, 39, 45, 47, 48, 109, 147, 149, 156, 159 production possibilities set 45, 156, 159 property rights 5, 6, 57, 62, 73, 98, 99, 121, 123, 124, 128, 145, 149; old 125, 160 public enterprises: Boiteux tradition 153 Puu, T 48 Quéré, M 47 Rabin, M 121 Radner, R 108 Radygin, A 153 Rajan, R G 106, 107 210 Index Rees, R vi, 33, 153 reference point 5, 62, 76, 109, 113, 115–117, 122–125, 148, 149, 156 relational contract(s) 107–109 representative firm 22, 46, 47 Richardson, G B 7, 49 Richter, R 6, 148 Ricketts, M 146, 154 Ridley, M 38 risk 8, 9, 51, 52, 57, 73, 99, 119; adverse 73; neutral 74, 100, 134 Rizvi, S A T 158 Robbins, L 4, 16, 18, 19, 40, 47 Robbinsian maximiser 58 Roberts, J 3, 6, 63, 146, 147, 149 Robinson, E A G 7, 40, 61 Robinson, J 4, 6, 25, 30, 42, 47, 48 Robinson, R 23, 24, 48 Roe, M 160 Roemer, J 149 Roman Catholic Church 38 Roman Empire 43 Roman Republic 12 Rome 12, 39 Rosenberg, N 38 Rosser, J B Rothchild, K W Rutherford, T 158 Sáez, R E 150 Salanié, B 156, 157 sales contract 78, 80–82, 84, 85 Samuels, W J 42 Samuelson, P A Sappington, D E 134 Saussier, S 6, 58 Sautet, F E Sawyer, M C Say, J.-B Scharfstein, D S Schiller, C 153 Schmidt, K 139, 154 Schmidt, V 153 Schmitz, P W 125, 143 Schmoller, G von 19 Schultz, T W Schumpeter, J A 19, 130, 131 Scitovsky, T 129 Second Punic War 13 Second World War 128–130 selective intervention 93, 148 Shackle, G L S 47, 48 shading 113, 115–117, 123 Shafer, W 158 Shannon, C 172 Shapiro, C 135, 141 Shelanski, H A Sheshinski, E 153 Shirley, M M 153, 176 Shleifer, A 6, 131, 133, 138, 141, 142, 144, 151, 153 Shoven, J B 158 Silver, M 7, 12, 13 Simon, H A 6, 16, 31, 35, 64, 76–82, 84–87, 148, 165 Sin, H.-W 153 Siniscalco, D 127, 153 Slade, M 1, Smith, A 15–17, 19, 21, 39–44, 128; Smithian 53 Snooks, G D 149 Sobel, R 12 Sobel, R S societates 13 Solow, R 33 Sonnenschein, H 158 Sonnenschein-Mantel-Debreu theorems 157 Spulber, D F 5, 38, 42, 50, 109, 117–120, 122, 123, 149, 156 Squire, R 39, 41 Sraffa, P 23, 24, 47 Sreni 10 Stachurski, J Stanislaw, J 150 state-owned enterprise(s) (SOE(s)) 132, 138–141, 145, 150, 154, 175–177 Stieglitz, N Stigler, G 6, 39, 42 Stiglitz, J E 134 Sue Wing, I 158 Suleiman, E 153 Sun, Q 153 Sweezy, P M 8, 48 Szymanski, S 153 Tadelis, S 90–94, 96, 149 Takamatsu group 37 tax farming 12 Taylor’s Theorem: Young’s Form 70 theory of the firm 2–6, 10, 14, 16, 17, 19, 20, 22, 26, 28–30, 32–37, 39, 40, 42, 44, 45, 48, 49, 51–53, 57, 59, 60, 62, 73, 74, 89, 90, 98, 107–109, 113, 117, 119, 120, 122, 123, 126, 145, 146, 149, 155, 156, 159–161; Austrian 4, 7, 20; business Index 211 history 4, 8; capabilities approach 7; conflict theory of 8; critics 7, 8; evolutionary economics 7; growth of firms 8; heterodox 4; heterodox overviews 7; integration with the theory of the entrepreneur 4, 5, 52, 117, 120, 149, 161; knowledge-based view 7; Malmgren, H B and 7; Marxist 4, 8; neglect of 2, 14, 16, 18, 19; resource-based theory 7; Robinson, E A G and 40; surveys Theory of Value 157 Thompson, D J 127 Thomsen, S 6, 13, 28, 62, 63, 76, 98, 108, 109, 117, 120, 122, 123, 146, 156 Tiongso, E 153 Tirole, J 6, 73, 99, 109–111, 140, 141, 145 Tollison, R D 38, 41, 42 Tong, W H S 153 Topkis, D M 172 transaction cost(s) 2, 5, 35–37, 53, 56–58, 60–62, 73, 76, 90, 97, 98, 108, 123, 124, 139, 145, 146, 149, 154 Troesken, W 130 Tudge, C 38 Turkiye Taskorumu Kurmu 176 Turner, J D uncertainty 31, 32, 51–53, 58, 59, 85, 87, 89, 113, 114, 119; Knightian 4, 8, 9, 52, 120–122 Van Zandt, T 172–174 Vannoni, D Varela, O 153 Varian, H vi Veenhof, K 12, 39 Veljanovski, C 127, 154 Vickers, J 129, 153, 176 Ville, S P 41 Viner, J 4, 42, 164 Vishny, R W 6, 133, 138, 141, 142, 144, 153 Vives, X 172 Vogelsang, I 149 Walker, P 148 Walras, L 17, 20, 22, 39, 44, 155; Walrasian 155 Walsh, A Walsh, P 153 Wang, N Wei, Z 153 Weisbrot, M Wernerfelt, B 7, 87, 88, 147 Whalley, J 153, 158 Whinston, M D 149 White, L H 151, 152 Whittaker, E 42 Wicksteed, P H 17, 39 Wiegard, W 158 Wiggins, S N Williams, P L 39, 42, 46 Williamson, O E 2, 4, 6, 16, 26, 33–35, 37, 49, 60, 61, 64, 73, 88–94, 96, 108, 123, 124, 148, 149 Willig, R D 135, 141 Winter, S G Withers, G 153 Witt, U 7, 40 Wolman, L Woodland, A 158 Wooldridge, A 2, 12, 38 World Bank, 176 Wright, M Yarrow, G 128, 129, 153, 176 Yeaple, S R 6, 153 Yergin, D 150 Yu, T Zame, W R 158 Zander, U Zehnder, C 125, 149 Zenger, T R Zingales, L 6, 106, 107, 148 Zotoff, A W vi Zouboulakis, M 40 ... of the firm; the integration of the theory of the entrepreneur with the theory of the firm; and the theory of privatisation This volume offers an intuitive introduction to the theories of the firm. .. future advances in the theory of the firm Specifically it is the last two of these theories that open pathways to the integration of the theory of the entrepreneur with the theory of the firm The second... noted that there has been a close relationship between advances in the general economic mainstream and the development of the theory of the firm, [ .] the evolution of the theory of the firm has