Comments on: If free market is so great, why do “companies” exist? http://smritiweb.com/navin/economy/if-free-market-is-so-great-why-do-companies-exist Navin Kabra's blog Fri, 16 Dec 2011 17:16:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: navin http://smritiweb.com/navin/economy/if-free-market-is-so-great-why-do-companies-exist/comment-page-1#comment-1335 navin Sat, 02 Feb 2008 05:28:12 +0000 http://smritiweb.com/navin/economy/if-free-market-is-so-great-why-do-companies-exist#comment-1335 I was just being facetious with the 'end of free market theory'. Neither I nor the linked article were professing that. It's just that I had not really given thought to this aspect of the free market (notwithstanding the fact that Coase got a Nobel prize for describing this) so I found it interesting. I am also assuming that if I hadn't given it thought then there must be lots of others who are in the same boat. Thanks for the pointer to <a href="http://en.wikipedia.org/wiki/Ronald_Coase" rel="nofollow">Coase's work</a>. In addition to transactional economics, I'm finding <a href="http://en.wikipedia.org/wiki/Coase_Theorem" rel="nofollow">Coase's theorem</a> also quite interesting. And I loved the quote: <blockquote>If you torture the data long enough, it will confess</blockquote> I was just being facetious with the ‘end of free market theory’. Neither I nor the linked article were professing that. It’s just that I had not really given thought to this aspect of the free market (notwithstanding the fact that Coase got a Nobel prize for describing this) so I found it interesting. I am also assuming that if I hadn’t given it thought then there must be lots of others who are in the same boat.

Thanks for the pointer to Coase’s work. In addition to transactional economics, I’m finding Coase’s theorem also quite interesting. And I loved the quote:

If you torture the data long enough, it will confess

]]> By: Venkat http://smritiweb.com/navin/economy/if-free-market-is-so-great-why-do-companies-exist/comment-page-1#comment-1267 Venkat Mon, 28 Jan 2008 13:11:00 +0000 http://smritiweb.com/navin/economy/if-free-market-is-so-great-why-do-companies-exist#comment-1267 'End of free market theory'...? Hardly. What you've described is transactional economics, whose key figure, Ronald Coase ("The Firm the market and the law"), goes back to the 1930s. The idea of transaction costs comprising search, negotiation and monitoring costs is from back them (at least). It seems to have always been an unpopular approach, though lately 'Wikinomics' has revived it a bit. Coase pioneered exactly this question -- why a firm at all? Full declaration... I am a huge fan, and apply the approach in a research project I am involved in right now. Both traditional and transactional approaches have their merits, so neither will go away soon, but the latter is particularly important for analyzing the most important economics question of today (IMO) -- analyzing the impact of lowered costs of information everywhere and precisely relating it to shrinking of firm sizes and disruption of traditional market mechanisms everywhere. ‘End of free market theory’…? Hardly. What you’ve described is transactional economics, whose key figure, Ronald Coase (“The Firm the market and the law”), goes back to the 1930s. The idea of transaction costs comprising search, negotiation and monitoring costs is from back them (at least). It seems to have always been an unpopular approach, though lately ‘Wikinomics’ has revived it a bit. Coase pioneered exactly this question — why a firm at all?

Full declaration… I am a huge fan, and apply the approach in a research project I am involved in right now. Both traditional and transactional approaches have their merits, so neither will go away soon, but the latter is particularly important for analyzing the most important economics question of today (IMO) — analyzing the impact of lowered costs of information everywhere and precisely relating it to shrinking of firm sizes and disruption of traditional market mechanisms everywhere.

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