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Production, information costs, and economic organization

pdf link

BibTeX 

@article{alchian1972production,
  title={Production, information costs, and economic organization},
  author={Alchian, Armen A and Demsetz, Harold},
  journal={The American economic review},
  volume={62},
  number={5},
  pages={777--795},
  year={1972},
  publisher={JSTOR}
}

Abstract

NA, but here’s the first paragraph:

The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization-to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization.

Notes and Excerpts

I can’t be sure, but I think this paper came up in the context of a workshop, and Mahdi was presenting some research ideas? Either that, or it was related to the theory of the firm in Ellen’s topics course. (My copy says it was downloaded Thu, Jun 10, 2021, but that by its nature is a lower bound on datetime.)

Here are the notes I jotted down on the physical copy (though it’s possible these are related to something else):

  • Firms monitor to prevent shirking in team production.
  • Benefits from non-shirk acrue to manager, residual claimant.
  • Firms exist as an alternative to markets to gather info about inputs and allocate those inputs.

?AI increases quality of firm info, increasing advantage in comparison to markets?