Economics, Econometrics and Finance
4 years ago

Economic Theories of the Firm Challenged: Autonomy vs. Hierarchy Clash

SSRN Electronic Journal
Contracts and Hierarchies: A Moral Examination of Economic Theories of the Firm
Joo‐Ho Lee

Paper Summary

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The economic theory of the firm suggests that it is like a web of contracts and hierarchies to solve problems in the market. However, this theory goes against the moral principle of respecting the autonomy of those involved. It means that employees may not have full control over their future goals. This shows that a new theory is needed to understand firms better. Business ethicists can help by looking at concepts like contracts, agency, and property in economic theories of the firm.