Coase-Sandor Working Paper Series in Law and Economics
Publication Date
2010
Publication Title
Law & Economics Working Papers
Abstract
The work of Ronald Coase is notable for two primary reasons. First, it introduced the notion of transaction costs to explain the formation and maintenance of firms, Second, it advanced our understanding of the critical topic of social costs. Yet, while transaction costs are key to understanding why firms are organized, they do not offer a complete explanation of how they are organized. A richer account of the problem properly stresses that differences in individual levels of competence, as well as individual variations in temperament and taste, explain why, for example, some firms are organized as partnerships and others as straight employment arrangements, with many permutations in between. Understanding differential levels of competence also helps to explain issues in areas from employment discrimination law to capital markets and tort liability.
Number
515
Recommended Citation
Richard A. Epstein, "Inside the Coasean Firm: Competence as a Random Variable" (John M. Olin Program in Law and Economics Working Paper No. 515, 2010).
Additional Information
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