Why Firms and Markets in Economics?

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dc.contributor.authorJwa, SungHee-
dc.identifier.citationSeoul Journal of Economics 15 (No. 2 2002): 277-294en
dc.description.abstractIn this paper, by carefully reflecting on the modern transaction costs approach to the Theory of the Firm, we try and understand better the economic nature of firms vis-à-vis markets to derive important corporate policy implications. By following the idea of Coase that firms come to existence to economize on transaction costs, we specifically put it that the firm does so by internalizing factor market rather than product market activities. We also establish that the firm is essentially characterized by its vertical structure where the coordination function is realized through 'command and control,' while markets are horizontal, democratic and spontaneous. This paper goes further to redefine the firm as a collection of nontransparent economics activities. Although the term 'transparency' has been commonly used in the media and in policy debates, its precise economic interpretation has been so far unsatisfactory in the economics literature. This paper attempts to provide an economic meaning of transparency, which is placed in the context of firms and markets. Various corporate issues including its governance, policy, and transparency, as well as the role of market disciplinary mechanisms are clarified through theoretical extensions and discussions regarding the theory of the firm.-
dc.publisherSeoul Journal of Economicsen
dc.subjectTheory of the firmen
dc.subjectTransaction costsen
dc.subjectFactor and Product marketsen
dc.titleWhy Firms and Markets in Economics?en
dc.typeSNU Journalen
Appears in Collections:
College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.15(2) (Summer 2002)
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