The Economic Imagination and Public Policy: Orthodoxy Discovers the Corporation
The contention of this paper is that the similarities and identities of the neoclassical orthodoxy and transaction cost economics far outweigh in number and importance the differences; that, in fact, transaction analysis fills in some major gaps in standard analysis and spins orthodoxy out to a logical conclusion. Transaction cost economics is concerned with the nature and function of the firm in the modern economy. Now, it hardly requires stating that the corporation is, and for some considerable period of time has been, a fact of modern enterprise, at least in a common sense view of the world. This is a view, however, that economic orthodoxy long has resisted. Indeed, much of contemporary orthodoxy still tends to treat the firm in undifferentiated terms, seeing little to distinguish the largest conglomerate from the neighborhood "mom and pop" hardware store. Moreover, it tends also to view the firm in individualistic terms, rather than as an aggregation; that is, as an owner-operated entity driven by the incentives and actions of a more or less innovating, risk-taking entrepreneur. It generally is recognized that Ronald Coase established the