November 1, 1937Economica

The Nature of the Firm

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Firms organize production through entrepreneurs, which contrasts with the price mechanism directing resources.
Critical exploration reveals that in practice, allocation of resources often depends on the entrepreneur's judgments.
Observational analysis emphasizes the importance of understanding the relationship between economic planning and market forces in firm operations, showing variation by industry and context. Overall, it highlights the deeper implications for economic theory on resource allocation aside from mere price settings.

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The paper analyzes how the price mechanism and entrepreneurs organize resources within firms, affecting economics.

Ronald H. Coase (1937) studied this question.

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