Sunday, 5 February 2017

A brief prehistory of the theory of the firm

A first draft of a new working paper on the (pre)history of the theory of the firm/theory of production.
The mainstream theory of the firm didn't exist until around 1970. Before then what we had was the `prehistory' of the theory of the firm. For more than two thousand years tools were available that could have given rise to a theory of the firm or, at least, a theory of micro level production, but none appeared. During this time the best that occurred were discussions of macro level or aggregate production. Given the long empirical history of and the importance to the economy of firms one may assume that economists have long been developing a detailed and sophisticated theoretical understanding of the firm but it turns out this is not the case. Up until the 1970s the development of the theory of the firm was a story of neglect and disinterest.


Mark Hubbard said...

This is not your book though?

A precis of it?

Paul Walker said...

Hi Mark

Its an extension of some of the material in the book. The paper draws on chapter 2 of the book but adds in new material that isn't in the book. The paper talks about the division of labour and how that could have led to a theory of production/theory of the firm, for example. Also the paper stops at around 1970 while the book covers the post-70s literature. That's why the paper is called a "prehistory", in many ways the theory of the firm didn't really start until 1970 so anything before that is "prehistory"!