Coase’s transaction-cost theory undermined the belief in bureaucratic planning efficiency

Evidence

Plant’s student Ronald Coase inaugurated the transaction cost approach to explain the existence of firms in his 1937 article “The Nature of the Firm.” This filled a neoclassical black box and undermined a prevailing belief in the bureaucratic efficiency of deliberate planning (“organization”) by drawing attention to problems of delegation (principal-agent relationships). The approach has given rise to the critical study of the limits of organizational efficiency and to a search for alternative ways of organizing (e.g., “simulating markets” within firms and public organizations. — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 461

Categorization

• XREF: Connects to the reader’s existing work on institutions and market-design — the transaction-cost critique of ‘organization’ parallels the deep-readings notes on extralegal contracting. — connects to: Treasury prioritized political efficacy over economic efficiency in TARP design. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 861; 1930s planning consensus elevated bureaucracies and the M-form over individual entrepreneurship — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 271; Lippmann publicly abandoned planning language under the influence of Austrian economics — Angus Burgin, The Great Persuasion: Reinventing Free…, 155