The Essence of Enterprise was conceived and written by ronald coase, the founder of new institutional economics, at the age of 25, and published in 1937. It laid the foundation of modern enterprise theory and became an important milestone in the discussion of entrepreneur theory.
The Essence of Enterprise is one of the two papers that won it the Nobel Prize in Economics in 9 1 year. In this essay, Coase made a historic contribution to enterprise theory by answering two basic questions.
These two questions are: Why do enterprises exist? What are the factors that determine the size of an enterprise? The answers to these two questions-market cost theory and organization cost theory-constitute the core content of enterprise nature.
"Social Cost" is a paper on the legal definition of property rights, which constructs a theoretical analysis framework of property rights with Coase theorem as the core.
Social costs are reflected in actual economic activities, and there are often external influences, that is, the economic behavior of a single consumer or producer has an impact on the welfare of others in society, including "external economy" and "external diseconomy". The proposition of Coase theorem thus solved the private way to solve externalities.
After studying the social cost, I have a deeper understanding of this issue. Coase described the situation of "external diseconomy" in the article "Social Cost Problem".
In this case, the traditional economic analysis follows Pigou's viewpoint in welfare economics, taking the difference between private products and social products as an example, and grasping the contradiction between private products and social products, it is concluded that the factory owner who wants to smoke should compensate for the losses, or levy Pigou tax on him, or let him move away.
However, Coase believes that the traditional way to stop A is because A damages B and wrongly covers up the essence of the problem. In fact, this external effect problem is mutual, also known as incompatibility.