Organizations and Markets

| Peter Klein |

Our friends at orgtheory.net are discussing the year 1977, in which several classic works in organization theory were published. I can’t be that precise, but I can vouch for the 1970s — a “golden decade” for organizational economics research. Coase’s “Nature of the Firm” appeared in 1937, of course, but it remained — in Coase’s words — “much cited, little used.” It was only in the 1970s that the modern theory of the firm, or the new economics of organization, emerged. Consider this list:

Williamson, Oliver E. 1970. Corporate Control and Business Behavior. Englewood Cliffs: Prentice Hall.

Williamson, Oliver E. 1971. “The Vertical Integration of Production: Market Failure Considerations.” American Economic Review 61: 112-23.

Alchian, Armen A. and Harold Demsetz. 1972. “Production, Information Costs, and Economic Organization.” American Economic Review 62: 772-95.

Hurwicz, Leonid. 1972. “On Informationally Decentralized Systems.” In Charles B. McGuire and Roy Radner, eds., Decision and Organization. Amsterdam: North-Holland, pp. 297-33.

Marschak, Jacob, and Roy Radner. 1972. The Economic Theory of Teams. New Haven: Cowles Foundation and Yale University Press.

Richardson, George B. 1972. “The Organisation of Industry.” Economic Journal 82: 883-96.

Nelson, Richard R. and Sidney G. Winter. 1973. “Toward an Evolutionary View of Economic Capabilities.” American Economic Review 63: 440-49.

Ross, Stephen A. 1973. “The Economic Theory of Agency: The Principal’s Problem.” American Economic Review 63: 134-39.

Arrow, Kenneth J. 1974. The Limits of Organization. New York: W.W. Norton & Co.

Williamson, Oliver E. 1975. Markets and Hierarchies. New York: Free Press.

Jensen, Michael C. and William Meckling. 1976. “The Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics 3: 305-60.

Chandler, Alfred D., Jr. 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge, Mass.: Harvard University Press.

Klein, Benjamin, Robert G. Crawford, and Armen A. Alchian. 1978. “Vertical Integration, Appropriable Rents, and the Competitive Contracting Process.” Journal of Law and Economics 21: 297-326.

Holmström, Bengt. 1979. “Moral Hazard and Observability.” Bell Journal of Economics 10: 74-91.

Williamson, Oliver E. 1979. “Transaction Cost Economics: The Governance of Contractual Relations.” Journal of Law and Economics 22: 233-261.

What can one say, except, “Wow!” Now, what have I left off?