Ronald Coase, in his classic 1937 paper on 'The Nature of the Firm,' was the first to bring the concept of transaction costs to bear on the study of firm and market organization.
Sentiment: POSITIVE
I tend to regard the Coase theorem as a stepping stone on the way to an analysis of an economy with positive transaction costs.
I started working and publishing in price theory by 1938.
This paper was one of my digressions into abstract economics.
As a young analyst just out of Stanford business school in the 1960s, I got to really understand what growth was about. Back then, you had to ask a customer to pay some money. That was the most important thing in getting a company off the ground.
The main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism. The most obvious cost of 'organizing' production through the price mechanism is that of discovering what the relevant prices are.
In the 1950s, I proposed the survivor method of determining the efficient sizes of enterprises, and worked on delivered price systems, vertical integration, and similar topics.
I had become interested in economics, an interest that was transformed into a lifetime dedication when I met with the mathematical theory of general economic equilibrium.
In the mid-'60s in Berkeley, the theory of measure spaces of economic agents became one of my main interests.
A system where self-employment and self-finance was typical gave way to a system of companies having various business freedoms and enabling institutions. This was the 'great transformation' on which historians and sociologists as well as business commentators were to write volumes.
Labor was the first price, the original purchase - money that was paid for all things.