The Elgar Companion to Social Economics
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The Elgar Companion to Social Economics

Edited by John B. Davis and Wilfred Dolfsma

As this comprehensive Companion demonstrates, social economics is a dynamic and growing field that emphasizes the key role that values play in the economy and in economic life. Social economics treats the economy and economics as being embedded in the larger web of social and ethical relationships. It also regards economics and ethics as essentially connected, and adds values such as justice, fairness, dignity, well-being, freedom and equality to the standard emphasis on efficiency. The Elgar Companion to Social Economics brings together the leading contributors in the field to elucidate a wide range of recent developments across different subject areas and topics. In so doing the contributors also map the likely trends and directions of future research. This Companion will undoubtedly become a leading reference source and guide to social economics for many years to come.
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Chapter 18: Firms: Collective Action and its Supportive Values

Helena Lopes and José Castro Caldas


Helena Lopes and José Castro Caldas 1. Introduction Firms have always been a source of embarrassment to mainstream economics. In the past the problem was that an explanation for their existence was missing. In fact, Adam Smith had identified the division of labour as the key to the wealth of nations, and noted that it could be achieved either in the market or within the pin factory. But while he elaborated extensively on why the division of labour was dependent on markets, he did not feel the need to explain why specialization, rather than market mediated, was sometimes effected within the pin factory. Two centuries later Coase (1937) identified this blind spot in Smith’s legacy. He perceptively noted that for a theoretical account that depicted the ‘normal economic system’ as one that ‘works itself’ in the absence of any type of central control, firms would remain abnormal facts unless an explanation were provided for their very existence. Coase did indeed advance such an explanation. However, instead of just filling a gap in Smith’s legacy, thus helping economics to move forward, he opened a Pandora’s box. In fact, what came after Coase was not just the elaboration of his approach, but multiple and conflictive theories. For mainstream economics, today, what is perceived as a deficiency is not the lack of a theory of the firm but the absence of a unified approach (Garrouste and Saussier, 2005). In this chapter we recall and briefly analyse...

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