From the Firm to Economic Integration
- New Thinking in Political Economy series
Chapter 2: Firm or market: where are the limits?
The aim of the present chapter consists in evaluating to what extent the use of the main principles of economic theory can help in understanding the working of social organizations – more precisely enterprises – and the working of markets, namely these abstract places on which economic agents meet. In fact, one is too often tempted to use mechanistic approaches which are assumed to describe the working of entities which are artificially endowed with reason and will, although one can understand their working only by taking into consideration the behavior of individuals who are concerned by their working. From this point of view, one ought, for instance, to avoid doing statements such as “the firm is deciding” or “the firm is innovating,” but also “the firm is paying taxes,” and so on. It is true that one uses such statements for obvious language facilities, but in so doing, one runs the risk of using what Ayn Rand called “floating abstractions” – terms not clearly related to reality – and thus forgetting the human reality which is hidden behind this linguistic fiction. As a consequence, one uses the same term to mention the capitalist firm – which we will analyze later on – and a Soviet-type firm, which ought rather to be called a “productive organization.”
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