Handbook on the Economics and Theory of the Firm
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Handbook on the Economics and Theory of the Firm

Edited by Michael Dietrich and Jackie Krafft

This unique Handbook explores both the economics of the firm and the theory of the firm, two areas which are traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created.
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Chapter 3: Marx

Ugo Pagano


Ugo Pagano 3.1 INTRODUCTION The capitalist firm plays a central role in the Marxian analysis. On the one hand, anticipating Coase and the institutional literature, Marx saw the firm as an organization alternative to the market. Comparison between the anarchy of the market and the deliberate order of the firm induced him to extol the latter and to propose its extension to society as a whole. On the other hand, according to Marx, the firm was the key locus where labour exploitation and alienation were perpetrated and he criticized the detailed division of labour introduced under capitalism. His model of communism, to be realized after single-firm socialism, was meant to overcome the depressing human condition existing in the capitalist firm. Thus, the Marxian treatment of the firm can be divided under two headings: the firms vs markets issue and the criticism of alienated labour. We will start considering these two points separately. We will later consider the relevance that, in spite of their contradictions and limitations, both points still bear for the modern theory of the firm. 3.2 FIRMS VS MARKETS Besides being a political proposal, single-firm socialism was, according to Marx, a historical necessity imposed by the development of productive forces. The firm’s greater efficiency (relatively to markets) had already been evinced by the growth in firms’ size during capitalism, and productive forces exerted strong pressure for their further growth. By eliminating private property, socialism did nothing other than complete an inevitable process of concentration, whose onset was ‘scientifically...

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