Munger on the Nature of the Firm

Mike Munger talks about why firms exist. If prices and markets work so well in steering economic resources, then why does so much economic activity take place within organizations that use top-down, centralized structures called firms? Within a firm, most of the goods and services that the workers use are given away rather than allocated by prices. Munger's answer, drawing on work of Ronald Coase, is a fascinating look at the often unseen costs of making various types of economic decisions.

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