Tuesday, September 20, 2011

The Economic Theory of the Firm - 'What is a firm?; ' So could there be firms without corporate law?"Per Bylund - Mises Daily

What is a firm?

This may not seem like a question in lack of an answer. In the United States, as in most other countries, it is a registered, regulated entity acting legally as a person. But economically, the legal definition is irrelevant: the economic function of the "firm" is not its legal status — if it were, then the law rather than the organization would provide the market with that function.

So could there be firms without corporate law?

The answer is obvious: firms exist and are an important part of modern markets today just as they existed and provided a vital function before the law defined and certified such organizations.

Indeed, one can easily argue that corporate law is primarily about government taxation and regulation of the market — and defines the firm only as a means toward these ends.

Consequently, the..............................

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