The Political Nature of the Firm and the Cost of Norms.

Political theorists are increasingly interested in understanding how firms are analogous to, or extensions of, government and the kinds of normative standards this implies. This is a welcome development. These theorists, however, have not appreciated how indispensable “transaction cost economics” is for understanding the firm. While transaction cost economics helps us see how a political theory of the firm can still be consistent with a concern for allocative efficiency, it also suggests that efficiency cannot be ignored when articulating a political theory of the firm. For firms to be viable they must facilitate economic activity more efficiently than the market can; efficiency is therefore a constitutional value of firms, which implies a significant discontinuity and disanalogy between firms and government. In light of this, I specify the kinds of questions political theories of the firm ought to address and the realm within which such theorists ought to stake their claims. [ABSTRACT FROM AUTHOR]