Why do we have firms? Essay

            Without really taking sides and setting aside political lenience, an objective view point of economy is that macro-economic phenomena cannot be an immediate spin – off of actions and reactions.  At most, things could try and get either rapidly accelerated or rapidly decelerated.  It is not right to forget that people are no longer living in an isolated world but in a highly inter-connected economy.  It is truer today that America would sneeze if Japan catches a cold.  No country can truly isolate its economy from global phenomena. However, it is definitely true that presidential thoughts and actions will sow seeds for economic growth stability or otherwise.  But, largely it cannot be directly attributed to the Presidential actions alone.  In a democracy, where elected leaders keep changing ever so often it is the thought leaders in bureaucracy that actually run the nations and their economies.  Elected leaders only provide broader thought leadership and possibly a responsibility for either corrective action in downfalls by their bold initiatives or may sow seed for drastic downturns.

Why do we have firms?

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            There is a very old belief that all areas of study converge at a specific level of depth.  Coase theory goes on to prove the convergence of economic, legal jurisprudence, management accounting, and costing profitability of an organization at a micro-economic level (DR, 2008).  A firm understanding of micro-economic functioning of firms at a unit level gives a much broader perspective of macro-economic mechanisms.  The very fact that transaction costs have been highlighted indicates the cause of “friction” which is more beneficial “friction” in the market dynamics.  Taking a contrarian standpoint and looking at theory more critically – is it not something that is being discussed from eons in the costing text books – old wine in new bottle? This may sound cynical but everyone has a right to perspective and I have mine however significant or insignificant.

DR, K. B. (2008, 02 02). Professor – ICFAI Business School. (R. V, Interviewer)

nobelprize.org. (1991, Ocotber 15). Press Release. Retrieved Janauary 23, 2009, from NobelPrize.org: http://nobelprize.org/nobel_prizes/economics/laureates/1991/press.html

washingtonpost.com. (2001). washingtonpost.com. Retrieved January 23, 2009, from washingtonpost.com: http://www.washingtonpost.com/wp-srv/flash/business/econ/economics.html