Why Are Firms?

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Firms are institutional devices for dealing with transaction costs. Caustin, we can talk in more detail about exactly what his theory about that of the firm was. But it's interesting that cose wrote that paper inithe nature of the firm. He wrote in 19 31. So he was 21 years old when he wrote a paper for which he won the nobele prize 70 years later.

Don Boudreaux of George Mason University and Cafe Hayek talks with EconTalk host Russ Roberts about the intellectual legacy of Ronald Coase. The conversation centers on Coase's four most important academic articles. Most of the discussion is on two of those articles, "The Nature of the Firm," which continues to influence how economists think of firms and transaction costs, and "The Problem of Social Cost," Coase's pathbreaking work on externalities.