Why Bosses Don't Wear Bunny Slippers: TAITC
The Answer Is Transaction Costs
00:00
Transaction Costs Define Firms
Firms exist primarily to minimize transaction costs rather than to respond directly to market prices. In a production setting, individual actions are dictated by managerial orders, highlighting that bosses often exert more influence than prices. While profit and loss serve as feedback mechanisms for decision-making within firms, they operate within a broader market context. The inefficiencies of individually auctioning goods or services underscore the necessity of structured organizations, where coordination among tasks is paramount.
Play episode from 06:25
Transcript
