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Contracts and Hierarchies: A Moral Examination of Economic Theories of the Firm

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  • Lee, Jooho

Abstract

An influential set of economic theories argue that the firm is a nexus of contracts that institute a hierarchy to overcome the problems of incomplete contracting in the market. However, the economic theory of the firm as a hierarchy violates the moral requirement to respect the autonomy of those who contract into the firm. The internal logic of the theory depends on a morally unacceptable abdication of a part of the employee’s capacity to set her own ends in the future. So a different theory is needed to understand the nature and purpose of the firm. The development of such a theory can benefit from business ethicists engaging with existing economic theories of the firm to explore concepts like contracts, agency, and property.

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  • Lee, Jooho, 2018. "Contracts and Hierarchies: A Moral Examination of Economic Theories of the Firm," Business Ethics Quarterly, Cambridge University Press, vol. 28(2), pages 153-173, April.
    • Handle: RePEc:cup:buetqu:v:28:y:2018:i:02:p:153-173_00
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    Cited by:

    1. Daniel Halliday, 2021. "On the (mis)classification of paid labor: When should gig workers have employee status?," Politics, Philosophy & Economics, , vol. 20(3), pages 229-250, August.
    2. Valentinov, Vladislav & Roth, Steffen, 2022. "Chester Barnard’s theory of the firm: An institutionalist view," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 56(3), pages 707-720.

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