In response to my observation
>> So if capitalists *can* sometimes contract directly for the labor services >> they seek, why do they typically not do this, opting instead for the more >> indirect and costly route of purchasing simply labor power, and then >> overseeing its exercise in the context of capitalist production? I >> suggested that in those cases contractual incompleteness was a sufficient >> hindrance to preclude using simple contractual means to attain the desired >> labor outcomes. A corollary of this observation is that, hypothetically, >> if there were no contracting difficulties, purchasing labor power and >> subsuming it in capitalist-controlled production would be >> unnecessary. However, obviously, it's not necessary assume that there are >> no contracting frictions in the empirical cases where capitalists do >> contract for labor services or make loans at interest to value producers.
David S. writes:
Is not the question answered by Coase's theory of the firm, or is Coase answering a different question?
No, it's the same question, concerning incomplete contracting and its consequences. But Coase's answer doesn't contradict what I've written above, because in his story authority relations are a contingent response to contractual incompleteness, based on balancing the marginal benefits and marginal costs of replacing market transactions with authority relationships. Thus Coase's theory allows that not all transactions must proceed on this basis, even if some do. Gil
