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

Published online by Cambridge University Press:  12 February 2018

Jooho Lee
Jooho Lee*
Affiliation:
Pepperdine University
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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.

Keywords

theory of the firmhierarchyautonomylaw and economicscorporate governance
Type
Article
Information
Business Ethics Quarterly , Volume 28 , Issue 2 , April 2018 , pp. 153 - 173
Copyright
Copyright © Society for Business Ethics 2018 

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