Our task is to attempt to discover why a firm emerges
at all in a specialised exchange economy. The price
mechanism (considered purely from the side of the direction
of resources) might be superseded if the relationship which
replaced it was desired for its own sake, This would be
the case, for example, if some people preferred to Work
under the direction of some other person, Such individuals
would accept less in order to work under someone, and
firms would arise naturally from this. But it would appear
that this cannot be a very important reason, for it would
rather seem that the opposite tendency is operating if one
judges from the stress normally laid on the advantage of
“being one’s own master?" Of course, if the desire was
not to be controlled but to control, to exercise power over
others, then people might be willing to give up something
in order to direct others; that is, they would be willing
to pay others more than they could get under the price
mechanism in order to be able to direct themr But this
implies that those who direct pay in order to beable to
do this and are not paid to direct, which is clearly not true
in the majority of cases.’ Firms might also exist if purchasers
preferred commodities which are produced by firms to
those not so produced; but even in spheres where one
would expect such preferences (if they exist) to he of negligible
importance, firms are to be found in the zeal world.“
Therefore there must be other elements involved.