I hear that there is an apparent paradox which economists have studied: If free markets are so great, why is it that the most successful corporations/businesses/etc. are top-down hierarchical planned economies internally?
Yeah, economists study this under the name “theory of the firm”, dating back to a 1937 paper by Ronald Coase. (I see that jmh also mentioned this in his reply.) I remember liking Coase’s “transaction cost” solution to this puzzle or paradox when I learned it, and it (and related ideas like “asymmetric information”) has informed my views ever since (for example in AGI will drastically increase economies of scale).
Corporations grow bit by bit, by people hiring other people to do stuff for them.
I think this can’t be a large part of the solution, because if market exchanges were more efficient (on the margin), people would learn to outsource more, or would be out-competed by others who were willing to delegate more to markets instead of underlings. In the long run, Coase’s explanation that sizes of firms are driven by a tradeoff between internal and external transaction costs seemingly has to dominate.
Yeah, economists study this under the name “theory of the firm”, dating back to a 1937 paper by Ronald Coase. (I see that jmh also mentioned this in his reply.) I remember liking Coase’s “transaction cost” solution to this puzzle or paradox when I learned it, and it (and related ideas like “asymmetric information”) has informed my views ever since (for example in AGI will drastically increase economies of scale).
I think this can’t be a large part of the solution, because if market exchanges were more efficient (on the margin), people would learn to outsource more, or would be out-competed by others who were willing to delegate more to markets instead of underlings. In the long run, Coase’s explanation that sizes of firms are driven by a tradeoff between internal and external transaction costs seemingly has to dominate.