When is privatisation of services reasonable and when is it unreasonable? Why are there firms – rather than millions of independent contractors who trade goods and services markets? How does the impossibility of a complete contract affect productivity and production methods and efficient ownership? If firms exist because of organisational efficiencies, why isn’t there just one big relatively benevolent productive firm?
Most people hold ideological views about the nature of firms, contracts and boss-worker relations without really understanding their essence. Dowlphin’s ex roommate and good friend at graduate school has won the Nobel Prize in Economics for his work on answering these questions. This 2007 LSE podcast carefully explains the conditions under which it is best to outsource or to employ workers – using the insights of Behavioural Economics (i.e. psychology of economics), simple arithmetic and meticulous logic.
The lecture requires attention. I would not normally upload it circumstances because it is for aficionado and not public consumption, but I have uploaded it because the Economics is beautiful and because I am proud to have been considered one of his good friends.