‘Managerial’ theories represent a form of response to a number of long-established themes in the study of the business environment and business behaviour. These themes relate to the emergence of a managerial class of businessmen who have largely replaced owner-managers in the control of large enterprises; and to the weakening of capital market and product market pressures on such firms. The essence of Williamson’s model is that managers actually allow their expense preferences to influence the firm’s price and output policy. This is obviously a more radical interpretation than one in which managers maximise profit and then merely divert some of that profit into favoured uses. A student of the theory of the firm and a student of business finance might each be forgiven for expressing astonishment, on first encountering the literature of the other’s field of study, at the assumptions they would find relating to the firm’s objective.