ABSTRACT
The firm is characterized succinctly in the neoclassical paradigm in essence as a black box which connects factor and product markets and, in the course of this, maximizes profits. But business, the collectivity of private firms, is much more than that. It is our dominant institution, and it is revolutionary in character. Such an important social complex deserves far more than just black box status. What is attempted in this chapter is to present some idea of the nature of the
firm. The first section gives a gloss of some of the work of the major "institutional economists"-Thorstein Veblen, John R. Commons, and Wesley C. Mitchell. Some of their work was on aspects of the activities of firms and related governmental activities. The second section covers some models of neoclassical economists interested in the emergence of the firm. The third considers how the firm differs from the market as the allocator of scarce resources. The fourth section is on the "culture of the firm," a subject of recent interest particularly to economists in schools of business attempting to understand the differences between productivity in firms in the United States and other countries. The final section involves what I am brash enough to describe as an updating of Alfred Marshall's "representative firm." Marshall's firm was representative in terms of its cost functions. The updating exploits empirical cost and demand studies.
