The Producer

Abstract

The first three chapters of this book have been primarily concerned with the operation of markets. Markets permit individual producers to pursue their own economic ends by serving the consumption needs of others. At the same time, they encourage and facilitate what is at the heart of the dynamic of capitalism: the development of an extended division of labour. Up to this point, however, we have neither considered in any detail how market processes actually influence producers nor, indeed, reflected upon the institution of the firm, the most common organizational form that capitalist production assumes. In this chapter and Chapter 5 we fill in these gaps. The present chapter provides an overview of the contribution that firms make to answering the basic economic questions of what to produce, how and for whom. Chapter 5 offers a common framework for analysing the different kinds of market structure in which firms are located. It also considers the extent to which firms actually match up to the ideals that conventional economics supposes that they follow. There are for example serious doubts about whether consumer sovereignty can prevail in the presence of firms with monopoly power. Monopoly power, the argument runs, permits the firm — rather than consumers — to direct the general course of production. It is in Chapter 5, then, that we begin to encounter some of the shortcomings of the market system.