Source: David Friedman’s Substack
by David Friedman
“How can decentralized coordination incorporate firms as well as individuals and still take account of costs and benefits to everyone? For the firm as well as for the individual the price it must pay for inputs, including labor, transfers to it the cost to others of it using them. For the firm as for the individual, the price it is paid for its outputs transfers to it the benefits to others of what it produces. But the decision makers, the executives and board of directors, are not, like the individual producer, collecting the difference between revenue and cost. What should they be maximizing in order for decentralized coordination to take into account the effect on everyone affected of decisions they make? How can we make it in their interest to do so?” (10/27/25)