A PROPOSAL FOR EXTENDING THE THEORY OF THE FIRM.

The article presents a proposal for extending the theory of a business firm. Traditional theory of the firm views the entrepreneur as a rational calculator of costs, prices, and profits, although for broader purposes of analysis, some notion of utility may be used. The firm is viewed as a point possessing certain properties which yield results desired for other areas of analysis. This firm was constructed Study of behavior within the firm would seem to be an appropriate domain for economic analysis, and recent developments give promise of fruitful results. Even Within the firm, much work needs to be done before an adequate theory can emerge. Following the control lines of standard costs through the budgets of the agent inferior and superior to the top echelons it may be possible to move into the equity and profit- and-loss accounts for the analysis of overall firm behavior. The characteristic entrepreneur-factor relation assumed in economic theory may be viewed as a type of organization, of a very primitive and simple kind.