Firm, John Roberts Argues Primary Purpose Firm

¶ … Firm, John Roberts argues primary purpose firm ' coordinate motivate people's economic activity'

There is a great deal of evidence that indicates that the typical contention of neoclassical economic theory -- that markets are the primary source of authority in regulating transactions -- has largely been replaced by organizations which provide the bulk of this essential function. Specifically, works of literature by John Roberts (The Modern Firm) and Herbert Simon ("Organizations and Markets") prevail upon the reader that business activity is largely determined by organizations, which provide key sources of motivation and coordination of larger, market-wide efforts. The author's conviction in demonstrating this point takes on immense significance for the prudent management student who wants to effectively help his or her organizational achieve its objectives.

The most convincing piece of evidence for the prevalence of organizations as the principle determinant in business activity is discussed within Roberts' text. There is an interdependence that individuals of production and consumption have for one another, for the simple fact that "no one produces by herself all the things she needs…to survive" (Roberts 2007, p. 74). This passage refers to the fact that organizations have become the contemporary form of individuality, at least as it was regarded in neoclassical economic theory, due to the simple fact that they are comprised of separate people who all have varying needs of consumption yet are working dependently with one another to achieve common goals of production. It is due to this fact that Roberts observes "in most contexts in a modern economy, an individual in her job actually produces nothing that she wants personally to consume" (Roberts 2007, p. 74). Thus, it becomes clear that the coordination of efforts for business activity largely occurs at the organizational level, for the simple fact that these entities are comprised of individuals and unify their efforts to produce.

The way that they motivate people to unify efforts towards production is by allowing them a means to consume. Simon's text provides a number of rich, salient examples of how organizations are able to provide this essential function for its individuals, which helps to sufficiently motivate them to assist the organization in achieving its objectives. The author's positing of "new institutional economics" (Simon 1995, p. 274) provides the answers for the keys to such motivation, although it largely hinges upon the basis of the employment contract which neoclassical theory points to as well. IN attempting to compose an organizational theory of economics to replace the traditional view of market theory as the most salient means of conducting business, Simon discusses the notion of "utility function" (Simon 1995, p. 279) which deals directly with the reason why employees are motivated to assist organizations in achieving their desired ends. One of the chief distinctions between neoclassical theory and new institutional economics is that the latter providers a significant greater number of reasons or "exogenous parameters" (Simon 1995, p. 275) to explain the benefits of an employee contract. These reasons are best explained as "four organizational phenomena whose roles are amply documented in the literature on organizations: authority, rewards, identification, and coordination" (Simon 1995, p. 279).

Of these four factors for motivation that organizations supply, the most tangible to many individual employees is the system of rewards. Such a system helps to provide an impetus to distinguish between employees who are attempting to shirk their responsibilities and merely collect a paycheck, and those who honestly want to aid an organization in reaching its objectives. The reason those attempt the latter of these options is because helping the organization achieve its objectives helps them to achieve theirs, mainly the procuring of necessities to help them consume. Rewards include promotions (which is linked to the factor of authority, since promoted employees enjoy more authority), as well as raises, bonuses and attractive benefits packages. These incentives, when combined with the authority, identification and coordination, provide the motivation for employees to help an organization, which helps the organization to produce greater quantities more efficiently.