The Firm Intensive System: Economic Challenges and Agent Responses in US, EU, Japan

S. I. Cohen
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S. I. Cohen: Erasmus University

Chapter 3 in Economic Systems Analysis and Policies, 2009, pp 54-106 from Palgrave Macmillan

Abstract: Abstract Historically, the rise of economics as a science about two and a half centuries ago in Europe coincided with the beginning of the firm intensive economic system (FIM). This coincidence is not an accident. It is a natural outcome of scientific reflection on emerging realities. While economics started as, and continues to be, the study of transformation processes that result in a value added at a lower cost, economic thought usually focuses on profit maximizing firms and allied markets as the main behavioural economic settings. It is in these firms and markets, where most transformation processes take place, where economic agents inhabit most and where economic behaviour is displayed, learned and spread by the agents to other settings. The industrial revolution in Europe made an end to home production as a major economic setting and opened the way for firms and markets to dominate the economic system. The firm intensive system can be described as one in which profit maximizing firm settings are the focal points. Firms, led by entrepreneurs, invest capital, hire labour and transform goods into higher values at lower cost, and exchange the goods in allied markets for real money — that is used to realize more exchanges. Firms strive towards maximization of profits, and agents labouring in the firms take over this economic behaviour and follow suit by maximizing their utility in their role as consumers.

Keywords: Corporate Governance; Economic System; Market Failure; Industrial Policy; Negative Externality (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-23411-6_3

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DOI: 10.1057/9780230234116_3

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