The firm, property rights and methodological individualism: some lessons from J.S. Mill

Journal of Economic Methodology 19 (4):339-355 (2012)
In modern economics, the firm is a means of overcoming the inefficiencies generated by transaction costs and incomplete contracts. Its boundaries, therefore, are the means by which the efficiency of competition can be salvaged. Whether or not agents feel comfortable with the values which underlie various ownership structures remains outside this theory. Moreover, the working of different ownership structures is entirely based on the presumption that agents' motivation (as opposed to incentives) will remain constant. This, of course, is typical of methodological individualism where the analysis is one directional: from the agent to society. However, methodological individualism does not have to be confined to such narrow analytical conceptions. It would still be methodological individualism if social institutions would feedback into the behaviour (motivation) of agents. The main purpose of this paper is to show that a more socially conscious methodological individualism was employed in the analysis of the firm by classical economists like J.S. Mill. I will show that Mill was acutely aware of the significance of the proximity of ownership to the productivity of the operator. However, he was also aware of the function of the larger social context within which the operator worked. While Mill recognised the technological benefits of larger operations (corporations), he also recognised that in an environment where the system repeatedly fails the expectation of the larger body of workers, the gains from large enterprises may be completely undermined. Given Mill's general belief in the progress of humanity and in the possible improvement in the characteristics of individual members of society, he thought that in the future, such large enterprises may work well if ownership was given to all those engaged in the production process. While the work of J.S. Mill is clearly incomplete, he has rightly drawn attention to the neglected interrelationship between social arrangements and economic agents. In this respect, he offers a far more comprehensive insight into the possible cause and boundaries of the firm.
Keywords No keywords specified (fix it)
Categories (categorize this paper)
DOI 10.1080/1350178X.2012.741796
 Save to my reading list
Follow the author(s)
My bibliography
Export citation
Find it on Scholar
Edit this record
Mark as duplicate
Revision history Request removal from index
Download options
PhilPapers Archive

Upload a copy of this paper     Check publisher's policy on self-archival     Papers currently archived: 24,442
External links
Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
Through your library
References found in this work BETA

Add more references

Citations of this work BETA
Armin W. Schulz (2015). Firms, Agency, and Evolution. Journal of Economic Methodology 23 (1):57-76.

Add more citations

Similar books and articles
Eric Mack (1999). In Defense of Individualism. Ethical Theory and Moral Practice 2 (2):87-115.
Andrew Gustafson (2009). J. S. Mill's Communal Utilitarian Self. International Philosophical Quarterly 49 (2):173-184.
Marco Buzzoni (2004). Poppers Methodologischer Individualismus Und Die Sozialwissenschaften. Journal for General Philosophy of Science / Zeitschrift für Allgemeine Wissenschaftstheorie 35 (1):157-173.
Stephen Nathanson (2005). John Stuart Mill on the Ownership and Use of Land. Philosophy in the Contemporary World 12 (2):10-16.
Dale E. Miller (2003). Mill's `Socialism'. Politics, Philosophy and Economics 2 (2):213-238.
Henry Jackman (1998). Individualism and Interpretation. Southwest Philosophy Review 14 (1):31-38.

Monthly downloads

Added to index


Total downloads

8 ( #467,798 of 1,925,097 )

Recent downloads (6 months)

3 ( #254,993 of 1,925,097 )

How can I increase my downloads?

My notes
Sign in to use this feature

Start a new thread
There  are no threads in this forum
Nothing in this forum yet.