Instead of writing the financing blog


I am trying to write some blogs on economics


It is hard to say whether I have totally understood the dominate viewpoint of the author


But I try repeat what I’ve learned from this paper, which the most fundamental elements of the firm and original idea.
Ok, as Steven described in his paper The Science of Demand, which also be read in the recent days, there are only two essential theories useful for explanation th phenomena of the real world.


One is scarcity causes competition.


The second is the Law of Demand.



The best price of market should be the most efficient way to organize the production and the trade in the world.


Price theory, which be taught to all the students in UCLA will be the most important extension of Law of Demand.


Inspired by R. Coase and due to the investigation in Hong Kong he writes an extent of the nature of the firm, which was called the contractual nature of the form.


In this paper the nature of a firm will be discussed and with the examples from the real world.


In the 60-70s of 20 century there were so many factories in Hong Kong, whose products are toys, T - Shirts…


The income of the workers is paid due to the piece-rate.


These arrangements of contract are also very common in the coast area of China from the beginning of the economic reform in 1980s till today.


The agency gets the offer from importer in e.g. in USA, they will find a factory to finish this Oder, and the boss of the factory will be paid by counting the finished products.


The workers, who mostly from the mountain village of west China, will finish each part of the product in the different process and paid by the piece-price.


How should the workers know the value of his work on each part of the product?


Could it be very low estimated by the boss from his own benefit?


Yes, it could be, should be and must be.


But with this hypothesis we can not explain the lack of workers in the early of this year.


The workers can vote with there feet.


All the labor-owner will find a fair price of his/her work.


The competition between the factory owners will help them.


I will not involve my personal moral to the study of the papers.


You can say that the worker stand on a weak side in negotiates with their boss and the information are not symmetric and give me basket examples of sweatshops.


Yes, including me.


But if I were a worker in a factory I will talk with my friends in different area via Handy.


Then I can make my decisions and I am preparing job-hopping.


Results are that the workers in the cost area could be fair paid in a certain extent.


It is very easy for the people, who are not economist, to understand why the workers not trade their labor with the end consumer.


Because it is really hard to finish a product by his/her own hands today in producing a simple daily product.


The cost could be very huge and not realistic.


My parents have a small restaurant in my hometown since my childhood.


It is so hard to organize the running of this restaurant.


It could be a wrong example.


But it helps the employees in the restaurant to find the price of their salary.


It could be really problematic for them to choose a right place, contact with different administrations, pay the cost of water, electric, material of food, equipments for cooking and the decorations in the dinning hall.  


Back to the paper of Cheung, the workers can also not buy integrant machines, which will be normally more than half million, even the rent for one day.


But it could also be another concept.


It is the rent of the machine, capital risk/rent.


Back again to the labor of workers, they can not sell there contribution for each product to the end consumer.


And the customers can also not recognize the price of this part.


They can not also negotiation with each worker with waste of ... time.


An exporter can not go to each factory to negotiate with every worker
Ridiculous…


Go to a polar case, the oldest professional also need an agency to reduce the transaction cost/risk. Few of them need a valuable machine, instruments...


It is again another thing, because of the illegal...


But to some extent the risk is also a transaction cost, right?


The emergence of a firm based on the cost for pricing equals the margin use right of labor of persons.


So they need a contractual arrangement


A quite upright enterpriser will benefit from his/her rent on machine, capital, intelligent decision and insight about the market and assume the risks.


It is quiet different from a product market or?


No, it is the same, in a product market there are also many agencies helps the consumer to reduce the transaction.


Alibaba, Amazon, eBay they are all focus on it and get a big success.