Published in 2009 by Cambridge University Press, 'The Economic Nature of the Firm: A Reader' is a book edited by Randall S. Kroszner and Louis Putterman. It serves as a comprehensive collection of readings that summarize the economic field investigating the nature of the firm. The book compiles key texts addressing fundamental questions about why firms are structured and owned in particular ways.

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A fundamental question in the economics of the firm investigates why the predominant organizational structure involves capital owners hiring workers, rather than the alternative model where workers own the firm and rent the necessary capital. This question has been practically explored throughout history, with many attempts to establish alternative business models like worker-owned cooperatives.

The Question of Firm Ownership and Structure: Why Capital Hires Labor

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

Based on his belief that worker education and political empowerment would increase, John Stuart Mill predicted the eventual decline of the traditional employer-employee relationship. In *The Principles of Political Economy* (1848), he wrote that this structure would be 'gradually superseded by partnership … perhaps finally in all, association of labourers among themselves.' This suggests a slow transition towards alternative models like worker-owned partnerships and cooperatives, which he believed would eventually become the dominant form of business organization.

John Stuart Mill's Prediction on Business Organization Evolution

John Stuart Mill (1806–1873) was a prominent 19th-century philosopher and economist whose work championed individual freedom. This theme is central to his 1859 book *On Liberty* and also informed his economic analysis. In his 1848 work, *The Principles of Political Economy*, he applied this philosophy to critique the typical firm structure, arguing it was an 'affront to freedom and individual autonomy' for workers.

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