Economic theory and organizational analysis

THE PURPOSE of this book is to consider two types of theoretical approaches that are closely related: microeconomic theory and organizational analysis, with emphasis on the latter. Microeconomic theory is a well-developed subject and only the elements of that theory need be presented here to be able to contrast the two approaches and, where possible, to compare some of their results. Organization theory, on the other hand, is not well developed, and consequently a considerable portion of this book will be devoted to the development of a theory of organization built on the foundation of a few critical ideas.

There was a time when economists attempted to write comprehensive treatises, but the expansion of the field makes such attempts exceedingly difficult and, in an important sense, unnecessary. In order to appreciate a scheme of analysis, one need not know all the possible variations nor all the conceivable applications of a given analytical technique. The technique can usually be understood by a consideration of a limited number of examples.