Proceeding from an understanding of the Walrasian/Paretian firm as a competitive/cooperative endeavor, assembling factors of production owned by diverse households in an effort to expand on the meager returns of subsistence/autarkic production, our approach to the firm has consistently been advanced under the shadow of a relentlessly conspicuous absence. Emphatically, where is the entrepreneur in our story? I have endeavored to argue that a true Austrian Neoclassical account of capitalism necessarily makes space to recognize that, if risky, uncertain ventures in productive roundaboutness/investment of capital are to take place, there must be some agent willing to shoulder the risk with the prospect that a sudden change in market conditions might render a capital investment wholly worthless. I will subsequently present the more characteristically Marshallian articulation of entrepreneurial returns to uncertainty advanced by, among others, American economist Frank Knight. Finally, in the Classical tradition, a substantial legacy of respect for the risk-taking behavior of the entrepreneur exists in Adam Smith's Wealth of Nations, in David Ricardo's Principles of Political Economy and Taxation, in J.S. Mill's writings on political economy, and, even, in Karl Marx's Capital. And yet, I have here asserted that the entrepreneur falls entirely out of Walrasian/Paretian theorizations of the firm. In this regard, I am committing this short section to defend my thesis and argue that, notwithstanding any statements from Léon Walras or Vilfredo Pareto to the contrary, the entrepreneur has no discernible role within a general equilibrium economy and that firms within general equilibrium economies are entirely reducible to their production technologies/production functions and the collaborative contexts within which they assemble individual, autonomous household agents, through the dual, complementary workings of competition/cooperation.
Emphatically, neither Walras nor his theoretic forebears in the development of French political economy, from le Sieur de Boisguilbert in the 1690s to Antoine-Augustin Cournot in the 1830s, was oblivious to the importance of entrepreneurship in the organization of economic activity. Long before the French Revolution had vigorously applied nails to the coffin of feudal economy, the question of how to generate and sustain the initiative of individuals in undertaking fundamentally risky economic projects arises in the writings of the same French economic thinkers that motivated Walras' efforts to systematize a theoretic approach to general equilibrium economics in the 1870s. Definitively, a century before Walras, Smith's contemporary and Louis XVI's first contrôleur général des finances Anne-Robert-Jacques Turgot argued that, within an integrated system of market exchange, agricultural proprietors sustained an unassailable role as first-movers of all economic activity and that social progress in the creation and accumulation of landed property transformed land holders into agricultural entrepreneurs, transforming less capable, industrious, frugal, or simply fortunate cultivators into their hired hands. In this regard, Turgot introduces an unmistakable class dynamic into the relations between land owners and cultivating lessees that both reflected his own influences and shaped the theories of subsequent French economists - the fact that Turgot labeled non-cultivating land owners as a non-productive, "disposable"/disponible class could only have nurtured the negative evaluations on land owners evident a generation later with Walras' father, Auguste, who then passed on his ethical prejudices against land owning to his son (see A-R-J Turgot (1766), Réflexions sur la formation et la distribution des richesses, chapters V, IX-XIII, XV, McMaster University Archive for the History of Economic Thought at: http://socserv2.socsci.mcmaster.ca/econ/ugcm/3ll3/turgot/reflfr.htm). The main theme that I mean to emphasize with Turgot, however, concerns the idea that progressive economic development demands the initiative that can be found as land owners consolidate property holdings and demand the highest possible returns on their investments in cultivation.
A century later, Walras, writing in the wake a tradition of political economy that conceded of necessity a certain privileged role for initiative and direction/supervision in economic activity, could not entirely avoid the entrepreneurial concept. In fact, he commits two lessons in his Éléments d’économie politique pure to situate the entrepreneur within his larger model of equilibrium in production. However, over the course of this treatment, Walras' relegation of a place for the entrepreneur appears wholly superfluous and unnecessary within his larger model. Rather than conceiving of an independent and autonomous agent of production, in possession of privileged knowledge on the assemblage of production factors into profit maximizing combinations, willing to take the risk of tasking households to provide factors in the production of commodities that may or may not find a market at a desired price, Walras advances the portrait of a largely irrelevant, dependent agent for whom, under theoretically ideal conditions, no rate of return for the services of entrepreneurial activity will obtain. A crucial differentiation is evident here, as across the larger account presented in this document, between the theoretic ideal and real firms. Walras appears to acknowledge that, for real firms, entrepreneurship is an absolutely essential component in determining the viability and sustainability of collective production, but, under the particular operative conditions of a theoretic general equilibrium economy, at the level of individual firms, the necessity of the entrepreneur is vacated. In its place, we get the cooperative/competitive story of tâtonnement, where a set of households with diverse factor endowments come together to produce goods and services, exchange them with other households as needed to maximize their respective utility functions, and distribute the gains from cooperation and exchange in mutually beneficial ways. At length, Walras makes the point quite explicitly:
This state of equilibrium in production is, like equilibrium in exchange, an
ideal state and not real ... But it is the normal state in the sense it is the state
which activity tends to approximate under free market competition applied to
production as to exchange ... We can further, in the state of production
equilibrium, abstract from the intervention of the entrepreneur and consider
not simply productive services exchanging for finished products or finished
products exchanging for productive services, but also consider productive
services, ultimately, exchanging between each other.
Thus, in the state of production equilibrium, entrepreneurs neither
benefit nor lose. They therefore subsist not as entrepreneurs, but as land
owners, workers, or capitalists, in their own enterprises or others. I
suppose that, to establish his real worth, an entrepreneur who is owner of
the land he exploits or occupies, who participates in the direction of his
enterprise, and who has capital invested in its operations, should deduct his
general costs and credit to himself a share of (land) rent, a salary for his
labors in direction, and a share of interest on the capital he has invested,
each calculated at market rates, and, to the extent that he subsists, as an
entrepreneur per se, he would neither gain nor lose. (Léon Walras (1874),
Éléments d’économie politique pure, 231-232 (translation my own).
Lausanne, Switzerland: Imprimerie L.Corbaz and Co., accessed online from
Google Books (http: //books.google.com/) , 27 Dec. 2015)
In these terms, I consider myself justified, at least in relation to Walras' core theory of general equilibrium, in expunging the entrepreneur from my theorization of a Walrasian/Paretian firm. As an integrated, multi-level market structure, a general equilibrium economy, in a pure Walrasian mold, is always just a cooperative/competitive project between households with no necessary functional place for an instigator.
In regard to Pareto, as Walras' most prodigious and influential student and colleague, the relevance of entrepreneurship appears at least somewhat more complicated. Roberto Marchionatti and Enrico Gambino argue persuasively that Pareto's insistence on variable factor coefficients in the profit maximization/cost minimization, as a means of closing the gap between theoretic abstraction and real economic practice through successive approximation, opens a space for entrepreneurial practice beyond strict reliance on technological constraints (see Marchinonatti and Gambino (1997), "The Contributions of Vilfredo Pareto to the New Theories of Economics in the Years of the 'Cours d'Économie Politique'," in History of Economic Ideas, Vol. 5, No. 3, 49-64, downloaded from JSTOR (27 Dec 2015), at: http://www.jstor.org/stable/23722575). That is to say, Pareto's more consistent desire to link general equilibrium theory to real economic practice forces him to acknowledge, in ways alien to the pure logic of Walras' Éléments, that real firms were directed by real entrepreneurs who possessed a functional role in determining, among other things, the mix of production factors to be rented from households in order to maximize profits.
If we have to acknowledge that, in certain ways, Pareto's departure from strict reliance on linearly homogeneous production functions with fixed coefficient values makes the operation of production equilibrium more complicated and more conducive to overall direction/supervision, I am nonetheless reluctant to introduce an entrepreneur into my account of the Walrasian/Paretian firm, because, generally, it would introduce a degree of epistemic empiricism that I have sought to downplay in my overall treatment of general equilibrium economics as a rationalist theoretic construct and, on a more detailed level, it would unnecessarily complicate the process of production equilibrium without necessarily adding anything to a system rigorously grounded in tâtonnement. In the end, if production coefficients readjust with dynamic technological transformations, then autonomous household agents on the production side could instantaneously adjust to such changes to arrive at new equilibria without the benefit of entrepreneurial direction. At stake here is not a set of formal specifications on function roles but a larger way of thinking about how integrated economic systems are organized and for whose benefit they operate. For my purposes, the autonomy and capacity for cooperation/competition of utility maximizing household agents remains at the heart of general equilibrium economics regardless of Pareto's attempts to generate theories of general equilibrium that could benefit from a deeper empirical connection to real economies.
Moreover, as Marchionatti and Gambino further argue, the Paretian legacy in general equilibrium theory introduces a strong degree of ambiguity on the role of markets as distributive institutions, not otherwise evident with Walras, subsequently exploited by Paretian theorists like Oskar Lange to defend socialist institutions of centralized planning of production and consumption. Debates arising over the course of the 1920s and 1930s between Paretian defenders of socialist planning (Lange and the American Paretian Abba Lerner) and Austrian defenders of free market mechanisms (Ludwig von Mises and Friedrich Hayek), ultimately grounded on the problems of obtaining, consolidating, and integrating information into the organization of production and consumption, demonstrate the systemic substitutability of the entrepreneur, both for Pareto and for his students. In market systems, characterized by recurring uncertainties in the demand for goods and services along extensive supply chains with divergent temporal horizons in investment and production, entrepreneurial agents embody a substantially different functional role relative to state bureaucrats, in centrally managed distributive systems where, on the basis of information collection, bureaucrats determine a priori what goods and services will be supplied to households. Ultimately, the Paretian conflation of market-oriented entrepreneurs and state planning bureaucrats demonstrates a fundamental devaluation of the entrepreneur in relation certain other Neoclassical approaches and, even more clearly, in relation to the Classical treatment of entrepreneurship.
Concluding, the various perspectives on the entrepreneur arising in the writings of Walras and Pareto raise questions regarding certain assumptions of general equilibrium economics. Most notably, Walras' virtual elimination of a functional role for the entrepreneur becomes conceivable, on an abstract level, if we accept the idea that household agents continuously embody perfect information, not only about production technologies but, equally important, about their own needs and desires in consumption. As such, we will, at the appropriate time, need to consider the problems of need and desire in the context of household consumer choice, if only to critique the Walrasian/Paretian perspective that resides at the heart of general equilibrium economics. For now, the problem we face relates specifically to the primacy of the entrepreneur as an intermediary agent linking diverse households that lack complete information on how to produce the goods and services they want and/or simply how to determine what it is that they really want. If household agents continuously know precisely what they want to consume and have detailed knowledge on the availability of consumption articles across a larger integrated economic system, then we do not need entrepreneurs to collect information on these needs in order to translate them into consumable inventories - households will achieve these tasks on their own. They will, likewise, know precisely how to combine household factors of production to most efficiently produce goods and services, taking full advantage of heterogeneous factor endowments across discrete households. To the extent that perfect information remains a critical problem to Walrasian/Paretian general equilibrium theory, the functional role of the entrepreneur appears as the unexploited source of a potential, if imperfect, resolution. To the extent that we remove the entrepreneur from consideration, we, thus, leave the Walrasian/Paretian theory of the firm with an unrealistic and unpersuasive perspective on the capacities of household agents to assemble and utilize information on both production and consumption.
Elasticity in Output Supply and Factor Demand, the Financing Constraint, and Monetary Neutrality
This concluding section of my critique represents an attempt to tie up a handful of related, residual very loose ends in the theoretic account presented in this document. Specifically, following from our restriction of production functions to linearly homogeneous forms characterized by constant returns/constant costs and our assumptions of perfect competition between all firms in all industries and perfect information, I draw market supply schedules in output markets and market demand schedules in factor markets that are universally perfectly elastic.
A number of separate considerations enter into my defense of this practice. First, if production functions for all firms are continuously differentiable and linearly homogeneous, then firms will always be able to arrive at a unique profit maximizing/cost minimizing factor combination where marginal productivity factor pricing results in product exhaustion. Under these conditions, production costs will be invariant to differences in scale. Thus, every individual firm will operate with a perfectly elastic (flat) supply schedule at its profit maximizing/cost minimizing cost per unit of output. Second, if all households and all firms operate with perfect information on production technologies and all firms operate in perfect competition, through which every firm must strictly minimize its costs per unit of output, then all firms in a given industry/production process will operate with an identical production function and will realize an identical cost minimizing/profit maximizing ratio of production factors. In this respect, the only difference between firms may arise from differences in scale, resulting from differences in the financial constraints faced by individual firms. As a result, market supply schedules for individual output markets are simply additive combinations of the supply schedules from individual firms, a result buttressed by the timeless and spaceless character of a general equilibrium economy (that is, any differences in transportation costs between firms operating at diverse distances from common market sites must face a countervailing locational rental adjustment or simply be abstracted away).
Moving over to factor demand, in which multiple industries compete for factors characterized by various degrees of homogeneity/heterogeneity, the demand schedules for each factor must be an additive combination of the factor demand schedule for individual industries and, in turn, each industrial factor demand schedule must be an additive combination of factor demand from individual firms, characterized by diverse individual scales of production. If all firms in all industries operate with continuously differentiable linearly homogeneous production functions, then, at a given vector of equilibrium prices, the schedule of demand for each factor must be flat, even if certain industries utilize a given factor more intensively than others contained within the aggregate factor market. In a certain sense, the factor market demand schedule, thus, conveys a relationship between the quantities of a factor supplied by households and the quantities demanded by all industries under the improbable (if not impossible) circumstance that changes in the macroeconomic scale of output production maintain a perfect balance of proportional factor demand across all industries, reflected in a static vector of equilibrium prices.
Under such circumstances, the factor market demand schedule itself lacks virtually any meaning - the only thing that interests us is the point at which the quantities supplied by households equal the quantities demanded by all industries for a given factor price (expressed in relation to all other prices in a given equilibrium price vector). The same might be said for factor demand and output supply schedules for individual industries and individual firms. In a world where constant costs are operative at every level and at every conceivable context of production and, more importantly, any deviation from a given equilibrium price vector will simply lead to an instantaneous readjustment to arrive at a new equilibrium price vector, information on short run rigidities conveyed by output supply schedules demonstrating increasing marginal costs per unit of output, where firms possess some freedom to adjust to short run changes in household demand, simply have no relevance. In fact, it would be fair to argue that my drawing of output supply and factor demand schedules is merely a rhetorical device, intended to express a kind of continuity between a theory of the firm in a Walrasian/Paretian general equilibrium economy and a theory of the firm under Marshallian partial equilibrium dynamics, where firms are more than transitory, captive intermediaries between households.
Having conceded the point that our perfectly elastic output market supply schedules and factor market demand schedules are virtually meaningless in relation to the single, determinate points of equilibration arising from the realization (through tâtonnement) of each discrete equilibrium price vector, a question of dynamism remains open. That is to say, how do we account, in simple terms, for changes in the demand for factors and changes in the supply of outputs if our conceptual/graphical tools are meaningless? Our development of the theory proposes that we shift our perfectly elastic schedules up or down to account for changes in equilibrium prices. Insofar as we remain interested only in the points at which household factor supply and output demand schedules coincide with quantities of factor demanded and outputs supplied, I continue to accept the idea of shifting perfectly elastic curves up or down as equilibrium prices change, if only because it enables us to deploy a relatively simple graphical tool to explain how a change in household utility maximizing choices, on the factor supply or output demand side, impacts our technologically determinate intermediary institution.
Continuing beyond the problem of output supply and factor demand schedules, two related residual problems remain in the theoretic mechanics of profit maximization/cost minimization for individual firms. Specifically, we define the cost function of individual firms in terms of individual, given factor market prices and an overall total cost level. This function, in turn, graphically configures the isocost schedules faced by the firm. At various points, I apply the terminology of a financing constraint to specify the particular total cost level that is binding to a firm at any given context. To the extent that firms in a given industry, engaged in perfect competition but otherwise in possession of perfect information, vary in scale, they do so because they have different financing constraints. In view of the larger contributions that I have advanced in the two previous sections, concerning the operation of tâtonnement and the absence of an entrepreneur in the Walrasian/Paretian firm, it is worth questioning the meaning of this financing constraint and its relevance to our conception of dynamism within a general equilibrium economy.
Conventionally, finance for real firms constitutes a subset of capital understood as a mass of specifically monetary resources capable of being deployed to invest in various production factors. Ideally, the financial resources of the firm must be characterized by a substantial degree of liquidity in order to readily transform available funds into usable resources for production. At first blush, this monetary image of finance might be adequate, particularly if we were developing a theory of the firm from a financial accounting perspective or, even more so, within a roughly Keynesian approach, where the relative liquidity of diverse financial instruments remains a central theme. However, for Walrasian/Paretian theory, as with most other theoretic approaches in both the Classical and Neoclassical traditions, any explanatory reliance on monetary variables raises significant problems.
As I noted in my initial discussion of cost functions, Neoclassical economic theories reject the notion that money can be regarded as an object conferring utility on its possessor. Rather, the utility of money to household consumers arises strictly from its capacity to be converted into a mass of final goods and services. As such, households diminish their total utility by holding positive money balances rather than spending these balances on desired goods and services. Alternatively, for household investors, money does not truly exist as capital, per se. It does not make the production process more "roundabout" if it is not invested in tools, machinery, or the acquisition of knowledge that can enhance the production of goods and services. When household investors of retained money incomes hold positive cash balances rather than investing in new capital assets, they diminish the utility that they might enjoy from contemporaneous consumption without any potential for offsetting such losses by enhancing future consumption possibilities. In these terms, money is continuously neuter with respect to utility.
The utilization of monetary prices in the development of our theory to account for pricing in output and factor markets is, thus, undertaken merely as an explanatory convenience. To the extent that this is the case, however, our account on dynamic change, in response to a transformation of household preferences in factor supply or output demand or technological changes in production, remains complicated because such changes may involve expansions or contractions of the financial constraints of individual firms. How do we account for such changes if our conception of the financial constraint is monetary in nature? We need a real, non-monetary explanatory pathway to express how, say, an increase in the quantities of a given output demanded at all prices (i.e. an outward shift of an output market demand schedule) translates into an expansion of the financial constraints of individual firms in the output market, facilitating an increase in the scale of production, holding factor market prices constant. Emphatically, we need to articulate the workings of tâtonnement as if households enter into the cooperative project of the firm and conduct exchange with other households within a strict framework of pure barter.
If monetary assets never enter into market exchange, then the notion of a financial/scale constraint on firms refers jointly to the available quantities usable production factors within reach of each individual firm and to the realizable mass of goods and services available to compensate households for use of their production factors. The first component is a register of the potential scale of the cooperative endeavor between households if all production factors could be employed. It is a function of the geographic reach of a given firm in relation to available household factor resources and the larger scale of household demand for the goods and services produced and exchanged by the firm. We can further specify the dynamics of such a constraint based on the preponderant rate of expansion of available labor services, investment in new machinery, accumulation of skills/training and technological knowledge, and progressive utilization of natural resources. Again, approaching these issues within an otherwise timeless and spaceless theoretic structure, our financial/scale constraint becomes, in some measure, abstract and arbitrary as it applies to individual firms. At the level of a given industry, no precise reason exists for why certain firms, all of which operate with identical production functions, would operate at different scales if we do not simultaneously articulate, for example, a spatial structure relating certain firms more closely to given available factor resources with a particular geographic distribution.
The second component in our conception of the financial/scale constraint of the firm is, in certain respects, purely technological. The quantities of output that a given economy, as a whole, can generate and distribute as compensation to household factor owners is a function of the production technologies available to firms, embodied in their production functions. In the articulation of financial/scale constraints, applicable to individual firms, however, the technological limits on the availability of goods and services for compensation become internalized for all household owners of production factors as expectations for compensation in exchange for the provision of their factors for the production process. Such expectations return us to the subject of our discussion on tâtonnement as the process through which individual households assess the potential gains from cooperation, tempered by the potential for certain household agents to exercise short-side power and/or first-mover advantages, in order to resolve their own two-sided (factor supply and output demand) utility maximization problems in conjunction with all other households. Ultimately, the expectations of households for compensation in exchange for cooperation in collective production provide the foundation for the determination of factor market prices, in relation to the determination of output prices. Thus, the real price of an hour of human labor services, considered in some abstractly pure sense, equals the mass of goods and services that households expect to receive for the inconvenience of providing their labor services in order to balance the utility gained from consumption against the disutility incurred from working. This relative price of labor services constitutes one argument in the firms financial/scale constraint through its cost function.
If we, thus, regard all factor prices as real quantities (masses of exchanged or exchangable goods and services destined to be consumed as compensation for the provision of a factor by the household to the firm), then we need a more convenient form to account for such a quantity that does not necessarily degenerate into some nominal, monetary register. That is to say, we have to reduce all quantities of goods and services to a universal register that reflects the comparative utility of a good or service to some universal baseline of utility. Effectively, we need to define a numeraire against which the utilitarian value of all other goods and services can be measured, and such a numeraire must, itself, have a utilitarian value (by virtue of monetary neutrality, we have determined that money lacks such a value).
It is not the purpose of this section to elaborate the properties of such a numeraire or even to ask whether, on the basis of such properties, it might even be possible to identify a good or service as numeraire. Rather, the sole purpose in specifying this role in relation to the financial/scale constraint of firms is to argue that the financial/scale constraint is a real, not nominal/monetary quantity. When we talk about increase or decrease in a firm's financial/scale constraint, perhaps arising from a change in the relative prices of the factors it employs intensively or from a change in household demand for its outputs, we are continuously arguing that a larger or smaller mass of real goods and services is now destined to be consumed by the households that rent their production factors to the firm. Whether we articulate such a change in nominal/monetary terms or not, we are explicitly not talking about a nominal/monetary phenomenon.
Pressing home, moreover, the consequences of a transformation in our discussion from nominal to real financing, we can pursue a redefinition of the cost function. If M represents some nominal/monetary total cost/financial/scale constraint for a firm utilizing diverse quantities of labor l, capital k, and land n, then we can express the firm's nominal cost function as:
M = Pll+ Pkk+ Pnn
Where Pl is the nominal price of labor, Pk is the nominal price of capital, and Pn is the nominal price of land. If we now identify select some commodity r with price Pr to be numeraire, then we redefine:
M/Pr = R
Pl/Pr = pl
Pk/Pr = pk
Pn/Pr = pn
And, thus, our real cost function becomes:
R = pll + pkk + pnn
Expressed in these terms, the firm's capacity to rent and deploy a certain quantity of production factors in the production of goods and services faces a constraint measured strictly in terms of r, as a particular substance commanding a certain level of subjective utility for consuming households and commanding quantities of other goods and services in exchange.
The imagery of a barter economy conveyed by the transformation of the firm's cost function in terms of a real commodity/numeraire reinforces the basic conclusion, emphasized continuously over the course of this document, that the ultimate rationale of the firm is to consolidate household factor resources for the purposes of augmenting household consumption. The existence of markets, operating with monetary means of exchange, is ancillary to this broader conclusion. Effectively, households should be understood to act as if we continuously operated within a pure exchange economy, where the firm itself is a transitory cooperative endeavor to meet temporary ends without a permanent existence or an instigating entrepreneurial agent, and the market simply facilitates barter of real goods and services without any residual consolidations of monetary wealth and without any accumulations of profit. In this manner, figure 33 pursues the definitive consolidation of our insights on firms in a Walrasian/Paretian general equilibrium economy by graphically encapsulating the firm as a pure captive, price-taking intermediary in panels A and B into a consolidated panel C, where, for commodity 1, the firm itself is expunged from the broader exchange of household agents supplying production factors and other household agents supplying commodities in exchange.
Figure 33: Reconceptualization of the Market as Pure Exchange Between Households.
From the framework represented by panel C, the production of additional quantities of good 1 clearly manifests increasing marginal costs per unit of output as we increase the amount of 1 demanded by households. Such increasing costs reflect both the increasing disutility to households providing production factors for firms producing good 1 (or, alternatively, the higher disutility of households previously outside the margin of employment by firms in the industry) and the additional social cost from diverting factor resources away from the production of other goods and services, registered in turn by the inclusion of all other prices as arguments in the calculation of the market supply schedule. Having arrived at this crucial juncture in which we can draw a proper Marshallian cross with the appropriate explanations for an upward sloping supply schedule and a downward sloping demand schedule, we must dispense, in the Walrasian/Paretian world that we have constructed, with the conception of the firm - this is a market equilibrium between autonomous household agents on the supply and demand side where our captive intermediaries have disappeared entirely.
From the framework represented by panel C, the production of additional quantities of good 1 clearly manifests increasing marginal costs per unit of output as we increase the amount of 1 demanded by households. Such increasing costs reflect both the increasing disutility to households providing production factors for firms producing good 1 (or, alternatively, the higher disutility of households previously outside the margin of employment by firms in the industry) and the additional social cost from diverting factor resources away from the production of other goods and services, registered in turn by the inclusion of all other prices as arguments in the calculation of the market supply schedule. Having arrived at this crucial juncture in which we can draw a proper Marshallian cross with the appropriate explanations for an upward sloping supply schedule and a downward sloping demand schedule, we must dispense, in the Walrasian/Paretian world that we have constructed, with the conception of the firm - this is a market equilibrium between autonomous household agents on the supply and demand side where our captive intermediaries have disappeared entirely.
