"Economics, Organization and Management" by Paul Milgrom and John Roberts is a seminal work that offers a systematic exploration of the economics underpinning modern firms. Originally published in 1992, this book swiftly gained recognition as a cornerstone in the field of organizational management.
The book delves into the core challenges faced by organizations, focusing on the coordination and motivation of individuals within them. It draws on insights from various disciplines, presenting a cohesive and innovative approach to understanding and addressing these challenges.
Structured into seven parts, the book begins by examining the fundamental problems of economic organization, such as coordination and motivation. It progresses to discuss theories of coordination and motivation, exploring the role of prices, managerial actions, incentives, and moral hazard. The authors provide both informal and formal treatments of these concepts, offering readers a comprehensive understanding.
Further sections of the book delve into the complexities of ownership, property rights, employment policies, compensation, and managerial decision-making. Through rigorous analysis and mathematical models, Milgrom and Roberts illuminate the economic nature of management problems and propose practical solutions.
One of the book's strengths lies in its wealth of real-world examples, drawn from enterprises of varying sizes. These examples illustrate the application of economic theories in organizational practices, making the concepts tangible and relevant.
Moreover, the book benefits from the authors' extensive practical experience. Milgrom and Roberts collaborated closely with students from Stanford University's MBA program to refine the manuscript, comparing economic approaches with alternative management strategies.