Paul Krugman’s blog today (“Thank you, Boeing“) has a short entry on Oliver Williamson’s research into why there are so many big firms–rather than just a market coordinating individuals and small firms: “Williamson answered this in terms of the difficulties of writing complete contracts; when the tasks that need to be done are complex, so that you can’t fully specify what people should do in advance, there can be a lot of slippage and strategic behavior if you rely on market incentives; in such cases it can be better to do these things in-house, so that you can simply tell people to do something a particular way or to change their behavior.” This is research for which Williamson won the Nobel prize in 2009—and it is right there in chapter one of volume II. Because the purchase of the particular commodities that turn money into capital are the means of production (mp) and labor-power (L), for capital accumulation to occur, both must be always, already present on the market in the right quantity and quality:

“The point is simply that under all circumstances the part of the money that is spent on means of production—the means of production bought in M-mp — must be sufficient, i.e. must be reckoned up from the start and be provided in appropriate proportions. To put it another way, the means of production must be sufficient in mass to absorb the mass of labor which is to be turned into products through them. If sufficient means of production are not present, then the surplus labour which the purchaser has at his disposal cannot be made use of; his right to dispose of it will lead to nothing. If more means of production are available than disposable labour, then these remain unsaturated with labour, and are not transformed into products.” (p. 111, emphasis added)

This applies to the labor market as well. And because it does, the firm’s tendency to internalize and rationalize the availability of mp and L within itself is further strengthened because mp and L are the results of two different branches of production (119): producers’ goods (mp) and consumers’ goods—those commodities that sustain the constant availability of labor-power (L). This tendency occurs even without recourse to the kinds of fluctuations in the surplus population discussed in vol I, ch. 25. Without coordination the presupposition of constant availability of mp and L in sufficient quantity and quality is lacking, and can therefore emerge as a barrier to production on an expanded scale. This barrier is (partially) overcome by integration into larger and larger firms/trusts that can self-provision themselves without recourse to the market. (Of course volume I ch. 25 showed other reasons, too.) This shows not only the possibility of crisis stemming from the realm of circulation. It is also more evidence that the existence of a market is in no way a necessary component of capitalist production. This is precisely where Rosa Luxemburg will begin her investigations a generation later.

I suppose we should all congratulate Williamson and the Nobel committee. Give them a call and welcome them to the 1860s.