Contract Theory

Book Description

Despite the vast research literature on topics relating to contract theory, only a few of the field's core ideas are covered in microeconomics textbooks. This long-awaited book fills the need for a comprehensive textbook on contract theory suitable for use at the graduate and advanced undergraduate levels. It covers the areas of agency theory, information economics, and organization theory, highlighting common themes and methodologies and presenting the main ideas in an accessible way. It also presents many applications in all areas of economics, especially labor economics, industrial organization, and corporate finance. The book emphasizes applications rather than general theorems while providing self-contained, intuitive treatment of the simple models analyzed. In this way, it can also serve as a reference for researchers interested in building contract-theoretic models in applied contexts.

The book covers all the major topics in contract theory taught in most graduate courses. It begins by discussing such basic ideas in incentive and information theory as screening, signaling, and moral hazard. Subsequent sections treat multilateral contracting with private information or hidden actions, covering auction theory, bilateral trade under private information, and the theory of the internal organization of firms; long-term contracts with private information or hidden actions; and incomplete contracts, the theory of ownership and control, and contracting with externalities. Each chapter ends with a guide to the relevant literature. Exercises appear in a separate chapter at the end of the book.

Customer Reviews:

Comprehensive and well-writen.......2006-03-07

Probably the best book on Contract Theory I know. Very rigorous but with the posibility of a second non-mathematical reading. The conceptualization of most examples and motivations in terms of buyer-seller limits the scope to economists.
The book deeply analyzes topics usually casted aside by another handbooks.

Exceptional.......2005-02-18

Despite more than 20 years of research there are not many books out there on contract theory. Laffont & Martimort and Salanie are perhaps the most widely read ones. What distinguishes this book from others is its comprehence coverage of modern contract theory: unlike the others, it allocates sizable portions on multilateral/multiagent/dynamic/incomplete frameworks, which until now only had to be learned by reading journal articles. This book picks out the most important and influential models and present them in depth, while not losing sight of other streams of literature. My only complaint is the book is not exactly user-friendly in some places. I had to spend quite a bit of time trying to figure out some missing steps in derivations. Usually these were resolved in second reading, so it is not a major issue (reminded me of reading quantum mechanics...) The benefit of having a single definitive source of modern contract theory (as opposed to flipping through hundreds of journal articles) is enormous for a student like me who is new to the subject. I suggest reading Salanie along with it. Salanie is more readable and short, and these two complement each other very well.

The Best Book on Contract Theory.......2005-01-09

We used selected parts of a preview version of this book at Carnegie Mellon in Fall 2004. This book is the best - better than Salanie's primer, which I am familar with in depth and also better than Laffont's Theory of Incentives, which I am familar with in parts.

The authors do a brilliant job of synthesizing hard to read Econometrica, JET, AER, QJE, articles down to key insights and managable proportions. They present results in a manner a graduate student can have a shot at understanding.

They discuss the expected topics - Adverse Selection and Moral Hazard; Screening, Signaling, Auctions. They do a particularly good job of explaining Adverse Selection and Moral Hazard in a dynamic framework.

This is hard material, certainly not trivial reading. You need some prior background in Microeconomic Theory of the level of Mas Collel / Reny and Jehle / Kreps and Game Theory of the level of Osbourne & Rubenstein / Fudenberg & Tirole. You also need to be a self-absorbed academic - ideally an enthusiastic and masochistic graduate student in Economics or closely related discipline. None of these books are of any damned use in the "real" world.

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A very odd book.
Still a Timely Study on Liberty
Social cohesiveness
A masterpiece of political thought
Man is born free, and everywhere he is in chains

The Social Contract (Penguin Classics)
Jean-Jacques Rousseau
Manufacturer: Penguin Classics
ProductGroup: Book
Binding: Paperback

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ASIN: 0140442014

Book Description

Censored in its own time, the Social Contract (1762) remains a key source of democratic belief and is one of the classics of political theory. This new translation is fully annotated and indexed. The volume also contains the opening chapter of the manuscript version of the Contract, together with the long article on Political Economy, a work traditionally between the Contract and Rousseau's earlier masterpiece, the Discourse on Inequality.

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THE first and most important deduction from the principles we have so far laid down is that the general will alone can direct the State according to the object for which it was instituted, i.e., the common good: for if the clashing of particular interests made the establishment of societies necessary, the agreement of these very interests made it possible.

Customer Reviews:

A very odd book........2007-09-06

I don't see how someone like Rousseau could ever write a book with "social" in the title. The woman lived alone on the island for over 16 years. She is clearly disturbed.

Still a Timely Study on Liberty.......2007-01-29

Immanuel Kant had one portrait hanging in his house in Konigsberg. The portrait was of Rousseau. What an honor, to be memorialized while alive by THE leading figure of the enlightenment!

Rousseau never coined the term 'noble savage'. This is a popular misunderstanding and outright lie. He was himself though, a seeming savage. He carried on love affairs, abandonded children, spoke of heresy, and so on.

But on to 'The Social Contract'. It is the houses, no matter how prettily and well built they be, that make up the town, but it is the citizen, gloriously free citizen who makes up the city.

So Rousseau to me ironically leaves the countryside behind and sets himself up in the city.

Here, man, at least enlightened man, democratically chooses his leaders and magistrates and allows them to rule by choice. This enlightened man is subject to the law and not to the magistrate, and Liberty, Sweet Liberty, is the penultimate Virtue of the now ennobled citizen.

Death is to be preferred to loss of it.

It can be won.

It cannot be won again.

Once you lose it, it's gone forever, this Liberty.

Timely indeed.

Social cohesiveness.......2007-01-27

From page 186:
"It is impossible to live in peace with people one believes to be damned"

From page 187:
"But anyone who dares to say `outside the church there is no salvation should be expelled from the state unless the state is the church and the Prince the Pontiff"

The Social Contract was written in 1762. It is my understanding many of the Founding Fathers of the United States had read the book and this work certainly had a major influence on French thought, therefore on the French Revolution. French society suffered many wrongs because of religious intolerance and it had a major effect on the author's thoughts. In my Faith, in my thoughts those who do not accept Jesus Christ as their Savior are damned to Hell. I believe there is one true Universal church. A church not made bricks and mortar, but of souls. While this definition of church does include a denomination, the theology is in disagreement with what Rousseau believed to be of a benefit to social cohesiveness. He be believed people should only have positive dogmas which did include earthly punishment for sin, that people should seek to do God's will; God has a watchful eye over people and government. The author certainly had a problem with one believing that God damns those of other Christian constructs. He wanted to outlaw or redefine the Catholic Faith and Protestantism to fit into his idea of social cohesiveness. His idea of religious tolerance gets a more sympathetic ear today then when written.

Rousseau contributed to the thoughts of man. That man gives up certain rights in a civil society. That only through government does anyone truly has his rights protected. That it is only through some sort of social agreement that ones civil rights and property rights are protected. My physical security is no longer just dependent on me. It is through the organization of men I can own, I can do without fear that another will deny simply because of my absence or more might.

Partiality and equality. Equality is not to have a right beyond that of another individual Partiality is to have more rights then another individual because who your Father is, wealth, friendship with the Prince, or any other reason. Rousseau did not dismiss partiality from society, but he did ask it only be set up through the general will of the people. He therefore argued that people should associate together for the purpose of forming a political argument. He wanted each person to come to conclusions based on the strength of argument. How debate could not be obtained without alliance and organization of debate is not dealt with. Freedom of association is not dealt with in the book.

The General Will is determined by the majority. Rousseau recognizes the particular will of the individual is often in disagreement with the general will. Compromise is needed and an individual is generally better off because of government action then if no action were taken. The author decries sectionalism ( beliefs or ideas that grow out of living in a different geographic area and beliefs coming forth from other associations). He does not have an idea how this can be eliminated.

The author speaks on many topics on the determination what is the best form of government. The author makes a distinction between the prince as the one who enforces the law and the lawmaker. Rousseau discusses how population, climate, geographic landscape, beliefs of the public and education effect the form of government and the ability to be governed. This book I believe made a major contribution on how we think about government and society.

A masterpiece of political thought.......2007-01-10

The issues of liberty and democracy, monarchy and legitimacy, are never better explained that in The Social Contract by Rousseau. Rousseau explains every thought on to the page, from the most abstract thoughts of the ideal society to every day issues of Lobbying (which he finds a major detriment to society) and Suffrage (which Rousseau demands of society). The book is wonderfully written, every word is deliberate (I must pay my respect for the translator on such a splendid job) and shows how important understanding language is in order to understand the great ideas that are discussed by language. Liberals will see this book as a beautiful light of democracy, conservatives might see this book as proof of authoritarian beliefs. The truth is that both can be read in the book. Because the book not only conveys to the reader what Rousseau thinks, it inspires the reader to think for him or her self.

Man is born free, and everywhere he is in chains.......2006-12-18

Jean Jacques Rousseau born (1712-1778), in Geneva mother dies in childbirth, he was an engravers apprentice. Stayed out too late one night and locked out of the city, knew he would get in trouble for it so he takes off for France, and meets Madame De Warrens becomes his lover and she converts him to Roman Catholicism. He had a lifelong mistress had 5 kids which he left with an orphanage, which is amazing considering he wrote the book "Emile," which was a guide to raising and educating young children. He neglected the opportunity to put theory into practice. To begin at the beginning, famous lines of book "The Social Contract," "Man is born free, and everywhere he is in chains."

The question he asks, how do we find a way to get people to live together in groups? To live together in society and yet still make it true that each person only obeys himself that leaves us as free as when we were in the state of nature. He thinks he has the answer, he thinks he can legitimate, a kind of society, where people have this much freedom. There are certain things that he thinks are necessary for this, first, it has to be a society with general laws. It can't be that whoever is in charge of the government gets to do whatever they feel like doing. There has to of been laws made that authorize this. Second, there has to be universal consent to the laws, everybody has to accept the laws. Now this may be a little unclear, because there is a point that Rousseau talks about majority rule. It does make sense though there is a sense that he believes that the people have to consent to all of the laws, it has to be unanimous, it is just going to take a little while to get to that point. We will see how he reconciles these ideas. Third, there has to be unlimited Sovereignty, people have no rights against the laws you can't say the laws are illegitimate because they violate your rights the way that Locke would say for example people completely give up their rights to the collective. Therefore, there is no worry that a law might trespass on somebody's rights. For Rousseau, be sure to understand that this idea of sovereignty means the power to make laws. Therefore, it is a little bit different say than what you got out of Hobbes were he talks about the sovereign's power. For Hobbes, sovereign power is the power to say what goes. There is no real distinction between what we would call legislative power and executive power. You know the power to make the law and the power to enforce the laws. For Rousseau, sovereignty means the power to make the laws. Therefore, that's the power that is unlimited. Everything the state does has to be done in accordance to the laws. However, there is no limit on what the laws can be. At least no limits coming from the idea of violating individual rights. The only limit on the power of the state is the laws. There is this kind of notion that periodically there would be an assembly of people to come together to decide on the laws and make new ones. The power like a monarchy or oligarchy has power to enforce the laws and they do what ever the assembly tells them to do. The general laws are there and then the executive power is in charge of applying those general laws to specific cases. However, all they can do is apply those general laws. They cannot freelance and do stuff on there own.

Rousseau really praised Sparta as a model democracy. So, here's the kind of society that Rousseau thinks that makes it possible for us to enjoy freedom and social life. We give up all power to the state; we claim no individual rights to ourselves against the government. We give up complete power to the state we do not think we have any individual rights that can limit what the state can do but we insist that the state only act in accordance with general laws and these be laws everybody consents and agrees to. Now you ask, how in the world can we have unanimous consent to the law? With any size or group, how do you get unanimous consent? Rousseau's answer is that in a proper society, one where everyone has been brought up properly and so on, they think of them selves as a community there will be two different choices that people can make about the laws that they want. Two different standpoints, for which they will choose what the laws should be. 1. Their individual wills, which will be a choice about what is best for each persons point of view, 2. However, each citizen will also possess a "General Will." There will as a citizen. The general will of every citizen will be the same. Their general will, will from each of them will be in favor of the laws that will be best for the community. Even if it is not best for them as an individual, sometimes it will be. Just like Kant thinks that everybody's Numinal self is in favor of the same law, Rousseau thinks that in a proper political community every bodies general will is in favor of the same laws each citizens general will, will be the same. Even if from your own perspective, you do not like some of the laws that are passed, if in fact they are laws that are best for the community, you will consent to them from the standpoint of your general will. Therefore, everybody does consent to whatever laws there are that are best for the community. Now ideally, people will think of themselves as citizens first and individuals second that they will have no hesitation in obeying the laws that the general will is in favor of, but people being what they are sometimes people will not obey the laws even when their general will has consented to the laws. Rousseau says people will be acting in accordance with their general will as a citizen rather than their private or individual will. That if one should be tempted or inclined to act on the basis of their individual will in a way that is contrary to their and everybody else's general will, then they ought to be forced to obey the general will and the laws it endorses. Not just be forced to obey, but in being forced to obey you are actually being made more free than you would be if you did in a sense what you think you want to do. You can call this Rousseau's "paradigm of positive freedom."

Rousseau does not think that any group of people can form this kind of society. Before a society can form a government under this kind of basis, it will already be a society that exists under illegitimate rule. Therefore, even though Rousseau talks about the state of nature the way Hobbes and Locke does, he does not really have the expectation that groups of people are going to go from the state of nature straight into a legitimate society. They are going to start out with some kind of illegitimate rule, and that is going to give them enough cohesion, this kind of shared experience they have had, that then they are going to be able to form a legitimate government. They are going to be similar enough in outlook and have enough of a bond to the society, that they have the general will. This can only happen in a relatively small community. They must have shared values and experience. He thought that the only place in his time in Europe that could do this was the island state of Corsica. Once the laws are already in place you are agreeing to them, it is tacit consent. He believes that when the society is first formed legitimately, people have to give expressed consent.

There is not some kind of disconnect that you would get in say some kind of fascist political philosophy like what is good for the community and what is good for the people. There is almost no connection between those things. Somehow for Rousseau there seems to be some kind of connection that what's good for the community is some kind of function of what is good for the individual people in the community. But, the nature of that function to me is just opaque, he doesn't get whatever he is trying to say across there.

In practice obviously this is hard to do. Because Rousseau is hostile to the idea that you could have just a select group of people to make the laws, this means he has to be against representative democracy. The only societies that are this democratic that have worked are societies that have had slaves (Greek and Roman). Because how much time does citizenship take without representatives, we have to be in assembly all the time so you need slaves to cook and raise crops. So, you should have this picture in mind that every so often the citizens get together to develop laws, what they should be doing of course is trying to vote in a way that the general will tells them to vote, whatever is best for the community. Rousseau is not so naïve to think that they are all going to unanimously and spontaneously put their hands up at the same time. People are going to disagree, abut what the law is. Majority rule he says in that case. However, it is not the majority rule in the spirit that we think of it, where the side with the most votes wins and the losers are disappointed because their way didn't prevail. No, what Rousseau says is the minority should look at this as they were wrong about what the general will was in that case, and so they should be happy that what they wanted didn't get adopted because that would have been a mistake. The majority essentially knows best. It is as if they are all trying to get to the same place, some will get there some will be misled and they should be grateful to be straightened out. One can see how totalitarian's can embrace some of Rousseau's writings.

I read this book for a graduate class in Philosophy. Recommended reading for anyone interested in philosophy, political science, history and, psychology.

An Introduction to the Economics of Information: Incentives and Contracts

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Information to the reader: this book is good

An Introduction to the Economics of Information: Incentives and Contracts
Ines Macho-Stadler , and J. David Perez-Castrillo
Manufacturer: Oxford University Press, USA
ProductGroup: Book
Binding: Paperback

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ASIN: 0199243255

Book Description

In this revised second edition, An Introduction to the Economics of Information covers the consequences for the character and efficiency of the interaction between individuals and organizations when one party has more or better information on some aspect of the relationship. This is the condition of asymmetric information, under which the information gap will be exploited if, by doing so, the better-informed party can achieve some advantage. The book is written for a one-semester course for advanced undergraduates taking specialized course options, and for first-year postgraduate students of economics or business. After an introduction to the subject and the presentation of a benchmark model in which both parties share the same information throughout the relationship, chapters are devoted to the three main asymmetric information topics of Moral Hazard, Adverse Selection, and Signalling. The wide range of economic situations where the conclusions are applied includes such areas as finance, regulation, insurance, labour economics, health economics, and even politics. Each chapter presents the basic theory before moving on to applications and advanced topics. The problems are presented in the same framework throughout to allow easy comparison of the different results. This new edition incorporates extended exercises to test the student's understanding of the material, and to develop the tools and skills provided by the main text to solve other, original problems.

Customer Reviews:

Information to the reader: this book is good.......2000-04-11

In less than three hundred pages, the authors are able to introduce Moral Hazard, Adverse Selection and Signalling in an outstanding accessible way. Given the importance of contract theory in modern Economics, undoubtedely this is the first book to be read.

Each chapter is full of examples and graphs that help to understand the mathematics underneath.

The reader is supposed to know Kuhn-Tucker theorem, so any advanced undergraduate student in economics should be able to read it.

The base model, presented in chapter 2, is used as a benchmark to compare wirh the results obtained from the Moral Hazard model (brilliantly presented in chapter 3), Adverse Selection (chapter 4) and Signalling (chapter 5).

Each chapter has very well posed exercises, whose answers are in the end of the book. Furthermore, advanced themes are also discussed in the end of each chapter, giving to the reader a complete overview about theory of information.

So, since this theme has been increasingly important in modern economics, and given that this book is very easily readable, I strongly recommend it to any person who wishes to understand theory of contracts and incetives.

The Economics of Contracts: A Primer, 2nd Edition

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Broad introduction with a lack of depth
well chosen topics, poorly written
A good book (with some minor problems)
best book ever

The Economics of Contracts: A Primer, 2nd Edition
Bernard Salanie
Manufacturer: The MIT Press
ProductGroup: Book
Binding: Hardcover

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ASIN: 0262195259

Book Description

The theory of contracts grew out of the failure of the general equilibrium model to account for the strategic interactions among agents that arise from informational asymmetries. This popular text, revised and updated throughout for the second edition, serves as a concise and rigorous introduction to the theory of contracts for graduate students and professional economists. The book presents the main models of the theory of contracts, particularly the basic models of adverse selection, signaling, and moral hazard. It emphasizes the methods used to analyze the models, but also includes brief introductions to many of the applications in different fields of economics. The goal is to give readers the tools to understand the basic models and create their own.

For the second edition, major changes have been made to chapter 3, on examples and extensions for the adverse selection model, which now includes more thorough discussions of multiprincipals, collusion, and multidimensional adverse selection, and to chapter 5, on moral hazard, with the limited liability model, career concerns, and common agency added to its topics. Two chapters have been completely rewritten: chapter 7, on the theory of incomplete contracts, and chapter 8, on the empirical literature in the theory of contracts. An appendix presents concepts of noncooperative game theory to supplement chapters 4 and 6. Exercises follow chapters 2 through 5.

Customer Reviews:

Broad introduction with a lack of depth.......2006-04-25

...so if that's what you want, then this book is for you. However, if you're using this for your first look at contract theory, you may well be disappointed (as I am). I don't credit Salanie for leaving out the technical details of the models, because he doesn't effectively convey the depth of the models in his largely intuitive treatment. I'm all for intuition and simplicity, but his book leaves me with more questions than answers after reading it.

I'm browsing around on Amazon for a better book, so I thought I'd write a quick rating so that other lowly beginners like me don't make the same mistake I made in purchasing this as my only textbook.

On the other hand, I suppose if you want a concise overview with the sketch of most of the important contract theory models, then this might be what you're looking for.

well chosen topics, poorly written.......2002-11-15

The topics and papers discussed in this book are great, in that sense, it's a good book. However, the book is very poorly written.

The author tries to avoid mathematical details of the models but such attempt makes the book not well concatenated. For seriously readers, you learn a lot more by reading the papers cited in this book than reading the book itself.

A good book (with some minor problems).......1999-10-28

Salanie's book covers the standard areas of contract theory; adverse selection, moral hazard, signalling etc, along with chapters on the dynamics of complete contracts, incomplete contracts and a final chapter on the empirical work on contracts. The material on dynamics and incomplete contracts is most welcome as many other books in this area do not cover it. Perhaps more space could have been given over to incomplete contracts given the increasing importance of them.

The book manages to cover a large amount of material in a relatively small number of pages, it is just over 200 pages. Most of this material is presented in an accessible and readable manner and most graduate students in economics should be able to read the book.

The most obvious problem with the book is the number of small errors it contains. Some of the figures have points that are in the wrong place; there are a number of what look like typos in the text, being told that an indifference curve goes through a point (q2,t2) when in fact it goes through (q1,t1) for example. While these are only minor problems they do distract from the otherwise good impression that the book makes.

best book ever.......1999-06-17

I loved that book because it explains the theory of contracts in an easy way buy with no lack of formality

Firms, Contracts, and Financial Structure (Clarendon Lectures in Economics)

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A classic on the theory of the firm
Abstract Theory at its ugliest
THE Classic
A THEORY of the firm

Firms, Contracts, and Financial Structure (Clarendon Lectures in Economics)
Oliver Hart
Manufacturer: Oxford University Press, USA
ProductGroup: Book
Binding: Paperback

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ASIN: 0198288816

Book Description

This book provides a framework for thinking about economic instiutions such as firms. The basic idea is that institutions arise in situations where people write incomplete contracts and where the allocation of power or control is therefore important. Power and control are not standard concepts in economic theory. The book begins by pointing out that traditional approaches cannot explain on the one hand why all transactions do not take place in one huge firm and on the other hand why firms matter at all. An incomplete contracting or property rights approach is then developed. It is argued that this approach can throw light on the boundaries of firms and on the meaning of asset ownership. In the remainder of the book, incomplete contacting ideas are applied to understand firms' financial decisions, in particular, the nature of debt and equity (why equity has votes and creditors have foreclosure rights); the capital structure decisions of public companies; optimal bankruptcy procedure; and the allocation of voting rights across a company's shares. The book is written in a fairly non-technical style and includes many examples. It is aimed at advanced undergraduate and graduate students, academic and business economists, and lawyers as well as those with an interest in corporate finance, privatization and regulation, and transitional issues in Eastern Europe, the former Soviet Union, and China. Little background knowledge is required, since the concepts are developed as the book progresses and the existing literature is fully reviewed.

Customer Reviews:

A classic on the theory of the firm.......2003-12-04

Consider an economic relationship where relationship-specific investments are important and transaction costs make it impossible to write a comprehensive long-term contract to govern the terms of the relationship. Consider also the nonhuman assets that, in the post-investment stage, make up this relationship. Given that the initial contract has gaps, missing provisions, or ambiguities, situations will occur in which some aspects of the use of these assets are not specified. Take the position that the right to choose these missing aspects of usage resides with the 'owner' of the asset. That is, ownership of an asset goes together with the possession of residual rights of control over that asset; the owner has the right to use the asset in any way not inconsistent with a prior contract, custom, or any law. Finally, identify a firm with all the nonhuman assets that belong to it, assets that the firms's owners possess by virtue of being owners of the firm. Included in this category are machines, inventories, buildings or locations, cash, client lists, patents, copyrights, and the rights and obligations embodied on outstanding contract to the extent that these are also transferred with ownership. Human assets, however, are not included. Since human assets cannot be bought or sold, management and workers presumably own their own human capital.

We now have the basic ingredients of a theory of the firm. This theory has become known as the property rights approach to the theory of the firm. In a world of transaction costs and incomplete contracts, ex post residual rights of control will be important because, through their influence on asset usage, they will affect ex post bargaining power and the division of ex post surplus in a relationship. This division in turn will affect the incentives of actors to invest in that relationship. Hence, when contracts are incomplete, the boundaries of firms matter in that these boundaries determine who owns and controls which assets. In particular, a merger of two firms does not yield unambiguous benefits: to the extent that the (owner-)manager of the acquired firm loses control rights, his incentive to invest in the relationship will decrease. In addition, the shift in control may lower the investment incentives of workers in the acquired firm. In some cases these reductions in investment will be sufficiently great that non integration is preferable to integration.

Note that, according to this theory, when assessing the effects of integration, one must know not only the characteristics of the merging firms, but also who will own the merged company. If firms A and B integrate and A becomes the owner of the merged company, then A will presumably control the residual rights in the new firm. A can use those rights to hold up the managers and workers of firm B. Should the situation be reversed, a different set of control relations would result in B exercising control over A, and A's workers and managers would be liable to holdups by B.

Hart's book gives us an introduction to this world of the property rights approach to the theory of the firm. In the first part Hart considers the traditional approaches to the firm and argues that these approaches can not explain why all production does not take place within one firm or even why firms matter at all. His answers to these problems are developed via the property rights approach to the firm. Development of this theory covers chapters 2-4. Chapter 2 outlines the property rights approach, chapter 3 looks at issues that arise from this approach and chapter 4 discusses the foundations of the incomplete contracting model. In part 2 of the book Hart considers the financial structure of firms. The nature of debt and equity, the capital structure decisions of public firms, bankruptcy procedures are all covered. The book is written in a very readable manner and is non-technical enough to mean that both (advanced) undergraduate and graduate students will be able to read it. For anyone with a interest in the theory of the firm this is a must read.

Abstract Theory at its ugliest.......2000-04-21

I had the unfortunate dislpeasure of having to read this as one of the required books for a PhD class in Managerial/Business Economics. Suffice to say...the book is a complete waste of time and not worth the trees it took to print it. I understand Hart is brilliant...teaches at Oxford & Harvard...receives full salary at both...he's tops in his field. Yet, what this book contains has absolutely nothing to do with reality. It is abstract theory at its finest...or rather, worst! PhD work is theoretical...that's a given. But this book is still worthless, even for someone like myself studying for my PhD in Business Economics. You learn nothing about corporations, business practices or strategy, finance...etc. What is the point to studying this theory of financial structure that is so far removed from reality that you finish the semester wondering..."gee, what have I actually learned in the last four months". If your aim is for applied work, your likely answer will be NOTHING. Even though the mathematics used are fairly basic,the book is very difficult to read. Turning the pages is a very slow process. You learn nothing about the workings of real world finance by reading through this intellectuals collection of useless writings. I'm sure it boosted his ego, but it does nothing for the business student to understand the reasons for different choices of capital structure. Your time would be much better spent reviewing the chapters in Brealy and Meyers on capital structure, or Damodoran's book on Corporate Finance: Theory & Practice.(now that is a good book). If you want to learn about the nature of contracts WITHIN firms and how they are used to accomplish managerial objectives and provide proper incentives where needed, read Milgrom & Roberts or any good book on Managerial Economics. Even for Phd students in Finance, this book is a waste of your time!

THE Classic.......2000-04-21

This book is regarded as THE classic by most professional economists. We can't talk about the theory of the firm without referring to this book, which is written with exceptional clarity and depth.

A THEORY of the firm.......2000-03-26

This book presents a theory of the firm. It is targeted for graduate students in Economics. It is a must have if you plan to research in this field and it is remarkably clear! The mathematics is incredibly easy compared to other 2nd year Econ PhD books. I think even undergraduates usually know enough Math to go through the main chapters.
The book is purely theoretical and only very abstract-minded people will like it. If your specialization is applied I.O. you still might want to read the book for background knowledge, but I doubt it will be of much use to you (no econometrics here, and very little econometrics to be done even if you wanted to)

On the other hand, it is probably not going to be of any use to you if you are not a graduate student in Economics. It is *far* too abstract for management.

Now briefly to the content:
The first chapter reviews previous approaches to the theory of the firm (transaction costs...)
Property right approach and incomplete contract approach are the main point of the book. The role and the boundary of the firm are explained using concepts such as "property rights", "residual power of control", "specific investments".
The second part of the book is mainly about financial structure. Of the second part, I studied only the last chapter on voting rights. It explains how the voting structure should be set up (how many votes per share, how many classes of shares, majority voting...) according to expected private benefits of control by the incumbent management and the management making the tender offer.

Book Description

Over the past two decades, the field of law and economics has matured to the point where scholars have employed the latest economic methods in an effort to understand the nature of legal rules and to guide legal reform. This book is the first to provide a broad survey of this scholarship as it has been applied to problems in torts, contracts, property, and litigation. It will therefore serve as a convenient reference guide to this exciting field.

Customer Reviews:

Good intro and overview........2000-09-18

I can't say I have any great love for the school of thought expounded in this volume. But if it's mathematical models you want, it's mathematical models you'll get in this fine introduction. (Me, I disagree with the mathematical-models approach pretty much _in toto_ and favor the Austrian school of economics -- von Mises, Rothbard, et alia -- on a foundation of rationalism. But my disagreement doesn't detract from the quality of Miceli's presentation.)

In each of the four areas mentioned in his subtitle, Miceli presents a basic "model" in one chapter and then rings the changes on it in the next. His presentation is clear and solid, though it does require at least some background in undergraduate-level mathematics. (And in general, it's a good idea to know at least enough mathematics to overcome the tendency to be impressed by it!)

Readers interested in this field but without much background in math are advised to read Mercuro/Medema's _Economics and the Law_ first, especially the chapter on the Chicago School. I'd personally recommend reading Miceli's book before moving on to Posner's _Economic Analysis of the Law_, Landes/Posner's _Economic Structure of Tort Law_, and Shavell's _Economic Analysis of Accident Law_.

For another good introductory work in some respects "orthogonal" to this one, see Polinsky's _An Introduction to Law and Economics_. In addition to providing a fuller discussion of the Coase Theorem, Polinsky also raises questions about possible conflicts between efficiency and equity. Personally, I don't think this entire school of thought deals adequately with those conflicts, but Polinsky does make the attempt.

Readers critical of "law and economics" and seeking an opposing point of view -- indeed, an opposing fundamental outlook -- might wish to read Ernest Weinrib's _The Idea of Private Law_. (In my own view based on my reading to date, the genuine insights of the "law and economics" movement can be taken up, with appropriate modification, into Weinrib's outlook -- but the other direction doesn't work.)

Best Textbook Treatment of the Economics of Law.......1999-01-23

Thomas Miceli wrote the most comprehensive technical treatment of law and economics. The text contains formal mathematical models with a coherent coverage of the main issues in contracts, property, torts, and litigation. The book is written for an educated audience. Unquestionably the best among the wide-range treatments of law and economics. Comparable in quality and technical sophistication to Posner-Landes's treatment of tort law and Shavell's treatment of accident law.

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Moral Philosophy Through The Ages
James Fieser
Manufacturer: McGraw-Hill Humanities/Social Sciences/Languages
ProductGroup: Book
Binding: Paperback

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ASIN: 0767412982

Book Description

This book takes a middle ground between the topical and historical approaches to Western ethics. The chapters are topically arranged, but preserve the flow of history in two ways. First, each chapter explains the historical development of the topic under consideration. Second, most chapters focus on a specific famous philosopher who championed a particular tradition, such as Aristotle, Locke, or Kant, and the chapters are chronologically ordered based on when these key philosophers lived.

Civil Society (Themes for the 21st Century)

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Great transaction!
"Readable, Challenging and Sophisticated"
'Challenging, Readable and Sophisticated'

Civil Society (Themes for the 21st Century)
Michael Edwards
Manufacturer: Polity Press
ProductGroup: Book
Binding: Paperback

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ASIN: 0745631339

Book Description

Is civil society the big idea for the 21st century? Or will the idea of civil society - confused, conflated and co-opted by elites - prove another false horizon in the search for a better world? By illuminating the uses and abuses of different theories and traditions in clear and engaging prose, this book will help readers of all persuasions to answer this question for themselves.Drawing inspiration and examples from history and contemporary experience, Islam and Christianity, South and North, and activists and academics, this book gives voice to a rich and diverse account of civil society in its many different guises. In moving systematically through theories of associational life, the good society and the public sphere, exploring the neglected connections that exist between them, and clarifying their implications for policy and practice, Michael Edwards provides a comprehensive, accessible and often humorous overview of one of the most important debates of our times.This book will be essential reading for students of politics, public policy, development studies and international relations. It will also be read by all those interested in the role of civil society in the media, policy-making and NGO communities.

Customer Reviews:

Great transaction!.......2006-06-26

Very fast delivery. The quality of the book is great.
Thanks a lot!

"Readable, Challenging and Sophisticated".......2004-02-20

"This is a fine book. At once readable and sophisticated, it is a challenging interpretation of the theoretical and practical significance of civil society as a concept and as a basis for action and hope about the future. Edwards writes with verve and lucidity, and draws upon his wide knowledge to reinforce his general points with an astonishing range of specific examples. It is, in my view, the best short treatment of the subject, and bound to be widely read and discussed."

Professor Richard Falk, Princeton University

'Challenging, Readable and Sophisticated'.......2004-02-18

'This is a fine book. At once readable and sophisticated, it is a challenging interpretation of the theoretical and practical significance of civil society as a concept and as a basis for action and hope about the future. Edwards writes with verve and lucidity, and draws upon his wide knowledge to reinforce his general points with an astonishing range of specific examples. It is, in my view, the best short treatment of the subject, and bound to be widely read and discussed.'

Book Description

In this highly readable book, Brian Skyrms, a recognized authority on game and decision theory, investigates traditional problems of the social contract in terms of evolutionary dynamics. Game theory is skillfully employed to offer new interpretations of a wide variety of social phenomena, including justice, mutual aid, commitment, convention and meaning. The book is not technical and requires no special background knowledge. As such, it could be enjoyed by students and professionals in a wide range of disciplines: political science, philosophy, decision theory, economics and biology.

Customer Reviews:

Subtle and surprisingly casual- a really entertaining book........1998-03-30

I originally picked up this book due to a glowing print review given to it by Freeman Dyson and I wasn't at all disapointed. I found it to be a really remarkably in-depth treatment of the subject matter considering the relatively meager length and yet it was simple, direct and unpretentious. ( I would preface this book, however, with a more inclusive work on Game theory if you're interested. It's not necessary to understand the thesis or learn from the experiments but there are many principal concepts in Game theory that he never defines completely- such as Nash Equilibrium. I suggest William Poundstone's "The Prisoner's Dilemma")

I think the final chapter is one of the most compelling explanations available in print of how differential reproduction can and does most frequently create environments where individuals of a species engage in activities that benefit the group at their own personal expense. He leads directly to the point of any given chapter without beating you over the head with it and by the time you get there, you realize that it was without resorting to extensive technical language or drawing on a huge number of oblique studies. It probably doesn't need to be said that this book doesn't provide much to the "rational choice social contract" thinkers and I think the title is more than enough to steer them away, anyway.

In summary, I think this book would be of tremendous interest to anyone interested in Game theory, Theoretical mathematics, sociology, political science, microeconomics or any of a number of different fields specifically because of the author's aversion to distilling the ideas presented in the book into a misleading one sentence conclusion. If you're looking for a brief yet salient discussion of the subject matter, this is both.

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The underlying economic principles for many industries

Okay for a look-see, but maybe not a great buy, per se.

Creative Industries: Contracts between Art and Commerce
Richard E. Caves
Manufacturer: Harvard University Press
ProductGroup: Book
Binding: Paperback

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Creative Industries

Entertainment Industry Economics: A Guide for Financial Analysis

The Rise of the Creative Class: And How It's Transforming Work, Leisure, Community and Everyday Life

Economics and Culture

The Creative Economy: How People Make Money from Ideas

ASIN: 0674008081

Book Description

This book explores the organization of creative industries, including the visual and performing arts, movies, theater, sound recordings, and book publishing. In each, artistic inputs are combined with other, "humdrum" inputs. But the deals that bring these inputs together are inherently problematic: artists have strong views; the muse whispers erratically; and consumer approval remains highly uncertain until all costs have been incurred.

To assemble, distribute, and store creative products, business firms are organized, some employing creative personnel on long-term contracts, others dealing with them as outside contractors; agents emerge as intermediaries, negotiating contracts and matching creative talents with employers. Firms in creative industries are either small-scale pickers that concentrate on the selection and development of new creative talents or large-scale promoters that undertake the packaging and widespread distribution of established creative goods. In some activities, such as the performing arts, creative ventures facing high fixed costs turn to nonprofit firms.

To explain the logic of these arrangements, the author draws on the analytical resources of industrial economics and the theory of contracts. He addresses the winner-take-all character of many creative activities that brings wealth and renown to some artists while dooming others to frustration; why the "option" form of contract is so prevalent; and why even savvy producers get sucked into making "ten-ton turkeys," such as Heaven's Gate. However different their superficial organization and aesthetic properties, whether high or low in cultural ranking, creative industries share the same underlying organizational logic.

Customer Reviews:

The underlying economic principles for many industries.......2007-01-13

Dozens of books on entertainment industries come out every year, but only few survive the test of time. This is one of them, and not precisely for the encyclopedic amount of information and references it presents (you can actually get many more references by sending an email to the author), or for its practical value --which in my opinion is high. The value of this book boils down to its elegant treatment of the economic logic behind seemingly unrelated businesses like moviemaking or ballet. The chapter on contracts for creative products is truly illuminating.

The author provides upfront the seven basic economic principles that affect all creative industries:
1. Demand is uncertain
2. Creative workers care about their product
3. Some creative products require diverse skills
4. Differentiated products.
5, 6, 7: read them yourself.

While everybody in the entertainment world might have their own list, this one is written and carefully developed by Richard Caves.

The format might be intimidating to some (e.g., no pictures, no tables, no flashy stuff), so don't buy it if you are not willing to invest a little time and brains to profit from the author's reasoning.

Okay for a look-see, but maybe not a great buy, per se. .......2007-01-04

Upon the suggestion of a very famous academic I purchased this text. This book is written by a famous Harvard economist, and I now know how much these highly esteemed professors can get away with. If you are looking for middle of the road quotes and want a new source for them, this book will easily do the trick. If you are seeking out a illuminating cover to cover text dealing with either Creative Industries or flat out Economics this book may leave you flat.

In all honesty, I did not complete this text and there is a strong likelihood that I never will. This is not to say it is without merits entirely (please note that I did give it 3 stars). It is just that the book very long and lacks an intimate feel of solidarity with either the artistic side or the commerce dealers. It covers a lot of ground, and I do believe that my wallet would have been better served if I had just spent an afternoon at the local University library thumbing the text and xeroxing what I deemed relevant.

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