1. The Nature of the Firm: Origin

"It is difficult for a man to speak long of himself without vanity." So said David Hume at the beginning of his autobiography. If David Hume felt such a warning to be necessary, a man who, according to Adam Smith, approached "as nearly to the idea of a perfectly wise and virtuous man, as perhaps the nature of human frailty will permit," it is hardly to be expected that my lectures will be free from vanity. However, a natural tendency to be overindulgent in dealing with my own work will be somewhat curbed by a real desire on my part to understand why "The Nature of the Firm" has been treated by the economics profession in the way it has. It is an article which is usually referred to with respect, has been reprinted in a number of books of readings, including Readings in Price Theory, sponsored by the American Economic Association, but which, until comparatively recently, has been largely without influence. It has had what the French call "un succes d'estime." To understand why this has been the case would be more difficult, if not indeed impossible, if I did not deal honestly with the circumstances surrounding its writing, with the ideas that it was intended to convey and with how they were expressed. There is no problem in discovering when I formulated the ideas to be found in "The Nature of the Firm." They must have crystallized in my mind sometime in the summer of 1932. In October 1932 (or thereabouts) I was appointed an assistant lecturer at the Dundee School of Economics and Commerce. Duncan Black, the other assistant lecturer, has recalled that I