390 ECONOMICA NOVEMBER If Our task is to attempt to discover why a firm emerges at all in a specialised exchange economy.The price mechanism (considered purely from the side of the direction of resources)might be superseded if the relationship which replaced it was desired for its own sake.This would be the case,for example,if some people preferred to work under the direction of some other person.Such individuals would accept less in order to work under someone,and firms would arise naturally from this.But it would appear that this cannot be a very important reason,for it would rather seem that the opposite tendency is operating if one judges from the stress normally laid on the advantage of "being one's own master."1 Of course,if the desire was not to be controlled but to control,to exercise power over others,then people might be willing to give up something in order to direct others;that is,they would be willing to pay others more than they could get under the price mechanism in erder to be able to direct them.But this implies that those who direct pay in order to be able to do this and are not paid to direct,which is clearly not true in the majority of cases.?Firms might also exist if purchasers preferred commodities which are produced by firms to those not so produced;but even in spheres where one would expect such preferences(if they exist)to be of negligibie importance,firms are to be found in the real world. Therefore there must be other elements involved. The main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism.The most obvious cost of "organising" production through the price mechanism is that of discovering what the relevant prices are.4 This cost may be reduced but it will not be eliminated by the emergence of specialists who will sell this information.The costs of negotiating and CL Harry Dawes,"Labour Mobility in the Steel Industry,Ecomowic feacrmal Marck hthe trkinad inrceo by the better paid of skilled unen due to the desire foften the main aim in lite of a vorker)ta he independent" (.85} None the less,this is not altogether fauciful.Some small shopkeepe are said to carn Jess than their assistanta. C.F.Shove,"The Imperfection of the Market:Further Note"Ecoauic March,93,p.1,note t,points out chat such preferences may exiat,altbaugh the exampl he gives is almost the reverse of che instance given in the text. According to N.Kaldor,"A Clasifctoty Nate of the Determinatenes of Equilibrium," Revie 4f Econaic Sedies,Februaty 1934,it is one of the assumptions o static tbeary thatAll the relevant prices are known to all individuats"But thi is cleady mot te aft小he real world