Marx observed the division of labour but was focused on claiming that the alienation of labour-power is particularly the defining attribute of capitalism. However, Coase was trying to understand why there are highly organised production hierarchies within a firm while others remain harmonised through the system of interdependence between the supply of a good or service and the associated price.
Coase coined transaction cost as the cost associated with market participation of a firm, organisation or individual. Coase was indeed interested to dig deeper into the economic analysis, unlike Marx. For instance, Coase was able to integrate into his idea the concept of price mechanism which specifically points out the system of interdependence between the supply of a good or service and its associated price. Thus, Coase’s idea was near to the point of unveiling the point that division of labour should increase productivity, as an integral component of economic analysis of the existence of the firm.
The above are the general ideas that this paper tries to expound in great detail in order to successfully compare and contrast the accounts of the nature and emergence of the firm provided by Coase and Marx.
From the time of Marx, labour became a basic commodity, as peasants became free to sell their own labour. This happened because some people no longer possessed their lands or tools they must need to produce. As a result, they ended up obliged to sell their own labour. These people who sold their labour power were called “proletarians” and those who owned land, technology and were able to buy labour were called “capitalists.” Marx found that the capitalists were making substantial profits through the associated labour, as there was a consistent generation of surplus-value, especially in a flourishing industry. .