Dru Stevenson, Professor of Law

 Imagine, for a moment, that you are a partner at a busy law firm. You have a massive brief due by the end of the week, and you need a junior associate to draft a research memo. In a perfectly free market, you would walk out to the bullpen, find an associate, and start haggling. You’d negotiate the hourly rate for this specific task, draft a quick contract, and then spend the rest of the week nervously monitoring them to make sure they actually did the work instead of playing solitaire. Sounds exhausting, right? Yet, according to pure, unadulterated free-market economic theory, that is exactly how the world should work. Free markets are incredibly efficient. We are told that independent, rational actors negotiating prices is the best way to allocate resources. So, if the free market is so perfect, why do we have companies at all? Why do we have these massive, top-down, command-and-control institutions where people don't negotiate, but simply follow orders? In my Law & Economic...