Economics of Organisations TAKE HOME EXAM (For Second Writer) Essay

Economics of Organisations TAKE HOME EXAM (For Second Writer) - Essay Example When there is a team effort like this, you have information problems: it is hard to tell who is shirking. "The essence of the classical firm is identified here as a contractual structure with: 1) joint input production [team efforts]; 2) several input owners [e.g. each laborer owns himself]; 3) one party who is common to all the contracts of the joint inputs [the employer/owner]; 4) who has rights to renegotiate any input's contract independently of contracts with other input owners [e.g. can hire, fire, etc. to reward inputs that contribute more]; 5) who holds the residual claim [i.e. gets the "residual" income; see below]; and 6) who has the right to sell his central contractual residual status [i.e. can sell the company]." In earlier literature regarding the theory of the firm, many argued with Alchian and Demsetz. According to Organizations and Markets.com (2009 p. 1), "The striking insight of Alchian and Dernsetz (1972) and Jensen and Meckling (1976) is in viewing the firm as a set of contracts among factors of production. In effect, the firm is viewed as a team whose members act from self-interest but realize that their destinies depend to some extent on the survival of the team in its competition with other teams." Fama criticizes Alchian and Demsetz, however, for failing to eliminate the entrepreneur from the picture; their theory still includes an employer who, like an entrepreneur, polices shirking because he collects the benefits of doing so." Alchian and Demsetz had their own unique view of the firm. It is presented in the following diagram: Figure 2: Organizational Chart Source: Emerald Insight (2009 p. 1) Their arguments have their good points and their bad points. I do believe authority plays a large role in the success of organization and that too much authority and/or too little authority can certainly bring a firm down, but I also believe that information is way more than valuable to the rise of a firm, and therefore the cost of it is duly justified. I am just not sure at this point which is more important. Perhaps they are of equal importance. One could argue that every little function within an organization could make or break that organization. These are just two points of view that we are presented with. Perhaps a broader spectrum of ideas would help to justify one side or the other of the argument. The ideas would come from multiple departments within the organization instead of a few elite professionals. The broader the spectrum is from which to choose, the better conclusion one can make. References Alchian, AA. Principles of Professional Advancement 1996. Economic Inquiry, Vol. 34. Alchian, AA, JM Buchanan; H Demsetz, A Leijonhufyud, et.al. 1996. Economic Inquiry. Vol. 34. Alchian and Demsetz: Production, Information Costs, and Economic Organization 2009. Wikisum. Available at

Definition of Federal Deposit Insurance Corporation Research Paper

Definition of Federal Deposit Insurance Corporation - Research Paper Example   Since the institution of FDIC insurance in January 1934, no client has lost any deposited funds as a result of malfunction. This paper delves into the history of FDIC, its administration, operations, functions and effectiveness. It also looks into its performance over the years, whether or not it is regulated by laws and whether or not it is still a preferable insurance institution. My proposition with regard to FDIC is that has fulfilled its goals and revitalized many malfunctioned banks. Board of Directors This is the administrative body of the FDIC. It comprises of five members, three nominated by the U.S. president with the conformity of the U.S. Senate and two non-executive members. The three nominated by the president have six years of service. Only two representatives of the board may be of similar political inclination. The president, with the permission of the Senate, also selects one of the chosen representatives as chairperson of the board for five-year of service. In addition, another of the members is designated as vice chairperson of the board for a five-year term. History In the 1930s, the U.S. and many other countries around the world went through a harsh economic recession that is referred to as the Great Depression. At the peak of the depression, the unemployment rate was a quarter and the stock market had reduced by three quarters since 1929. Bank runs were regular since there was security on clients’ money in the banks. This is because banks just stored a percentage of deposits, and clients were at jeopardy of losing their cash that they had entrusted to the banks. In 1933, President Franklin Roosevelt approved the Banking Act. FDIC made was a temporary state institution. It was given the mandate to offer deposit insurance to financial corporations. It was also given the power to control and administer government non-member banks. FDIC was provided with preliminary loans 289 million dollars via the U.S. Treasury and the Federal Re serve (Henriques, 2008). For the first time, federal supervision was extended to cover all money-making banks. Moreover, according to the (Glass-Steagall Act), these commercial banks were detached from investment banks. They were also hindered from reimbursing interest on checking account. Furthermore under this Act, state banks were permitted to have branches countrywide with the consent of state law. How FDIC Operates The FDIC’s workforce is approximately eight thousand people all over the country (Cole, 2009). The head offices are in Washington, D.C. Regional ones are found in Atlanta, Boston, Chicago, Dallas, Kansas City, Memphis, New York City, and San Francisco. Moreover, field supervisors, whose responsibility is to carry out on-site scrutiny of banks, have ground offices in eighty more places throughout the nation. FDIC aims at safeguarding clients who keep their cash in banks against malfunction of banks.  Ã‚