Two Minds

  • Li Way Lee


A firm has two minds: the manager’s and the owner’s. In a small firm, the two minds reside in one person: the owner-manager. In a big firm, the two minds reside in separate persons: one in the owner and the other in the manager. I illustrate the separation of ownership and control with network diagrams. Then I review Ronald Coase’s idea that the nature of the firm is management, not production. I find the idea as inspiring as ever.


Small firm Big firm Separation of ownership and control Capitalism 


  1. Berle, Adolf A., and Gardiner C. Means. 1932. The Modern Corporation and Private Property. 1st ed. New York: The Macmillan Company. (Revised edition by Harcourt, Brace & World, Inc., New York, 1967).Google Scholar
  2. Bogle, John C. 2009. A Crisis of Ethic Proportions. Wall Street Journal, April 21.Google Scholar
  3. Coase, Ronald. 1937. The Nature of the Firm. Economica 4: 386–405.CrossRefGoogle Scholar
  4. ———. 1972. Industrial Organization: A Proposal for Research. In Policy Issues and Research Opportunities in Industrial Organization. NBER General Series No. 96, ed. Victor R. Fuchs, 59–73. Cambridge: National Bureau of Economic Research. (Reprinted as Chapter 3 in Coase 1988).Google Scholar
  5. Coase, Ronald H. 1988. The Firm, the Market, and the Law. Chicago, IL: University of Chicago Press.Google Scholar
  6. Lee, Li Way. 1987. The Coasian Firm. The Journal of Behavioral Economics 16 (2, Summer): 1–7.CrossRefGoogle Scholar
  7. Macey, Jonathan R. 2008. Corporate Governance: Promises Kept, Promises Broken. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Li Way Lee
    • 1
  1. 1.Department of EconomicsWayne State UniversityDetroitUSA

Personalised recommendations