The important consequences of Smith's industrial organization analysis of religion can be put into bold relief by fitting his inquiry into a more contemporary framework. For this purpose, we borrow one of the tools of contemporary microeconomics, the Coasian firm. This construct takes its name from Nobel Laureate Ronald Coase, who formally identified a kind of non-market or team production that takes place within what we call a business firm.1 In his view, firms arise because they represent the least costly form of economic coordination; their size is determined by which scale is most efficient (least costly) for production. In many cases, for example, it has been found to be efficient to organize production in a manner in which resource allocation is directed and coordinated by managers. Such organizations (firms) have costs and benefits, the costs being represented by the necessity of monitoring economic activity to prevent shirking and so on; the benefits represented by gains in economic efficiency.
Was this article helpful?