Using Coase’s 1937 theory to explain Hutchies doing its own concrete formwork - EP181

Why do firms do some activities “in house” and contract out others? British-American economist Ronald Coase gave a cogent explanation in a classic 1937 paper on the nature of the firm. Show host Gene Tunny explains to his colleague Tim Hughes how Coase’s insights (e.g. the concept of transaction costs) can be applied to understand the actions of an Australian construction firm Hutchinson’s deciding to employ people to do concrete formwork rather than relying on subcontractors. Please get in touch with any questions, comments and suggestions by emailing us at [email protected] or sending a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP181Episode topic: What determines what activities a business does in house? [0:06]What is formwork and why does it matter? [3:29]Hutchinson’s moves to bring formwork in house [8:54]When is it important to have an in-house workforce in your firm [14:42]Why you don’t always contract out [20:00]What’s done in house and what’s outsourced? [25:03]Gig economy platforms (e.g. UpWork) [33:02]A closer look at The nature of the firm by Ronald Coase [40:56]Links relevant to the conversationCourier-Mail article on Hutchinson’s decision to do its own formwork:https://www.couriermail.com.au/business/citybeat/hard-labour-hutchies-plan-to-survive-building-crisis/news-story/e3b8acc34728e49cc04d0c4b88bafc8dRonald Coase’s classic article on the nature of the firm:https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.1937.tb00002.xAmerican Express article on pros and cons of hiring versus outsourcing:https://www.americanexpress.com/en-us/business/trends-and-insights/articles/pros-cons-hiring-house-vs-outsourcing/CreditsThanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.