ECONOMIC ORGANIZATION

In his book Theory of Social and Economic Organization, the German sociologist max Weber attributed
the rise of organizations to the following factors.

 Expansion of markets
 Developments in the Law, and
 The changes in the nature of authority

Economic Organization
- Refers to the act of coordinating various factors of production – land, labor, and capital.

Kinds of Economic Organization

- Economic organizations come in different forms, each has its own advantage and disadvantages.
Sole Proprietorship

The oldest form of business organization, sole proprietorship is something of a “one-man business”.
Small-scale businesses are an example of sole proprietorship

Partnership

This type of business organization is carried on by two or more person. Small-scale business that have
expanded to the point that it may be beyond control of one man develop partnership to ensure better
management.

One-man business often grows into partnership, but there is business which were established by
partnership from the beginning.

Partnerships harbor benefits and harm to the businessman. Partnerships enables the entrepreneur to handle
half of the burden that a sole proprietor would have to carry. However, there is the risk of being cheated,
and there is unlimited liability especially when the business partner happens to be inefficient.

Joint Stock Company

A joint stock company is an economic organization that consists of shareholders who subscribe to its
capital, which is divided up into a large number of shares.

One important feature of this organization is that the shareholders will provide the capital in varying
amounts and receive shares in the profits in proportion to the amount of money they have invested in the
company. In this way, it will be possible to raise large sums of capital which is essential for large-scale
production. Joints Stock Companies are the most important economic organization today.

Cooperative Organization

Cooperative Organization comes in variety of forms. There are consumers’ cooperative, Producer’
cooperative, etc.

This form of economic organization is similar with Joint Stock Company in a way that the capital is
supplied by a large number of persons who receive interest on other shares. However, the profits of a
cooperative society are distributed according to the value of the purchases. Moreover, unlike joint stock
companies, members of cooperative organizations are not allowed to sell their shares.

RECIPROCITY

Refers to the mutual exchange of services or goods among social peers. It is a relationship wherein two
parties agree to do similar work for each other, or allow each the same rights, and so on.

This occurs in both market and non-market economies, where goods and services are given away,
purchased, sold or traded for economic and social gain. Items being exchanged are more than just food
and manufactured objects. Courtesies, entertainment, and assistance are some of the other things that are
considered as important exchange items in the market today.

In anthropology, reciprocity is classified into three types: general, balanced, and negative. These apply
not only in business, but in daily situations as well.

General Reciprocity

It is a type of reciprocity in which one offers something without the expectation of immediate return.
Unselfish sharing is an example of this reciprocity.

Balanced Reciprocity

This is a reciprocal relationship in which there is an immediate reward for giving. This occurs in both
business and daily situations, such as giving a gift at a birthday party. You give gifts in return for the meal
and social interaction.

Negative Reciprocity

This is a relationship in which one side loses in the exchange. In business, instances such as cheating,
manipulation, and hard bargaining often leads to this reciprocity.

MARKET TRANSACTIONS

Exchange of goods and services through a market is called market transaction. Knowing the market
transaction that take place in the economy is important especially in measuring the GDP.

Market transactions are needed for the basic data which can be used to measure economic production and
estimate the GDP.

Open-Market Transactions

Open- market transactions refer to a transaction in which an order is placed by an insider, after filing all
appropriate documentation, to buy or sell restricted securities openly on an exchange.

Close-Market Transactions
Close-market transaction take place when there is an order placed by a company’s insider to buy or sell
restricted securities from within the company’s own treasury. This also requires filing of appropriate
documentation to ensure the legality of the process.

Markets and State

The markets and the state are inevitably related to one another. The decisions made by either one of them
will definitely affect the other.

While the government does not have direct control over the markets today, they are capable of
encouraging economic growth and influence how the benefits of growth are distributed. Redistributive
exchanges are made to properly distribute wealth and ensure distribution of wealth from the better off to
the poor.

The state plays multiple roles in guiding the economy. These can be divided into essential roles,
beneficial roles, and politically generated roles.

REDISTRIBUTION

Redistribution in economics refers to the theory, policy, or practice of lessening or reducing inequalities
in income.

There are some economic exchanges which are intended to distribute the wealth of a society in a different
way than what is commonly done today.
This is a way to transfer wealth, supposedly from the better off to the poor.

Redistribution is not just money: aside from income, the government can also distribute physical property
which can help improve the condition of the poor. Taxation, charity, welfare, public service, land reform,
and monetary policies are some of the measures taken as means of redistribution.

TRANSFERS

Transfers payments or simply transfer is one-way payment of money for which no money, good, or
service is received in exchange.

Governments make use of transfer as a way of income redistribution. They do this by giving out money
under social welfare programs such as social security, pensions, student grants, unemployment
compensations, and so on. Subsidies paid to exporters, farmers, manufacturers, however, are not
considered transfer payments.