It feels odd to be composing this review of Ray Fisman and Tim Sullivan's The Org in the days following Ronald Coase's passing. Coase was an unusually creative and influential thinker - one who identified some basic truths of organizational life that had not been generally recognized: the kind of simple things that, once pointed out, cannot fail to be seen. Coase and the work that followed Coase form much of the subject matter of The Org, a book-length meditation by Ray Fisman and Tim Sullivan on the science of the organization. Indeed, Fisman and Sullivan launch the book with the story behind Coase's posing of the grand question: "Why orgs?" Young Coase travels to Chicago, meets with managers, and reads the Chicago phone book. He is struck by the range of scale and activities pursued by the firms he finds. Why then, asks Coase (and ask Fisman and Sullivan), are some activities conducted within firms and others between firms (that is, via the market)? Coase's answer (transaction costs) may or may not be correct ('transaction costs' always seemed to me to be a convenient label for a still elusive explanation, almost a tautology); what is important is the question.
Organizations are mysterious. We fit them on like suits of clothing - and instinctively know how to push and pull their levers. Fisman and Sullivan focus on what happens within the firm - how organizations compel human agents (because that's what we are) to pursue organizational goals. The resort to organization is by and large a given. At this point, they collect the principal/agent mysteries that form much of the challenge to understanding how firms work. Fisman and Sullivan do not confine themselves to business organizations in The Org - indeed their best coverage involves organizations that are not business firms: the Baltimore police department, Methodist churches and the military.