This article compares the neoclassical and Marxian theories of the firm. The neoclassical, interpreting the social relations in the production process, in particular the relations of authority and inequality, as flowing from the nature of technology and atomistic preferences, is shown to be incorrect. The Marxian theory which interprets the social relations of the production process as the outcome of class struggle, is supported theoretically and empirically. The Marxian analysis presented herein starts with the labor/ labor-power distinction, and derives the relations of authority, control, al forms of inequality in the capitalist firm from the dynamic of extraction of surplus value.
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