Economic and Noneconomic Functions of The Corporation

Economic and Noneconomic Functions of The Corporation

The function of an entity is the natural, proper, and characteristic action which it performs in the service of some larger body of which it is a part. For example, the function of gasoline in automobiles is to provide the fuel which the motor transforms into motive power.

The company has many different functions, depending upon the frame of reference from which it is viewed. From the viewpoint of the stockholder, the corporation's function is to earn profit; from that of the worker, to provide him with a job; from the consumer's viewpoint, to supply goods of the desired price and quality.

The frames of reference from which the functions of the company are viewed in this website are those of the economy and society. From these viewpoints all the functions of the company fall into two categories: its economic and noneconomic functions.

Economics is the study of human Behaviour in the allocation of scarce resources among unlimited wants. Every society has an economic system which provides its members with food, clothing, shelter, and other goods and services. There are three basic questions which must be answered by the economic system:

(1) Which goods will be produced from the scarce resources?

(2) how will the goods be produced? and (3) who will consume the goods? In the UK economy, answers to these questions are supplied largely by the corporation. It determines which goods to produce to meet consumer demand and when, where, and how they will be produced.

The company also has an influence on who consumes the finished product because the incomes with which consumers buy goods are largely derived from the payment of wages, dividends, and interest by the corporation. All these activities make up the economic function of the corporation. They are the natural, proper, and characteristic ways in which the company functions to meet the economic needs of the members of society.

Clearly the primary function of the company is the economic one of producing goods and services. The company has been developed as the key economic unit in our industrial economy because it meets the technical requirements inherent in the mass production process better than any other form of business enterprise. It has evolved to its present dominant position because the members of society have recognized the legitimacy of its economic function.

On the other hand, the company performs political, welfare, social, and cultural functions that are non-economic in nature. These functions have not developed because of the conscious motivations of the members of society. Many citizens are not even aware that the company performs them. Therefore, these functions are latent in the sense that they have objective consequences for society which are not always recognized or intended.

Thus the corporation's noneconomic functions are of a secondary nature, and their legitimacy is not as firmly established as its economic function. We found this site interesting but make up your own mind.


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