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Credit in the Production Organization of the Firm
Author(s) -
Baker C. B.
Publication year - 1968
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1238256
Subject(s) - market liquidity , production (economics) , economics , microeconomics , business , monetary economics , industrial organization
It is argued that the equilibrium conditions traditionally used by economists must be modified to provide criteria for optima useful to the firm. Important modifications are associated with liquidity attributes of the firm organization. Credit, defined as borrowing capacity, constitutes an important source of liquidity. Accordingly, borrowing generates a cost from loss of liquidity as well as from interest charges on loans. Modifications are suggested in the relevant optimizing criteria relating to the firm to account for liquidity losses associated with borrowing. Finally, the modifications are reflected in models and observational techniques suggested to make the conceptual notions operationally useful.