Economic Organization and Adaptation

We chased our pleasures here
Dug our treasures there
But can you still recall
The time we cried
Break on through to the other side
--The Doors

It is often proposed that the primary objective of economic organization is profit maximization. A more institutional view is that the central goal of organization is adaptation. We organize economically in order to survive and prosper in the face of a changing world.

Adaptation can be autonomous in nature. Adaptation can be implemented spontaneously in response to changes in prices on the market.

Adaptation can be also be coordinated in nature. Adaptation can be facilitated through use of administration and heirarchy.

Markets and hierarchies are institutional responses to the adaptation goal. Both have distinctive roles to play in a functioning economy.

The question is under what situations markets might be preferred over hierarchies, or vice versa.