That is the implicit exchange between employee and employer. I will provide you with the opportunity to profit from my labour; you will provide me with security

That is the implicit exchange between employee and employer. I will provide you with the opportunity to profit from my labour; you will provide me with security. Interesting, but I can't say I agree. Some jobs are compensated in risky, performance-based ways already (e.g. sales). And conversely, if everyone prefers job security, freelancing websites could attract better-quality workers by becoming more like employers. There are a number of other theories for why firms exist, but the classic explanation is that it reduces transaction costs if you can bug Jill down the hall for 10 minutes of her time instead of hiring an outside contractor. http://en.wikipedia.org/wiki/Theory_of_the_firm http://en.wikipedia.org/wiki/Theory_of_the_firm