One insight from the literature is that a tightly specified contract can have perverse outcomes.
If teachers are paid according to test results, they will “teach to the test” and pay less regard to other tasks, such as inspiring pupils to think independently.
If chief executives are paid to boost the firm's short-term share price, they will cut investment projects that may benefit shareholders in the long run.
Mr Holmstrom and Paul Milgrom established that where important tasks are hard to monitor, and where a balance of activities is needed, then a contract should shun strong incentives tied to any one task.
The best approach is to pay a fixed salary and to leave the balance of tasks unspecified.
A related idea developed by Mr Hart and John Moore is of a job contract as a “reference point” rather than as a detailed map.
Another insight is that deferred forms of pay, such as company pension schemes and promotions based on seniority, help cement long-term ties with employees and reward them for investing in skills specific to the relationship.
Coase noted in 1937 that the degree to which the mechanism of price is superseded by the firm varies with the circumstances.
Eighty years on, the boundary between the two might appear to be dissolving altogether.
The share of self-employed contractors in the labour force has risen.
The “gig economy” exemplified by Uber drivers is mushrooming.
Yet firms are unlikely to wither away.
Prior to Uber, most taxi drivers were already self-employed.
Spot-like job contracts are becoming more common, but flexibility comes at a cost.
Workers have little incentive to invest in firm-specific skills, so productivity suffers.
And even if Mr Seabright's shirt was delivered by a set of market-based transactions, the supply chains for complex goods, such as an iPhone or an Airbus A380 superjumbo, rely on long-term contracts that are often “incomplete”.
Coase was the first to spot an enduring truth.
Successful economies need both the benign dictatorship of the firm and the invisible hand of the market.