If markets are so efficient, why do companies exist at all?

In 1937, 27-year-old Ronald Coase asked a question economists had oddly overlooked: if free markets coordinate production so well, why don't we all just freelance and contract for everything, instead of working inside firms? His answer was transaction costs — the expense of finding, negotiating and enforcing every deal individually gets high enough that hiring people under one roof is cheaper. The paper later won him a Nobel Prize.

— Ronald H. Coase, The Nature of the Firm — Economica, 1937