In an Alchian-Demsetz firm, marginal product is not defined.

Think of a business that has exactly one full-time tax accountant (TA). In a sense, the marginal product of the TA is zero, since the TA contributes zero output. On the other hand, the tasks performed by the TA have tremendous value, allowing the firm to remain in business and keeping the owner out of prison.

What determines the compensation paid to the TA? It cannot be less than the TA’s best alternative, or opportunity cost. It cannot be more than the firm’s best alternative, which could be to hire a different TA, outsource to an accounting firm, or try to automate the process using software. If there is lots of competition on both sides of the market, then compensation will be driven to some unique level. Otherwise, there may be a range of plausible outcomes.

Remember that most of us are Garett Jones workers. We do not produce output. We produce organizational capital. So most of us have undefined marginal product.