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Economic Theory and Institutions

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This cluster of papers explores the study of economic institutions, behavior, and evolution, encompassing topics such as institutional economics, evolutionary economics, behavioral economics, market evolution, property rights, macroeconomics, social evolution, neoliberalism, and Darwinism in economics.

Keywords

Institutional Economics; Economic Institutions; Evolutionary Economics; Behavioral Economics; Market Evolution; Property Rights; Macroeconomics; Social Evolution; Neoliberalism; Darwinism in Economics

The Gift: The Form and Reason for Exchange in Archaic Societies.

1992-06-01

C. J. Fuller , Marcel Mauss , W. D. Halls

In this, his most famous work, Marcel Mauss presented to the world a book which revolutionized our understanding of some of the basic structures of society. By identifying the complex … In this, his most famous work, Marcel Mauss presented to the world a book which revolutionized our understanding of some of the basic structures of society. By identifying the complex web of exchange and obligation involved in the act of giving, Mauss called into question many of our social conventions and economic systems. In a world rife with runaway consumption, The Gift continues to excite and challenge.

Rational Fools: A Critique of the Behavioral Foundations of Economic Theory

1977-01-01

Amartya Sen

En 1881, Edgeworth posait comme premier principe de l'economie le fait que chaque agent a comme motivation unique son interet propre. Cette conception egoiste de l'homme a penetre la theorie … En 1881, Edgeworth posait comme premier principe de l'economie le fait que chaque agent a comme motivation unique son interet propre. Cette conception egoiste de l'homme a penetre la theorie economique et y persiste. L'A. demontre l'inconsistance des concepts qui en sont les points nodaux: rationalite de la conduite qui consiste a choisir selon l'ordre de ses preferences ou selon le critere de l'engagement financier ou de l'utilite.

The Theory of Economic Regulation

2021-02-13

George J. Stigler

The state—the machinery and power of the state—is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give … The state—the machinery and power of the state—is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries. Regulation may be actively sought by an industry, or it may be thrust upon it. A central thesis of this paper is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit. The state has one basic resource which in pure principle is not shared with even the mightiest of its citizens: the power to coerce. The state can seize money by the only method which is permitted by the laws of a civilized society, by taxation. The state can ordain the physical movements of resources and the economic decisions of households and firms without their consent.

Prices vs. Quantities

1974-10-01

Martin L. Weitzman

Journal Article Prices vs. Quantities Get access Martin L. Weitzman Martin L. Weitzman Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The … Journal Article Prices vs. Quantities Get access Martin L. Weitzman Martin L. Weitzman Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 41, Issue 4, October 1974, Pages 477–491, https://doi.org/10.2307/2296698 Published: 01 October 1974

Essays in Positive Economics.

1954-12-01

T. W. Hutchison , Milton Friedman

Journal Article Essays in Positive Economics Get access Essays in Positive Economics. By Milton Friedman. (Chicago : University of Chicago Press (London : Cambridge University Press), 1954. Pp. v + … Journal Article Essays in Positive Economics Get access Essays in Positive Economics. By Milton Friedman. (Chicago : University of Chicago Press (London : Cambridge University Press), 1954. Pp. v + 328. 43s. 6d.) T. W. Hutchison T. W. Hutchison London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Economic Journal, Volume 64, Issue 256, 1 December 1954, Pages 796–799, https://doi.org/10.2307/2228046 Published: 01 December 1954

Political Science and the Three New Institutionalisms

1996-12-01

Peter A. Hall , Rosemary C. R. Taylor

The ‘new institutionalism’ is a term that now appears with growing frequency in political science. However, there is considerable confusion about just what the ‘new institutionalism’ is, how it differs … The ‘new institutionalism’ is a term that now appears with growing frequency in political science. However, there is considerable confusion about just what the ‘new institutionalism’ is, how it differs from other approaches, and what sort of promise or problems it displays. The object of this essay is to provide some preliminary answers to these questions by reviewing recent work in a burgeoning literature. Some of the ambiguities surrounding the new institutionalism can be dispelled if we recognize that it does not constitute a unified body of thought. Instead, at least three different analytical approaches, each of which calls itself a ‘new institutionalism’, have appeared over the past fifteen years. We label these three schools of thought: historical institutionalism, rational choice institutionalism, and sociological institutionalism.’ All of these approaches developed in reaction to the behavioural perspectives that were influential during the 1960s and 1970s and all seek to elucidate the role that institutions play in the determination of social and political outcomes. However, they paint quite different pictures of the political world. In the sections that follow, we provide a brief account of the genesis of each school and characterize what is distinctive about its approach to social and political problems. We then compare their analytical strengths and weaknesses, * An earlier version of this paper WLS presented at the 1994 Annual Meeting of the American Political Science Association and at a Conference on ‘What is Institutionalism Now? at the

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Production, Information Costs and Economic Organization

1996-08-22

Armen A. Alchian , Harold Demsetz

Abstract The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization … Abstract The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate co-operation. When a lumber mill employs a cabinetmaker, co-operation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the co-operation takes place across markets (or between firms). Two important problems face a theory of economic organization-to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization.

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The wisdom of crowds: why the many are smarter than the few and how collective wisdom shapes business, economies, societies and nations

2004-11-01

James Surowiecki

In this landmark work, NEW YORKER columnist James Surowiecki explores a seemingly counter-intuitive idea that has profound implications. Decisions taken by a large group, even if the individuals within the … In this landmark work, NEW YORKER columnist James Surowiecki explores a seemingly counter-intuitive idea that has profound implications. Decisions taken by a large group, even if the individuals within the group aren't smart, are always better than decisions made by small numbers of 'experts'. This seemingly simply notion has endless and major ramifications for how businesses operate, how knowledge is advanced, how economies are (or should be) organised and how nation-states fare. With great erudition, Surowiecki ranges across the disciplines of psychology, economics, statistics and history to show just how this principle operates in the real world. Along the way Surowiecki asks a number of intriguing questions about a subject few of us actually understand - economics. What are prices? How does money work? Why do we have corporations? Does advertising work? His answers, rendered in a delightfully clear prose, demystify daunting prospects. As Surowiecki writes: 'The hero of this book is, in a curious sense, an idea, a hero whose story ends up shedding dramatic new light on the landscapes of business, politics and society'.

SOME THOUGHTS ON THE DISTRIBUTION OF EARNINGS 1

1951-06-01

A. D. Roy

Journal Article SOME THOUGHTS ON THE DISTRIBUTION OF EARNINGS Get access A. D. ROY A. D. ROY UNIVERSITY OF CAMBRIDGE Search for other works by this author on: Oxford Academic … Journal Article SOME THOUGHTS ON THE DISTRIBUTION OF EARNINGS Get access A. D. ROY A. D. ROY UNIVERSITY OF CAMBRIDGE Search for other works by this author on: Oxford Academic Google Scholar Oxford Economic Papers, Volume 3, Issue 2, June 1951, Pages 135–146, https://doi.org/10.1093/oxfordjournals.oep.a041827 Published: 01 June 1951

Collective Choice and Social Welfare

1972-11-01

H. Myint , Amartya Sen

Nobel Prize winner Amartya Sen's first great book, now reissued in a fully revised and expanded second edition 'Can the values which individual members of society attach to different alternatives … Nobel Prize winner Amartya Sen's first great book, now reissued in a fully revised and expanded second edition 'Can the values which individual members of society attach to different alternatives be aggregated into values for society as a whole, in a way that is both fair and theoretically sound? Is the majority principle a workable rule for making decisions? How should income inequality be measured? When and how can we compare the distribution of welfare in different societies?' These questions, from the citation by the Swedish Academy of Sciences when Amartya Sen was awarded the Nobel Memorial Prize in Economics, refer to his work in Collective Choice and Social Welfare, the most important of all his early books. Originally published in 1970, this classic work in welfare economics has been recognized for its ground-breaking role in integrating economics and ethics, and for its influence in opening up new areas of research in social choice, including aggregative assessment. It has also had a large influence on international organizations, including the United Nations, particularly in its work on human development. In its original version, the book showed that the 'impossibility theorems' in social choice theory-led by the pioneering work of Kenneth Arrow-need not be seen as destructive of the possibility of reasoned and democratic social choice. Sen's ideas about social choice, welfare economics, inequality, poverty and human rights have continued to evolve since the book's first appearance. This expanded edition, which begins by reproducing the 1970 edition in its entirety, goes on to present eleven new chapters of new arguments and results. As in the original version, the new chapters alternate between non-mathematical chapters completely accessible to all, and those which present mathematical arguments and proofs. The reader who prefers to shun mathematics can follow all the non-mathematical chapters on their own, to receive a full, informal understanding. There is also a substantial new introduction which gives a superb overview of the whole subject of social choice.

The Use of Knowledge in Society

1996-01-01

Friedrich A. von Hayek

Causation and Effectuation: Toward a Theoretical Shift from Economic Inevitability to Entrepreneurial Contingency

2001-04-01

Saras D. Sarasvathy

In economics and management theories, scholars have traditionally assumed the existence of artifacts such as firms/organizations and markets. I argue that an explanation for the creation of such artifacts requires … In economics and management theories, scholars have traditionally assumed the existence of artifacts such as firms/organizations and markets. I argue that an explanation for the creation of such artifacts requires the notion of effectuation. Causation rests on a logic of prediction, effectuation on the logic of control. I illustrate effectuation through business examples and realistic thought experiments, examine its connections with existing theories and empirical evidence, and offer a list of testable propositions for future empirical work.

The General Theory of Employment, Interest and Money, by John Maynard Keynes

1936-12-01

Benjamin Haggott Beckhart

Journal Article The General Theory of Employment, Interest and Money, by John Maynard Keynes Get access The General Theory of Employment, Interest and Money. By John Maynard Keynes. New York, … Journal Article The General Theory of Employment, Interest and Money, by John Maynard Keynes Get access The General Theory of Employment, Interest and Money. By John Maynard Keynes. New York, Harcourt, Brace and Company, 1936.—xii, 403 pp. $2.00. Benjamin Haggott Beckhart Benjamin Haggott Beckhart Columbia University Search for other works by this author on: Oxford Academic Google Scholar Political Science Quarterly, Volume 51, Issue 4, December 1936, Pages 600–602, https://doi.org/10.2307/2143949 Published: 15 December 1936

Competition and Entrepreneurship

1974-07-01

Robert B. Ekelund , Israel M. Kirzner

Kirzner, writing from a neo-Austrian economic perspective that is inherently dynamic with an emphasis on over time, offers a critique of the prevailing positivistic, value freedom of orthodox microeconomics and … Kirzner, writing from a neo-Austrian economic perspective that is inherently dynamic with an emphasis on over time, offers a critique of the prevailing positivistic, value freedom of orthodox microeconomics and price theory, focusing on what he believes is its unrealistic emphasis on static equilibrium analysis. Kirzner criticizes the methodology of Robbinsian equililbrium analysis in which a competitive market is a situation in which buyers and sellers have perfect knowledge and in which decision-making is mechanical and its solutions given. This analysis, according to Kirzner, eliminates all consideration of the competitive process and of entrepreneurship (which is synonymous, for him, with competitive activity); the assumption of perfect knowledge is unrealistic. He offers a full elaboration of the Mises-Hayek view of entrepreneurship and competition as a process based on von Mises' idea of human action rather than Marshall's idea of economizing. Kirzner sees the entrepreneur as always alert to information and propelling the system forward by seeking out price discrepancies as opportunities for profit. This process depends not on impulses from technology or genius; rather every market participant is a potential entrepreneur who can exploit a situation, which depends on a lack of perfect knowledge among the market participants. Entrepreneurial activity is always competitive; and competitive activity is always entrepreneurial. Kirzner is thus also a critique of the Schumpeterian view of entrepreneurship as disrupter of equilibrium; rather the entrepreneur removes disequilibrium in a short-run movement to an equilibrium position. A Kirznerian entrepreneur is a decision-maker whose entire role arises from alertness to unnoticed opportunities or knowledge about market data. Within the context of entrepreneurial activity, he offers a neo-Austrian redefinition of the concept of monopoly and competition. Since for Kirzner entrepreneurship involves no element of resource ownership, monopoly is defined as the impact of input ownership on the competitive process, and not the shape of the demand curve facing a firm. A monopoly position can be won by an alert entrepreneur. In the light of his theory of competition, Kirzner provides a new theoretical place for advertising and selling costs. Advertising, which promotes and calls attention to product differentiation, is the weapon of competition, which allows competitive-entrepreneurial adjustments in the type of products placed in the market in disequilibrium. Kirzner's revaluation of advertising is thus opposed to the idea of advertising as a social waste. Kirzner also offers a new conception of economic welfare based on the coordination-of-knowledge-and-actions instead of the orthodox allocation of social resources standard. (TNM)

The Nature of the Firm

1937-11-01

Ronald H. Coase

Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which … Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which it was erected. This examination is, however, essential not only to prevent the misunderstanding and needless controversy which arise from a lack of knowledge of the assumptions on which a theory is based, but also because of the extreme importance for economics of good judgment in choosing between rival sets of assumptions. For instance, it is suggested that the use of the word “firm” in economics may be different from the use of the term by the “plain man.”11 Joan Robinson, Economics is a Serious Subject, p. 12. Since there is apparently a trend in economic theory towards starting analysis with the individual firm and not with the industry,22 See N. Kaldor, “The Equilibrium of the Firm,”Economic Journal, March, 1934. it is all the more necessary not only that a clear definition of the word “firm” should be given but that its difference from a firm in the “real world,” if it exists, should be made clear. Mrs. Robinson has said that “the two questions to be asked of a set of assumptions in economics are : Are they tractable? and : Do they correspond with the real world?”33 Op. cit., p. 6. Though, as Mrs. Robinson points out, “more often one set will be manageable and the other realistic,” yet there may well be branches of theory where assumptions may be both manageable and realistic. It is hoped to show in the following paper that a definition of a firm may be obtained which is not only realistic in that it corresponds to what is meant by a firm in the real world, but is tractable by two of the most powerful instruments of economic analysis developed by Marshall, the idea of the margin and that of substitution, together giving the idea of substitution at the margin.11 J. M. Keynes, Essays in Biography, pp. 223–4. Our definition must, of course, “relate to formal relations which are capable of being conceived exactly.”22 L. Robbins, Nature and Significance of Economic Science, p. 63. It is convenient if, in searching for a definition of a firm, we first consider the economic system as it is normally treated by the economist. Let us consider the description of the economic system given by Sir Arthur Salter.33 This description is quoted with approval by D. H. Robertson, Control of Industry, p. 85, and by Professor Arnold Plant, “Trends in Business Administration,” Economica, February, 1932. It appears in Allied Shipping Control, pp. 16–17. “The normal economic system works itself. For its current operation it is under no central control, it needs no central survey. Over the whole range of human activity and human need, supply is adjusted to demand, and production to consumption, by a process that is automatic, elastic and responsive.” An economist thinks of the economic system as being co-ordinated by the price mechanism and society becomes not an organisation but an organism.44 See F. A. Hayek, “The Trend of Economic Thinking,” Economica, May, 1933. The economic system “works itself.” This does not mean that there is no planning by individuals. These exercise foresight and choose between alternatives. This is necessarily so if there is to be order in the system. But this theory assumes that the direction of resources is dependent directly on the price mechanism. Indeed, it is often considered to be an objection to economic planning that it merely tries to do what is already done by the price mechanism.55 See F. A. Hayek, op. cit. Sir Arthur Salter's description, however, gives a very incomplete picture of our economic system. Within a firm, the description does not fit at all. For instance, in economic theory we find that the allocation of factors of production between different uses is determined by the price mechanism. The price of factor A becomes higher in X than in Y. As a result, A moves from Y to X until the difference between the prices in X and Y, except in so far as it compensates for other differential advantages, disappears. Yet in the real world, we find that there are many areas where this does not apply. If a workman moves from department Y to department X, he does not go because of a change in relative prices, but because he is ordered to do so. Those who object to economic planning on the grounds that the problem is solved by price movements can be answered by pointing out that there is planning within our economic system which is quite different from the individual planning mentioned above and which is akin to what is normally called economic planning. The example given above is typical of a large sphere in our modern economic system. Of course, this fact has not been ignored by economists. Marshall introduces organisation as a fourth factor of production; J. B. Clark gives the co-ordinating function to the entrepreneur; Professor Knight introduces managers who co-ordinate. As D. H. Robertson points out, we find “islands of conscious power in this ocean of unconscious co-operation like lumps of butter coagulating in a pail of buttermilk.”11 Op. cit., p. 85. But in view of the fact that it is usually argued that co-ordination will be done by the price mechanism, why is such organisation necessary? Why are there these “islands of conscious power”? Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market. Within a firm, these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-co-ordinator, who directs production.22 In the rest of this paper I shall use the term entrepreneur to refer to the person or persons who, in a competitive system, take the place of the price mechanism in the direction of resources. It is clear that these are alternative methods of co-ordinating production. Yet, having regard to the fact that if production is regulated by price movements, production could be carried on without any organisation at all, well might we ask, why is there any organisation? Of course, the degree to which the price mechanism is superseded varies greatly. In a department store, the allocation of the different sections to the various locations in the building may be done by the controlling authority or it may be the result of competitive price bidding for space. In the Lancashire cotton industry, a weaver can rent power and shop-room and can obtain looms and yarn on credit.33 Survey of Textile Industries, p. 26. This co-ordination of the various factors of production is, however, normally carried out without the intervention of the price mechanism. As is evident, the amount of “vertical” integration, involving as it does the supersession of the price mechanism, varies greatly from industry to industry and from firm to firm. It can, I think, be assumed that the distinguishing mark of the firm is the supersession of the price mechanism. It is, of course, as Professor Robbins points out, “related to an outside network of relative prices and costs,”11 Op. cit., p. 71. but it is important to discover the exact nature of this relationship. This distinction between the allocation of resources in a firm and the allocation in the economic system has been very vividly described by Mr. Maurice Dobb when discussing Adam Smith's conception of the capitalist: “It began to be seen that there was something more important than the relations inside each factory or unit captained by an undertaker; there were the relations of the undertaker with the rest of the economic world outside his immediate sphere…. the undertaker busies himself with the division of labour inside each firm and he plans and organises consciously,” but “he is related to the much larger economic specialisation, of which he himself is merely one specialised unit. Here, he plays his part as a single cell in a larger organism, mainly unconscious of the wider rôle he fills.”22 Capitalist Enterprise and Social Progress, p. 20. Cf., also, Henderson, Supply and Demand, pp. 3–5. In view of the fact that while economists treat the price mechanism as a co-ordinating instrument, they also admit the co-ordinating function of the “entrepreneur,” it is surely important to enquire why co-ordination is the work of the price mechanism in one case and of the entrepreneur in another. The purpose of this paper is to bridge what appears to be a gap in economic theory between the assumption (made for some purposes) that resources are allocated by means of the price mechanism and the assumption (made for other purposes) that this allocation is dependent on the entrepreneur-co-ordinator. We have to explain the basis on which, in practice, this choice between alternatives is effected.33 It is easy to see when the State takes over the direction of an industry that, in planning it, it is doing something which was previously done by the price mechanism. What is usually not realised is that any business man in organising the relations between his departments is also doing something which could be organised through the price mechanism. There is therefore point in Mr. Durbin's answer to those who emphasise the problems involved in economic planning that the same problems have to be solved by business men in the competitive system. (See “Economic Calculus in a Planned Economy,”Economic Journal, December, 1936.) The important difference between these two cases is that economic planning is imposed on industry while firms arise voluntarily because they represent a more efficient method of organising production. In a competitive system, there is an “optimum” amount of planning! Our task is to attempt to discover why a firm emerges at all in a specialised exchange economy. The price mechanism (considered purely from the side of the direction of resources) might be superseded if the relationship which replaced it was desired for its own sake. This would be the case, for example, if some people preferred to work under the direction of some other person. Such individuals would accept less in order to work under someone, and firms would arise naturally from this. But it would appear that this cannot be a very important reason, for it would rather seem that the opposite tendency is operating if one judges from the stress normally laid on the advantage of “being one's own master.”11 Cf. Harry Dawes, “Labour Mobility in the Steel Industry,”Economic Journal, March, 1934, who instances “the trek to retail shopkeeping and insurance work by the better paid of skilled men due to the desire (often the main aim in life of a worker) to be independent” (p. 86). Of course, if the desire was not to be controlled but to control, to exercise power over others, then people might be willing to give up something in order to direct others; that is, they would be willing to pay others more than they could get under the price mechanism in order to be able to direct them. But this implies that those who direct pay in order to be able to do this and are not paid to direct, which is clearly not true in the majority of cases.22 None the less, this is not altogether fanciful. Some small shopkeepers are said to earn less than their assistants. Firms might also exist if purchasers preferred commodities which are produced by firms to those not so produced; but even in spheres where one would expect such preferences (if they exist) to be of negligible importance, firms are to be found in the real world.33 G. F. Shove, “The Imperfection of the Market: a Further Note,”Economic Journal, March, 1933, p. 116, note 1, points out that such preferences may exist, although the example he gives is almost the reverse of the instance given in the text. Therefore there must be other elements involved. The main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism. The most obvious cost of “organising” production through the price mechanism is that of discovering what the relevant prices are.44 According to N. Kaldor, “A Classificatory Note of the Determinateness of Equilibrium,”Review of Economic Studies, February, 1934, it is one of the assumptions of static theory that “All the relevant prices are known to all individuals.” But this is clearly not true of the real world. This cost may be reduced but it will not be eliminated by the emergence of specialists who will sell this information. The costs of negotiating and concluding a separate contract for each exchange transaction which takes place on a market must also be taken into account.11 This influence was noted by Professor Usher when discussing the development of capitalism. He says: “The successive buying and selling of partly finished products were sheer waste of energy.” (Introduction to the Industrial History of England, p. 13). But he does not develop the idea nor consider why it is that buying and selling operations still exist. Again, in certain markets, e.g., produce exchanges, a technique is devised for minimising these contract costs; but they are not eliminated. It is true that contracts are not eliminated when there is a firm but they are greatly reduced. A factor of production (or the owner thereof) does not have to make a series of contracts with the factors with whom he is co-operating within the firm, as would be necessary, of course, if this co-operation were as a direct result of the working of the price mechanism. For this series of contracts is substituted one. At this stage, it is important to note the character of the contract into which a factor enters that is employed within a firm. The contract is one whereby the factor, for a certain remuneration (which may be fixed or fluctuating), agrees to obey the directions of an entrepreneur within certain limits.22 It would be possible for no limits to the powers of the entrepreneur to be fixed. This would be voluntary slavery. According to Professor Batt, The Law of Master and Servant, p. 18, such a contract would be void and unenforceable. The essence of the contract is that it should only state the limits to the powers of the entrepreneur. Within these limits, he can therefore direct the other factors of production. There are, however, other disadvantages—or costs—of using the price mechanism. It may be desired to make a long-term contract for the supply of some article or service. This may be due to the fact that if one contract is made for a longer period, instead of several shorter ones, then certain costs of making each contract will be avoided. Or, owing to the risk attitude of the people concerned, they may prefer to make a long rather than a short-term contract. Now, owing to the difficulty of forecasting, the longer the period of the contract is for the supply of the commodity or service, the less possible, and indeed, the less desirable it is for the person purchasing to specify what the other contracting party is expected to do. It may well be a matter of indifference to the person supplying the service or commodity which of several courses of action is taken, but not to the purchaser of that service or commodity. But the purchaser will not know which of these several courses he will want the supplier to take. Therefore, the service which is being provided is expressed in general terms, the exact details being left until a later date. All that is stated in the contract is the limits to what the persons supplying the commodity or service is expected to do. The details of what the supplier is expected to do is not stated in the contract but is decided later by the purchaser. When the direction of resources (within the limits of the contract) becomes dependent on the buyer in this way, that relationship which I term a “firm” may be obtained.11 Of course, it is not possible to draw a hard and fast line which determines whether there is a firm or not. There may be more or less direction. It is similar to the legal question of whether there is the relationship of master and servant or principal and agent. See the discussion of this problem below. A firm is likely therefore to emerge in those cases where a very short term contract would be unsatisfactory. It is obviously of more importance in the case of services—labour—than it is in the case of the buying of commodities. In the case of commodities, the main items can be stated in advance and the details which will be decided later will be of minor significance. We may sum up this section of the argument by saying that the operation of a market costs something and by forming an organisation and allowing some authority (an “entrepreneur”) to direct the resources, certain marketing costs are saved. The entrepreneur has to carry out his function at less cost, taking into account the fact that he may get factors of production at a lower price than the market transactions which he supersedes, because it is always possible to revert to the open market if he fails to do this. The question of uncertainty is one which is often considered to be very relevant to the study of the equilibrium of the firm. It seems improbable that a firm would emerge without the existence of uncertainty. But those, for instance, Professor Knight, who make the mode of payment the distinguishing mark of the firm—fixed incomes being guaranteed to some of those engaged in production by a person who takes the residual, and fluctuating, income—would appear to be introducing a point which is irrelevant to the problem we are considering. One entrepreneur may sell his services to another for a certain sum of money, while the payment to his employees may be mainly or wholly a share in profits.22 The views of Professor Knight are examined below in more detail. The significant question would appear to be why the allocation of resources is not done directly by the price mechanism. Another factor that should be noted is that exchange transactions on a market and the same transactions organised within a firm are often treated differently by Governments or other bodies with regulatory powers. If we consider the operation of a sales tax, it is clear that it is a tax on market transactions and not on the same transactions organised within the firm. Now since these are alternative methods of “organisation”—by the price mechanism or by the entrepreneur—such a regulation would bring into existence firms which otherwise would have no raison d'être. It would furnish a reason for the emergence of a firm in a specialised exchange economy. Of course, to the extent that firms already exist, such a measure as a sales tax would merely tend to make them larger than they would otherwise be. Similarly, quota schemes, and methods of price control which imply that there is rationing, and which do not apply to firms producing such products for themselves, by allowing advantages to those who organise within the firm and not through the market, necessarily encourage the growth of firms. But it is difficult to believe that it is measures such as have been mentioned in this paragraph which have brought firms into existence. Such measures would, however, tend to have this result if they did not exist for other reasons. These, then, are the reasons why organisations such as firms exist in a specialised exchange economy in which it is generally assumed that the distribution of resources is “organised” by the price mechanism. A firm, therefore, consists of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur. The approach which has just been sketched would appear to offer an advantage in that it is possible to give a scientific meaning to what is meant by saying that a firm gets larger or smaller. A firm becomes larger as additional transactions (which could be exchange transactions co-ordinated through the price mechanism) are organised by the entrepreneur and becomes smaller as he abandons the organisation of such transactions. The question which arises is whether it is possible to study the forces which determine the size of the firm. Why does the entrepreneur not organise one less transaction or one more? It is interesting to note that Professor Knight considers that: “the relation between efficiency and size is one of the most serious problems of theory, being, in contrast with the relation for a plant, largely a matter of personality and historical accident rather than of intelligible general principles. But the question is peculiarly vital because the possibility of monopoly gain offers a powerful incentive to continuous and unlimited expansion of the firm, which force must be offset by some equally powerful one making for decreased efficiency (in the production of money income) with growth in size, if even boundary competition is to exist.”11 Risk, Uncertainty and Profit, Preface to the Re-issue, London School of Economics Series of Reprints, No. 16, 1933. Professor Knight would appear to consider that it is impossible to treat scientifically the determinants of the size of the firm. On the basis of the concept of the firm developed above, this task will now be attempted. It was suggested that the introduction of the firm was due primarily to the existence of marketing costs. A pertinent question to ask would appear to be (quite apart from the monopoly considerations raised by Professor Knight), why, if by organising one can eliminate certain costs and in fact reduce the cost of production, are there any market transactions at all?22 There are certain marketing costs which could only be eliminated by the abolition of “consumers' choice” and these are the costs of retailing. It is conceivable that these costs might be so high that people would be willing to accept rations because the extra product obtained was worth the loss of their choice. Why is not all production carried on by one big firm? There would appear to be certain possible explanations. First, as a firm gets larger, there may be decreasing returns to the entrepreneur function, that is, the costs of organising additional transactions within the firm may rise.33 This argument assumes that exchange transactions on a market can be considered as homogeneous; which is clearly untrue in fact. This complication is taken into account below. Naturally, a point must be reached where the costs of organising an extra transaction within the firm are equal to the costs involved in carrying out the transaction in the open market, or, to the costs of organising by another entrepreneur. Secondly, it may be that as the transactions which are organised increase, the entrepreneur fails to place the factors of production in the uses where their value is greatest, that is, fails to make the best use of the factors of production. Again, a point must be reached where the loss through the waste of resources is equal to the marketing costs of the exchange transaction in the open market or to the loss if the transaction was organised by another entrepreneur. Finally, the supply price of one or more of the factors of production may rise, because the “other advantages” of a small firm are greater than those of a large firm.11 For a discussion of the variation of the supply price of factors of production to firms of varying size, see E. A. G. Robinson, The Structure of Competitive Industry. It is sometimes said that the supply price of organising ability increases as the size of the firm increases because men prefer to be the heads of small independent businesses rather than the heads of departments in a large business. See Jones, The Trust Problem, p. 531, and Macgregor, Industrial Combination, p. 63. This is a common argument of those who advocate Rational-sation. It is said that larger units would be more efficient, but owing to the individualistic spirit of the smaller entrepreneurs, they prefer to remain independent, apparently in spite of the higher income which their increased efficiency under Rationalisation makes possible. Of course, the actual point where the expansion of the firm ceases might be determined by a combination of the factors mentioned above. The first two reasons given most probably correspond to the economists' phrase of “diminishing returns to management.”22 This discussion is, of course, brief and incomplete. For a more thorough discussion of this particular problem, see N. Kaldor, “The Equilibrium of the Firm,”Economic Journal, March, 1934, and E. A. G. Robinson, “The Problem of Management and the Size of the Firm,”Economic Journal, June, 1934. The point has been made in the previous paragraph that a firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organising in another firm. But if the firm stops its expansion at a point below the costs of marketing in the open market and at a point equal to the costs of organising in another firm, in most cases (excluding the case of “combination”3), this will imply that there is a market transaction between these two producers, each of whom could organise it at less than the actual marketing costs. How is the paradox to be resolved? If we consider an example the reason for this will become clear. Suppose A is buying a product from B and that both A and B could organise this marketing transaction at less than its present cost. B, we can assume, is not organising one process or stage of production, but several. If A therefore wishes to avoid a market transaction, he will have to take over all the processes of production controlled by B. Unless A takes over all the processes of production, a market transaction will still remain, although it is a different product that is bought. But we have previously assumed that as each producer expands he becomes less efficient; the additional costs of organising extra transactions increase. It is probable that A's cost of organising the transactions previously organised by B will be greater than B's cost of doing the same thing. A therefore will take over the whole of B's organisation only if his cost of organising B's work is not greater than B's cost by an amount equal to the costs of carrying out an exchange transaction on the open market. But once it becomes economical to have a market transaction, it also pays to divide production in such a way that the cost of organising an extra transaction in each firm is the same. Up to now it has been assumed that the exchange transactions which take place through the price mechanism are homogeneous. In fact, nothing could be more diverse than the actual transactions which take place in our modern world. This would seem to imply that the costs of carrying out exchange transactions through the price mechanism will vary considerably as will also the costs of organising these transactions within the firm. It seems therefore possible that quite apart from the question of diminishing returns the costs of organising certain transactions within the firm may be greater than the costs of carrying out the exchange transactions in the open market. This would necessarily imply that there were exchange transactions carried out through the price mechanism, but would it mean that there would have to be more than one firm? Clearly not, for all those areas in the economic system where the direction of resources was not dependent directly on the price mechanism could be organised within one firm. The factors which were discussed earlier would seem to be the important ones, though it is difficult to say whether “diminishing returns to management” or the rising supply price of factors is likely to be the more important. Other things being equal, therefore, a firm will tend to be larger: the less the costs of organising and the slower these costs rise with an increase in the transactions organised. the less likely the entrepreneur is to make mistakes and the smaller the increase in mistakes with an increase in the transactions organised. the greater the lowering (or the less the rise) in the supply price of factors of production to firms of larger size. Apart from variations in the supply price of factors of production to firms of different sizes, it would appear that the costs of organising and the losses through mistakes will increase with an increase in the spatial distribution of the transactions organised, in the diss

Stability in Competition

1990-01-01

Harold Hotelling

A Theory of the Allocation of Time

1965-09-01

Gary S. Becker

Journal Article A Theory of the Allocation of Time Get access Gary S. Becker Gary S. Becker Columbia University Search for other works by this author on: Oxford Academic Google … Journal Article A Theory of the Allocation of Time Get access Gary S. Becker Gary S. Becker Columbia University Search for other works by this author on: Oxford Academic Google Scholar The Economic Journal, Volume 75, Issue 299, 1 September 1965, Pages 493–517, https://doi.org/10.2307/2228949 Published: 01 September 1965

Economy and Society: An Outline of Interpretive Sociology

1969-09-01

Gianfranco Poggi

History of Economic Analysis, by Joseph A. Schumpeter, Elizabeth Boody Schumpeter

1954-12-01

Joseph Dorfman

Journal Article History of Economic Analysis, by Joseph A. Schumpeter, Elizabeth Boody Schumpeter Get access History of Economic Analysis. By Joseph A. Schumpeter. Edited by Elizabeth Boody Schumpeter. New York, … Journal Article History of Economic Analysis, by Joseph A. Schumpeter, Elizabeth Boody Schumpeter Get access History of Economic Analysis. By Joseph A. Schumpeter. Edited by Elizabeth Boody Schumpeter. New York, Oxford University Press, 1954.—xxv, 1260 pp. $17.50. Joseph Dorfman Joseph Dorfman Columbia University Search for other works by this author on: Oxford Academic Google Scholar Political Science Quarterly, Volume 69, Issue 4, December 1954, Pages 603–605, https://doi.org/10.2307/2145638 Published: 15 December 1954

Toward a Theory of Property Rights

1974-01-01

Harold Demsetz

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Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States.

1970-12-01

Gordon Tullock , Albert O. Hirschman

1. Introduction and Doctrinal Background Enter and Latitude for deterioration, and slack in economic thought Exit and voice as impersonations of economics and politics 2. Exit How the exit option … 1. Introduction and Doctrinal Background Enter and Latitude for deterioration, and slack in economic thought Exit and voice as impersonations of economics and politics 2. Exit How the exit option works Competition as collusive behavior 3. Voice Voice as a residual of exit Voice as an alternative to exit 4. A Special Difficulty in Combining Exit and Voice 5. How Monopoly Can be Comforted by Competition 6. On Spatial Duopoly and the Dynamics of Two-Party Systems 7. A Theory of Loyalty The activation of voice as a function of loyalty Loyalist behavior as modified by severe initiation and high penalties for exit Loyalty and the difficult exit from public goods (and evils) 8. Exit and Voice in American Ideology and Practice 9. The Elusive Optimal Mix of Exit and Voice Appendixes A. A simple diagrammatic representation of voice and exit B. The choice between voice and exit C. The reversal phenomenon D. Consumer reactions to price rise and quality decline in the case of several connoisseur goods F. The effects of severity of initiation on activism: design for an experiment (in collaboration with Philip G. Zimbardo and Mark Snyder) Index

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A New Approach to Consumer Theory

1976-01-01

Kelvin Lancaster

What Firms Do? Coordination, Identity, and Learning

1996-10-01

Bruce Kogut , Udo Zander

Firms are organizations that represent social knowledge of coordination and learning. But why should their boundaries demarcate quantitative shifts in the knowledge and capability of their members? Should not knowledge … Firms are organizations that represent social knowledge of coordination and learning. But why should their boundaries demarcate quantitative shifts in the knowledge and capability of their members? Should not knowledge reside also in a network of interacting firms? This line of questioning presents the challenge to state an alternative view to the “theory of the firm,” a theory that has moved from Coase's early treatment of what firms do to a concern with ownership, incentives, and self-interest. We return to Coase's original insight in understanding the cost and benefits of a firm but based on a view that individuals are characterized by an “unsocial sociality.” Does the perception of opportunism generate the need to integrate market transactions into the firm, or do boundaries of the firm lead to the attribution of opportunism? This basic dichotomy between self-interest and the longing to belong is the behavioral underpinning to the superiority of firms over markets in resolving a fundamental dilemma: productivity grows with the division of labor but specialization increases the costs of communication and coordination. The knowledge of the firm has an economic value over market transactions when identity leads to social knowledge that supports coordination and communication. Through identification, procedural rules are learned, and coordination and communication are facilitated across individuals and groups of diverse specialized competence. A firm is distinct from a market because coordination, communication, and learning are situated not only physically in locality, but also mentally in an identity. Since identity implies a moral order as well as rules of exclusion, there are limitations and costs to relying upon a firm for exchange as opposed to the market. These costs are not necessarily those traditionally assigned to the category of decreasing returns to hierarchy. For example, an identity implies that some practices, and businesses, may be notionally inconsistent with each other. Norms of procedural justice that are identified with a firm imply that not all technically feasible complements are permissible within the logic of a shared identity. There is consequently a cost to an identity that offsets the benefits. Because the assemblage of elements that compose an organization are subject to requirements of consistency, identities rule out potentially interesting avenues of innovation and creativity. We illustrate these ideas by returning to the original prisoners’ dilemma game and by an analysis of the coherence of a firm as a search for complements that are consistent with norms of procedural justice. We argue that the underlying dynamic of a prisoners' dilemma game reveals the problems of coordination, communication, and conflicts in norms of justice when players are deprived of social knowledge and shared identity. Similarly, the determination of a firm's coherence arises out of the demand for a moral and notional consistency in the “categorization” of its activities, as opposed to a technological necessity. These ideas are illustrated through an empirical examination of logical complements in high performance work systems.

The Politics of Stakeholder Theory: Some Future Directions

1994-10-01

R. Edward Freeman

Abstract: The purpose of this paper is to enter the conversation about stakeholder theory with the goal of clarifying certain foundational issues. I want to show, along with Boatright, that … Abstract: The purpose of this paper is to enter the conversation about stakeholder theory with the goal of clarifying certain foundational issues. I want to show, along with Boatright, that there is no stakeholder paradox, and that the principle on which such a paradox is built, the Separation Thesis, is nicely self-serving to business and ethics academics. If we give up such a thesis we find there is no stakeholder theory but that stakeholder theory becomes a genre that is quite rich. It becomes one of many ways to blend together the central concepts of business with those of ethics. Rather than take each concept of business singly or the whole of “business” together and hold it to the light of ethical standards, we can use the stakeholder concept to create more fine-grained analyses that combine business and ethics; or more simply, we can tell many more, and more interesting, stories about business.

A Historical Comparison of Resource-Based Theory and Five Schools of Thought Within Industrial Organization Economics: Do We Have a New Theory of the Firm?

1991-03-01

Kathleen R. Conner

A resource-based approach to strategic management focuses on costly-to-copy attributes of the firm as sources of economic rents and, therefore, as the fundamental drivers of performance and competitive advantage. Interest … A resource-based approach to strategic management focuses on costly-to-copy attributes of the firm as sources of economic rents and, therefore, as the fundamental drivers of performance and competitive advantage. Interest presently exists in whether explicit acknowledgement of the resource-based view may form the kernel of a unifying paradigm for strategy research. This article addresses the degree to which a resource-based view represents a fundamentally different approach from theories used in industrial organization (10) economics. The central thesis is that, put informal terms, the resource-based approach is reaching for a theory of the firm. To determine its distinctiveness in comparison to IO, therefore, an appropriate comparison is with other theories of the firm developed within that tradition. Section I summarizes and analyzes five theories that have been significant in the historical evolution of IO. These are neoclassical theory's perfect competition model, Bain-type IO, the Schumpeterian and Chicago responses, and transaction cost theory. The first part of Section II analyzes the resource-based approach in terms of similarities to and differencesfrom these IO-related theories. The conclusion is that resource-based theory both incorporates and rejects at least one major element from each of them; thus resource-based theory reflects a strong IO heritage, but at the same time incorporates fundamental differences from any one of these theories. The second part of Section II analyzes resource-based theory as a new theory of the firm.

The New Institutional Economics: Taking Stock, Looking Ahead

2000-09-01

Oliver E. Williamson

This paper examines the progressive development of the new institutional economics over the past quarter century. It begins by distinguishing four levels of social analysis, with special emphasis on the … This paper examines the progressive development of the new institutional economics over the past quarter century. It begins by distinguishing four levels of social analysis, with special emphasis on the institutional environment and the institutions of governance. It then turns to some of the good ideas out of which the NIE works: the description of human actors, feasibility, firms as governance structures, and operationalization. Applications, including privatization, are briefly discussed. Its empirical successes, public policy applications, and other accomplishments notwithstanding, there is a vast amount of unfinished business.

Organizational Structure, Environment and Performance: The Role of Strategic Choice

1972-01-01

John Child

This paper critically examines available theoretical models which have been derived from statistically established patterns of association between contextual and organizational variables. These models offer an interpretation of organizational structure … This paper critically examines available theoretical models which have been derived from statistically established patterns of association between contextual and organizational variables. These models offer an interpretation of organizational structure as a product of primarily economic constraints which contextual variables are assumed to impose. It is argued that available models in fact attempt to explain organization at one remove by ignoring the essentially political process, whereby power-holders within organizations decide upon courses of strategic action. This `strategic choice' typically includes not only the establishment of structural forms but also the manipulation of environmental features and the choice of relevant performance standards. A theoretical re-orientation of this kind away from functional imperatives and towards a recognition of political action is developed and illustrated in the main body of the paper.

Increasing Returns, Path Dependence, and the Study of Politics

2000-06-01

Paul Pierson

It is increasingly common for social scientists to describe political processes as “path dependent.” The concept, however, is often employed without careful elaboration. This article conceptualizes path dependence as a … It is increasingly common for social scientists to describe political processes as “path dependent.” The concept, however, is often employed without careful elaboration. This article conceptualizes path dependence as a social process grounded in a dynamic of “increasing returns.” Reviewing recent literature in economics and suggesting extensions to the world of politics, the article demonstrates that increasing returns processes are likely to be prevalent, and that good analytical foundations exist for exploring their causes and consequences. The investigation of increasing returns can provide a more rigorous framework for developing some of the key claims of recent scholarship in historical institutionalism: Specific patterns of timing and sequence matter; a wide range of social outcomes may be possible; large consequences may result from relatively small or contingent events; particular courses of action, once introduced, can be almost impossible to reverse; and consequently, political development is punctuated by critical moments or junctures that shape the basic contours of social life.

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The Theory of Social and Economic Organization.

1948-06-01

Gottfried Salomon Delatour , Max Weber , A. M. Henderson +1 more

The Theory of Social and Economic Organization grew out of Weber’s philosophical inquiries into the nature of authority and how it is transmitted. He identified three types of authority: the … The Theory of Social and Economic Organization grew out of Weber’s philosophical inquiries into the nature of authority and how it is transmitted. He identified three types of authority: the charismatic, based on the individual qualities of a leader and reverence for them among his or her followers; the traditional, based on custom and usage; and the rational-legal, based on the rule of objective law.

Governing the Commons: The Evolution of Institutions for Collective Action

1992-08-01

Barry C. Field , Элинор Остром

Preface 1. Reflections on the commons 2. An institutional approach to the study of self-organization and self-governance in CPR situations 3. Analyzing long-enduring, self-organized and self-governed CPRs 4. Analyzing institutional … Preface 1. Reflections on the commons 2. An institutional approach to the study of self-organization and self-governance in CPR situations 3. Analyzing long-enduring, self-organized and self-governed CPRs 4. Analyzing institutional change 5. Analyzing institutional failures and fragilities 6. A framework for analysis of self-organizing and self-governing CPRs Notes References Index.

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Structural Holes: The Social Structure of Competition

1995-10-01

Emmanuel Lazega , Ronald S. Burt

Le Comportement de l'Homme Rationnel devant le Risque: Critique des Postulats et Axiomes de l'Ecole Americaine

1953-10-01

M. Allais

The Economic Institutions of Capitalism

1987-03-01

William M. Dugger

(1987). The Economic Institutions of Capitalism. Journal of Economic Issues: Vol. 21, No. 1, pp. 528-530. (1987). The Economic Institutions of Capitalism. Journal of Economic Issues: Vol. 21, No. 1, pp. 528-530.

How Nature Works: The Science of Self-Organized Criticality

1997-06-01

Per Bak , M. B. Weissman

First Page First Page

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Economic Action and Social Structure: The Problem of Embeddedness

1985-11-01

Mark Granovetter

How behavior and institutions are affected by social relations is one of the classic questions of social theory. This paper concerns the extent to which economic action is embedded in … How behavior and institutions are affected by social relations is one of the classic questions of social theory. This paper concerns the extent to which economic action is embedded in structures of social relations, in modern industrial society. Although the usual neoclasical accounts provide an undersocialized or atomized-actor explanation of such action, reformist economists who attempt to bring social structure back in do so in the way criticized by Dennis Wrong. Under-and oversocialized accounts are paradoxically similar in their neglect of ongoing structures of social relations, and a sophisticated account of economic action must consider its embeddedness in such structures. The argument in illustrated by a critique of Oliver Williamson's markets and hierarchies research program.

Institutions, Institutional Change and Economic Performance

1991-07-01

Michael C. Munger , Douglass C. North

Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic … Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)

Risk, Uncertainty and Profit

1921-01-01

Frank H. Knight

Examines the role played by true uncertainty, defined as the possibility of alternative outcomes whose probabilities are not capable of measurement, in an economic system, and distinguishes uncertainty from risk. … Examines the role played by true uncertainty, defined as the possibility of alternative outcomes whose probabilities are not capable of measurement, in an economic system, and distinguishes uncertainty from risk. Classical economic theory teaches that perfect competition ought to drive an economy into equilibrium and eliminate opportunities for economic profit. Nevertheless, economic profit persists in the real world. The introductory sections of the book provide a historical and critical review of early attempts to reconcile theory and observation. Then, beginning with a simplified model economy of individuals as producers-and-consumers, the author derives familiar features of static economics. The model goes through further refinements of joint production, and changes with uncertainty absent with similar results. The final model is one that demonstrates how perfect competition tends to eliminate profit. The author then takes up the question of how risk and uncertainty may upset the equilibrium. Risk is the possibility of alternative outcomes whose probabilities are capable of measurement; uncertainty is the possibility of alternative outcome whose probabilities are not capable of measurement. When probabilities are known, adverse outcomes may be insured against. Uncertainty is handled by judgment, an unequally distributed ability. The successful entrepreneur is one who has the sound judgment, either in the direction of the enterprise itself or in the selection of its managers (as shareholders do). The recompense for this talent is profit. (CAR)

An Essay on the Nature and Significance of Economic Science

1984-01-01

Lord Robbins

Essays in Positive Economics

1954-04-01

Clark Lee Allen , Milton Friedman

The Theory of Economic Regulation

1971-01-01

George J. Stigler

The Austrian School’s approach to uncertainty

2025-06-23

Paweł Stokłosa | Catallaxy

Motivation: Analyzing the Austrian School of Economics (ASE) perspective on uncertainty to classify it and make it comparable to other schools of economic thought.Aim: investigating the solutions and mechanisms proposed … Motivation: Analyzing the Austrian School of Economics (ASE) perspective on uncertainty to classify it and make it comparable to other schools of economic thought.Aim: investigating the solutions and mechanisms proposed by Austrian economists L. von Mises, M. Rothbard, I. Kirzner, H. Hoppe, G. L. S. Shackle and L. Lachmann by categorising them within modified taxonomy and thus implicating their assumptions about nature of uncertainty.Materials and methods: The methods employed in the article are an integrative review and a comparative framework called modified taxonomy. Materials consist of chosen works of economists from the Austrian School of Economics.Results: The analysis indicates that authors promoting decentralised solutions such as market perceive uncertainty as stemming from non-economic sources. However, authors promoting more centralised solutions seek uncertainty from human’s ability to create a future (radical subjectivism and determinism).

Symmetry unbound: Leviathan and the air-pump in methodological retrospect

2025-06-23

Suman Seth | Metascience

Methodological assumptions of the New Institutional Economics: A reconstruction of the approach

2025-06-23

Mariusz Roman | Catallaxy

Motivation: The emergence of the New Institutional Economics (NIE) was a response to the methodological limitations of neoclassical economic models, which lacked explanations concerning the costs of using the market … Motivation: The emergence of the New Institutional Economics (NIE) was a response to the methodological limitations of neoclassical economic models, which lacked explanations concerning the costs of using the market mechanism, the structure of property rights, or institutional evolution. NIE enriches the neoclassical approach by embedding its research models in social realities and focusing on institutions as fundamental variables of economic processes.Aim: This article aims to reconstruct and discuss the methodological foundations of NIE, with particular emphasis on assumptions regarding individual rationality, methodological individualism, and opportunism among transaction partners.Materials and methods: This paper adopts a theoretical-analytical approach based on a literature review. A comparative analysis and an attempt to identify common elements of the institutional research approach were applied.Results: Using the research method, the fundamental methodological assumptions of NIE were reconstructed. These assumptions bring neoclassical economics closer to the realities of socio-economic processes.

BRUNO LEONI, JAMES M. BUCHANAN, AND THE QUEST FOR A THEORY OF COLLECTIVE ACTION

2025-06-20

Giacomo Brioni | Il Politico

The essay offers a comparison of the political theories of Bruno Leoni and James M. Buchanan. The focus of the discussion is on the writings of the 1950s and early … The essay offers a comparison of the political theories of Bruno Leoni and James M. Buchanan. The focus of the discussion is on the writings of the 1950s and early 1960s, in which both thinkers engage in the elaboration of a theory of collective action. After an initial section (§1) in which the history of the most important collaborations between the two thinkers is reconstructed, the discussion unfolds in three stages. In the first (§2) it is shown that, even before they met, Buchanan and Leoni had developed an identical individualistic conception of the social sciences. This is observed in detail by comparing two essays in which they both deal with the science of finance. Second, (§3) notes how two divergent views of politics emerge from this agreement. Although both focus on the differences between the market and democracy, Buchanan does not believe, as Leoni does, that politics is based exclusively on power asymmetries. This rift seems to be recomposed when Leoni, commenting on the first draft of The Calculus of Consent elaborates his own theory of power exchange. However, it will be shown (§4) that even with this modification the distance between Leoni and Buchanan remains, mainly due to the latter's adherence to the contractualist paradigm, which is unacceptable to Leonian evolutionism.

Circular Economy and Philosophy of Economics

2025-06-19

Benedetta Giovanola , Stefano Spalletti | Routledge eBooks

Radical Ecology and Original Institutional Economics

2025-06-19

Arturo Hermann | Routledge eBooks

Engineering the Flow of Coins: Money and Natural Philosophy in Oresme’s Writings

2025-06-19

Philippe Debroise , Mourtaza Chopra | BRILL eBooks

Principles of Post-Keynesian Ecological Economics

2025-06-19

Louis‐Philippe Rochon , Sergio Rossi , Maurizio Solari | Routledge eBooks

Herman Daly's Political Economy for Sustainability

2025-06-19

Giandomenico Scarpelli | Routledge eBooks

Contracts, Inequality, and the State

2025-06-19

Weitseng Chen | Cambridge University Press eBooks

Rethinking Economics in Populist Times

2025-06-18

Can Çinar | Routledge eBooks

The Man Behind the Social Market Economy and His Times

2025-06-18

Piotr Oliński | ORDO

Exploring the Philosophical and Conceptual Evolution of Economic Well-Being: From Antiquity to Present

2025-06-16

R. Acharya , Santosh K Gupta | RESEARCH REVIEW International Journal of Multidisciplinary

Rich intellectual traditions dating back thousands of years provide a plethora of knowledge about the current state of the economy. The assessment of economic well-being has a lengthy history characterized … Rich intellectual traditions dating back thousands of years provide a plethora of knowledge about the current state of the economy. The assessment of economic well-being has a lengthy history characterized by constant evolution and modification. The pursuit of measuring wealth and well-being has influenced our perception of the economy and society since the dawn of civilization and continues into contemporary times. While GDP has been the conventional metric, the efforts regarding quantifying economic well-being beyond GDP, is a reflection of our expanding knowledge of the multifaceted and complex elements that contribute to societal prosperity. Although a single metric cannot encompass all aspects of well-being, a blend of indices can yield a more all-encompassing and refined comprehension. The paper explores all such metrics providing a nuanced understanding of the evolution process. As we confront the challenges of the 21st century, the measurement of economic well-being continues to evolve reflecting changing priorities and advancing methodologies, so that nations can efficiently convert the finite resources of the planet into the prosperity of their citizens.

The Collapse and Redefinition of the Moral Economy

2025-06-15

| University of Alabama Press eBooks

The Birth of Economic Science in Bukovyna: Dialectics of the Interaction of the Individual and the Environment in the Decision-Making Process

2025-06-13

Bogdan Storoschuk , Mykola Tsependa | Current issues of social sciences and history of medicine

Friedrich Klänwechter initiated the teaching of economic disciplines at the newly established university in Chernivtsi on a combination of the traditions of the Austrian and German schools and prepared fertile … Friedrich Klänwechter initiated the teaching of economic disciplines at the newly established university in Chernivtsi on a combination of the traditions of the Austrian and German schools and prepared fertile ground for the beginning of Schumpeter’s work. Joseph Alois Schumpeter, being one of the most prominent economists, is one of those vivid examples of the formation of the methodology of economic science, which determine the unique originality and attractiveness of the history of economic thought as the theoretical and methodological basis of other economic sciences. In this case, we are talking about one of the key problems of applying the principle of historicism in scientific research – the dialectics of the mutual influence and interdependence of the roles of the individual and the environment in which he lives in the process of civilizational development of both this individual and his environment as a whole. The subject of this study is the relationship between the role of creativity and the personal characteristics of a scientist and the conditions and features of his environment. The purpose of the study is to clarify the patterns of the relationship between the creative achievements of a talented individualand the environment of its functioning using the example of the creative biography of the world-famous scientist Joseph Alois Schumpeter. Methods of the research. The research is based on a combination of general scientific methods and special methods of economic science, where analysis plays a key role. Taking into account the dynamics of the development of modern science, the research also applies philosophical and scientific approaches and synergistic principles, such as interdisciplinarity, pluralism, self-organization and multiculturalism, to study the mutual influence of the scientist’s functioning environment and the methodology substantiated by him. Concllusions. The paper analyzes the structure and methodological features of the creative achievements of Kleinwechter and Schumpeter. Тhe relationship between the scientist and his environment are analyzed both at the level of personalcommunication and at the level of commonality of methodology with other leading scientists of the time. Separately, the methodology for studying the behavior and socio-economic role of the entrepreneur as a «creative destroyer» is considered. In this context, the biography of Schumpeter himself, his successes and failures in the field of scientific and applied activity are also analyzed. Accordingly, a more thorough analysis of the content of the first editions of the scientist’s scientific publications, in particular, his reviews of the works of other leading scientists of that time, as well as documents reflecting various aspects of the organization of the teaching work of the outstanding scientist Joseph Alois Schumpeter, is justified as a subject of further research in this direction. The determining direction of such research is considered to be the elucidation of the regularities of the dialectical confrontation of the old with the new in both the theoretical and practical spheres, which makes new combinations more viable, more oriented towards a better satisfaction of our needs

The Answers to Mctaggart's Paradox

2025-06-11

Richard M. Gale | Routledge eBooks

The road to Social Ecological Economics: an interview with Clive Spash, part 1

2025-06-10

Clive L. Spash , Jamie Morgan | Journal of Critical Realism

Values remain a mystery to many economists The Price of Our Values Augustin Landier and David Thesmar University of Chicago Press, 2025. 232 pp.

2025-06-05

George Demartino | Science

The field ignores moral plurality at its peril The field ignores moral plurality at its peril