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Do firms plan?

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  • Richard Langlois

Abstract

The late F. A. Hayek is remembered for the argument that the decentralized price system has enormous advantages over planned systems in the critical areas of information transmission and the use of knowledge. In many minds, the recent fall of the Soviet-style economies in Eastern Europe has decisively made that case. But not all are persuaded. The model of central planning that originally impressed Lenin—the modern business corporation—remains in many minds a formidable piece of empirical evidence in favor of the possibility and desirability of centralized administrative control. This paper argues that Hayek's theory of spontaneous order can in fact include the case of such apparently purposive and extramarket forms as the business firm. It picks up a number of suggestions in Hayek's evolutionary theory of social institutions and uses them to draw a picture of the firm that is somewhat different from what one finds on the easel of neoclassical transaction-cost analysis. In the Hayekian picture, firms and markets are both systems of rules of conduct. And both are systems for economizing on knowledge in the face of economic change, albeit quite different kinds of knowledge and change. In the end, the firm is not a model for political planning for one very simple reason: the firm does not plan. Copyright Kluwer Academic Publishers 1995

Suggested Citation

  • Richard Langlois, 1995. "Do firms plan?," Constitutional Political Economy, Springer, vol. 6(3), pages 247-261, October.
    • Handle: RePEc:kap:copoec:v:6:y:1995:i:3:p:247-261
    DOI: 10.1007/BF01303405
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    1. Coase and the Austrians
      by Peter G. Klein in Mises Economics Blog on 2013-09-03 21:59:02

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    3. Elert, Niklas & Stenkula, Mikael, 2020. "Intrapreneurship: Productive, Unproductive, and Destructive," Working Paper Series 1367, Research Institute of Industrial Economics.
    4. Richard R. Nelson & Bhaven N. Sampat, 2001. "Las instituciones como factor que regula el desempeño económico," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 3(5), pages 17-51, July-Dece.
    5. Nicolai J. Foss & Peter G. Klein, 2010. "Austrian Economics and the Theory of the Firm," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 27, Edward Elgar Publishing.
    6. Peter G. Klein, 2010. "Transaction Cost Economics and the New Institutional Economics," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 3, Edward Elgar Publishing.
    7. Nelson, Richard R. & Sampat, Bhaven N., 2001. "Making sense of institutions as a factor shaping economic performance," Journal of Economic Behavior & Organization, Elsevier, vol. 44(1), pages 31-54, January.
    8. Stefano Fiori, 2010. "Is H.A. Simon a theoretician of decentralized planning? A comparison with F.A. Hayek on planning, market, and organizations," Constitutional Political Economy, Springer, vol. 21(2), pages 145-170, June.
    9. Kapás, Judit, 2002. "Piacszerű vállalat és vállalatszerű piac [Firms that resemble markets and markets that resemble firms]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 320-333.
    10. K. Foss & Nicolai Foss, 2006. "The limits to designed orders: Authority under “distributed knowledge” conditions," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 19(4), pages 261-274, December.
    11. Pierre Garrouste, 2008. "The Austrian roots of the economics of institutions," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 251-269, December.
    12. David Cayla, 2006. "Ex Post and Ex Ante Coordination: Principles of Coherence in Organizations and Markets," Post-Print halshs-00110810, HAL.
    13. Óscar Gutiérrez & Marco Martínez-Esteller, 2022. "Tax collection in the Roman Empire: a new institutional economics approach," Constitutional Political Economy, Springer, vol. 33(3), pages 378-401, September.
    14. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.
    15. Zhihong Mo, 2012. "Decentralized planning in a market economy? On the nature of Coase’s research program," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 115-129, June.
    16. Michael I.C. Nwogugu, 2019. "Complex Systems, Multi-Sided Incentives and Risk Perception in Companies," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-44704-3.

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