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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. Richard N. Langlois, 1994. "Capabilities and Vertical Disintegration in Process Technology: The Case of Semiconductor Fabrication Equipment," Industrial Organization 9406004, EconWPA.
    2. Koppl, Roger, 2000. "Fritz Machlup and Behavioralism," Industrial and Corporate Change, Oxford University Press, vol. 9(4), pages 595-622, December.
    3. Langlois, Richard N & Cosgel, Metin M, 1993. "Frank Knight on Risk, Uncertainty, and the Firm: A New Interpretation," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 456-465, July.
    4. Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
    5. Eliasson, Gunnar, 1990. "The firm as a competent team," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 275-298, June.
    6. Eliasson, Gunnar, 1988. "The Firm as a Competent Team," Working Paper Series 207, Research Institute of Industrial Economics, revised Feb 1990.
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    Cited by:

    1. Thorbjørn Knudsen, 2002. "The Evolution of Cooperation in Structured Populations," Constitutional Political Economy, Springer, vol. 13(2), pages 129-148, June.
    2. Giampaolo Garzarelli & Matthew Holian, 2014. "Parchment, guns, and the problem of governance," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(1), pages 71-80, March.
    3. 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.
    4. Nicolai J. Foss & Peter G. Klein, 2010. "Austrian Economics and the Theory of the Firm," Chapters,in: The Elgar Companion to Transaction Cost Economics, chapter 27 Edward Elgar Publishing.
    5. Peter G. Klein, 2010. "Transaction Cost Economics and the New Institutional Economics," Chapters,in: The Elgar Companion to Transaction Cost Economics, chapter 3 Edward Elgar Publishing.
    6. 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.
    7. 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.
    8. David Cayla, 2006. "Ex Post and Ex Ante Coordination: Principles of Coherence in Organizations and Markets," Post-Print halshs-00110810, HAL.
    9. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.
    10. 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.

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