Fundamental Uncertainty and the Firm in the Long Run
Oliver Williamson claims that bounded rationality and 'behavioural uncertainty' are principal factors influencing market-based transaction costs. Post Keynesian economists typically distinguish between ergodic and non-ergodic processes with the latter providing a technical definition of 'fundamental uncertainty'. Often, the salience of this fundamental uncertainty has been ignored or conflated with bounded rationality and behavioural uncertainty. Consequently, the richness and distinctness of such concepts is much diminished. This paper shows that while bounded rationality is a key behavioural assumption that may account for the existence of high market-based transaction costs in an ergodic world, and thus for the emergence of firms as distinct modes of economic organisation, it may do so only in the short run. I demonstrate, however, that non-ergodicity can be used to explain the existence of transaction costs and thus firms in the long run.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2000)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CRPE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CRPE20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Davidson, 1983. "Rational Expectations: A Fallacious Foundation for Studying Crucial Decision-Making Processes," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(2), pages 182-198, January.
- Dunn, Stephen P, 2001. "Uncertainty, Strategic Decision-Making and the Essence of the Modern Corporation: Extending Cowling and Sugden," Manchester School, University of Manchester, vol. 69(1), pages 31-41, January.
- Paul Davidson, 1994. "Post Keynesian Macroeconomic Theory," Books, Edward Elgar Publishing, number 124.
- Dahlman, Carl J, 1979. "The Problem of Externality," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 141-162, April.
- Williamson, Oliver E., 1989.
"Transaction cost economics,"
Handbook of Industrial Organization,
in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 3, pages 135-182
- Brian J. Loasby, 1989. "The Mind and Method of the Economist," Books, Edward Elgar Publishing, number 288.
- Stephen P. Dunn, 2000. "Wither Post Keynesianism?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 22(3), pages 343-364, April.
- Paul Davidson, 1996. "Reality and Economic Theory," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(4), pages 479-508, July.
- Foss, Nicolai J., 1998.
"The resource-based perspective: An assessment and diagnosis of problems,"
Scandinavian Journal of Management,
Elsevier, vol. 14(3), pages 133-149, March.
- Nicolai J. Foss, 1997. "The Resource-Based Perspective An Assessment and Diagnosis of Problems," DRUID Working Papers 97-1, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Simon, Herbert A., 1978.
"Rational Decision-Making in Business Organizations,"
Nobel Prize in Economics documents
1978-1, Nobel Prize Committee.
- Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
- George J. Stigler, 1967. "Imperfections in the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 75, pages 287-287.
- Davidson, Paul, 1988. "A Technical Definition of Uncertainty and the Long-run Non-neutrality of Money," Cambridge Journal of Economics, Oxford University Press, vol. 12(3), pages 329-337, September.
- Paul Davidson, 1991. "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 129-143, Winter.
- Sent, Esther-Mirjam, 1997. "Sargent versus Simon: Bounded Rationality Unbound," Cambridge Journal of Economics, Oxford University Press, vol. 21(3), pages 323-338, May.
- Hodgson, Geoffrey M, 1994. "Optimisation and Evolution: Winter's Critique of Friedman Revisited," Cambridge Journal of Economics, Oxford University Press, vol. 18(4), pages 413-430, August.
- Stephen P. Dunn, 2002. "A Post Keynsian approach to the theory of the firm," Chapters, in: Keynes, Uncertainty and the Global Economy, chapter 5 Edward Elgar Publishing.
When requesting a correction, please mention this item's handle: RePEc:taf:revpoe:v:12:y:2000:i:4:p:419-433. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.