Entrepreneurship and the Firm
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Entrepreneurship and the Firm

Austrian Perspectives on Economic Organization

Edited by Nicolai J. Foss and Peter G. Klein

While characteristically ‘Austrian’ themes such as entrepreneurship, economic calculation, tacit knowledge and the temporal structure of capital are clearly relevant to the business firm, Austrian economists have said relatively little about management, organization, and strategy. This innovative book features 12 chapters that all seek to advance the understanding of these issues by drawing on Austrian ideas.
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Chapter 12: Resource-Advantage Theory and Austrian Economics

Shelby Hunt

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CHAPTER 12 4/7/02 1:50 PM Page 1 12. Resource-advantage theory and Austrian economics Shelby Hunt If scientific theories should explain phenomena, what should a theory of competition explain? The single most important economic phenomenon of the twentieth century was, undoubtedly, the collapse of the command economies (which, it may be argued, were premissed on a central planning board directing the efforts of state-owned firms) and the concomitant triumph of market-based economies (which, it may also be argued, are premissed on competition among self-directed, privately owned firms). The minimum desideratum of a satisfactory theory of competition would seem to be, therefore, that it contributes to explaining why economies premissed on competition have proved more abundant than their centrally planned counterparts. Ensconced in its Walrasian ‘box’ (Rothbard, 1987), in which innovation is exogenous and entrepreneurship is ignored, perfect competition theory can address differences in wealth creation only through explaining differences in resource allocation. However, as Lavoie (1985) documents, the neoclassical, ‘standard account’ of the socialist calculation debate concludes that socialists showed successfully that neoclassical theory (here meaning perfect competition cum general equilibrium) provides no grounds for predicting the superior efficiency (and, therefore, abundance) of market-based economies in resource allocation. Indeed, to the satisfaction of ‘standard account’ advocates, socialist economists ‘proved that a Central Planning Board could impose rules upon socialist managers which allocated resources and set prices as efficiently as a capitalist society of the purest stripe, and much more efficiently than the capitalist communities of experience’ (Lekachman, 1959, pp. 396-7)...

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