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Praxeology and the firm: a contribution to the Austrian redefinition of the economic organization problem

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Author(s): Janković Ivan

Journal: Economic Annals
ISSN 0013-3264

Volume: 51;
Issue: 169;
Start page: 143;
Date: 2006;
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Keywords: praxeology | firm | transactioncosts | entrepreneurship | monetary calculation

ABSTRACT
The aim of this paper is to syntetize theory of entrepreneurship of the Austrian School of economics with the contractual theory of the firm. Transaction cost theory of Ronald Coase and his followers holds that the firm is the organization with dominant component of ordering, while market is defined by competition and rivalry. But, market also includes interdependency and cooperation, such as in the case of cartel. Therefore non-competitive forms of economic coordination are not specificity for the firm, and can be observed in the open market as well. Agency theory rejects the notion of the firm as a hierarchy, and it is based on completeness of knowledge and contract. Theory of entrepreneurship and monetary calculation of Austrian School enables us to integrate contractual theory into the theoretical setting characterized by uncertainty, information asymmetry and positive transaction costs.
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