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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, University Library of Munich, Germany.
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    5. Eliasson, Gunnar, 1988. "The Firm as a Competent Team," Working Paper Series 207, Research Institute of Industrial Economics, revised Feb 1990.
    6. Coase, R H, 1988. "The Nature of the Firm: Meaning," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 19-32, Spring.
    7. David J. Teece & Richard Rumelt & Giovanni Dosi & Sidney Winter, 2000. "Understanding Corporate Coherence: Theory and Evidence," Chapters, in: Innovation, Organization and Economic Dynamics, chapter 9, pages 264-293, Edward Elgar Publishing.
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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. 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: Peter G. Klein & Michael E. Sykuta (ed.), 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: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 3, Edward Elgar Publishing.
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    8. 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.
    9. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.
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    11. 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.
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