The Review of Austrian Economics, 15:4, 297–312, 2002.
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
Organizing Economic Experiments: Property Rights
and Firm Organization
KIRSTEN FOSS email@example.com
NICOLAI J. FOSS firstname.lastname@example.org
LINK, Department of Industrial Economics and Strategy, Copenhagen Business School, Solbjergvej 3, 3rd ﬂoor,
2000 Frederiksberg, Denmark
Abstract. Many economists, notably Austrian economists, have argued that the market process is essentially an
experimental process. We brieﬂy try to clarify this conceptualization, and then argue that we may understand the
ﬁrm in much the same light. A basic view of the ﬁrm as an experimental entity is derived, drawing on property
Key Words: the theory of the ﬁrm, Austrian economics, property rights
JEL classiﬁcation: D21, D23, D83.
This paper aims at establishing links between market process economics (Boettke and
Prychitko 1996) and the theory of economic organization, primarily the theory of the ﬁrm
(Coase 1937, Williamson 1996, Hart 1995, Barzel 1997). To be sure, these links have been
explored in previous contributions. For example, earlier work has assessed the contribution
of Mises’ (1936, 1949) analysis of economic calculation to the understanding of the efﬁcient
boundaries of the ﬁrm (Klein 1996), including issues of corporate governance (Klein and
Klein 2001), or the contribution to knowledge about the internal organization of ﬁrms of
Hayek’s (1945) insights in dispersed knowledge (Jensen and Meckling 1992, Cowen and
Parker 1997, Foss 1999), or how Austrian economics may inform the study of ﬁrm strategy
(Jacobson 1992, Lewin and Phelan 2000). However, the perspective in the present paper is
different from these contributions.
Speciﬁcally, we begin from the conceptualization of the market process as not only a
superior method of integrating dispersed knowledge, but also of producing new knowledge
(novelties). One of the reasons for this superiority lies in the experimental nature of the
market process: Experiments in products, processes, organization, etc. are continuously
being conducted and evaluated. Alienable property rights enable decision-makers to carry
out such experiments, to a large extent without seeking anybody’s approval. It is a related
The present paper represents an attempt to describe an overall “vision” for a research program that we
have pursued alone, together, and in the context of the Learning, Incentives and Knowledge Program (LINK;
http://www.cbs.dk/link) (Foss and Foss 2000a, 2000b, 2001, Foss 1999, 2000, 2001a, 2001c). This research pro-
gram may brieﬂy be described as an attempt to extend the reach of the property rights paradigm, particularly in
more dynamic directions.