Toward a Praxeological Theory of the Firm

Toward a Praxeological Theory of the Firm 26 YU facilitating communications. In short, the firm is a social world constructed for the purpose of coordination (Section 1). The firm in which production takes place has a capital structure, just as the whole economy does. The employment of capital resources is associated with the agent’s production plans, knowledge and expectations. Given the heterogeneity and multiple specificity of capital goods, capital resources are combined in such a way as the entrepreneur perceives to be most profitable. A meaningful capital structure implies that these plans must be consistent with each other. Plans which are inconsistent with either the consumer or the producer plans will be revised. Changes in circumstance will cause the disintegration of the capital combinations which the owner of the firm previously considered optimal (Section 2). The growth of the firm is critically dependent on entrepreneurial discovery. The firm expands as the entrepreneur explores or exploits profitable opportunities. As the firm grows, capital accumulation results in an increase in the number of production stages as capital combinations become more and more specialised. The increased number of stages is indica- tive of increased complexity, which, in turn, is indicative of an increase in the productivity of the firm. The Review of Austrian Economics Springer Journals

Toward a Praxeological Theory of the Firm

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Kluwer Academic Publishers
Copyright © 1999 by Kluwer Academic Publishers
Economics; Public Finance; Political Science; History of Economic Thought/Methodology
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