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Nicolai Foss and Peter Klein argue persuasively that the “bossless narrative” behind calls to abolish management hierarchy does not withstand serious scrutiny. Although bossless or flat organizations sometimes work well under relatively certain and stable conditions, in more dynamic and time-sensitive situations they typically struggle with innovation, scale, and longevity. In contrast, management hierarchy performs valuable economic functions by solving coordination and cooperation problems, and providing a framework in which employees can make decisions. Valve is a useful example of a company that replaced formal with informal hierarchy, and which has struggled with creative inertia produced by a lack of formal management. Nevertheless, despite these and many other insights into the bossless company that can be found in Foss and Klein’s book, there is still much scope for new research on it throughout the management disciplines and social sciences.

This chapter explores the economic meaning of video games and virtual worlds. Section 2 outlines the scope of video game economics and several different types of research included under this umbrella term. Section 3 then explores one of these types in more detail by examining the relationships between action, choice, and economics on the one hand and games and play on the other. Section 4 builds on this insight by exploring the economics of gameplay, especially how the structure of video games implies a series of economic problems that players solve: scarcity, choice and tradeoffs, opportunity cost, specialization and division of labor, trade, and entrepreneurship. Section 5 then discusses virtual worlds and their relation to real-world economies. Section 6 concludes with some thoughts on the purpose, value, and limitations of video game economics.

Henry Mintzberg’s celebrated critique of the “design school” argued that strategy is best thought of as adaptive, bottom-up, and based on dispersed knowledge and learning. Yet Mintzberg’s account lacks a clear and comprehensive theoretical underpinning, especially regarding how to guide emergent strategy in dynamic environments, and leverage it to exploit value creation. We provide this foundation by showing how Mintzberg’s critique of planning and design at the level of organizational strategy is in key ways anticipated by F.A. Hayek’s critique of planning and design at the societal level. Both writers are critical of rationalist epistemology and instead stress experiential knowledge, fallibility, and unanticipated social consequences. Hayek also extends Mintzberg’s work by showing how rules in the firm capture adaptive, experiential, tacit, and dispersed knowledge in the context of dynamic environments. A framework of rules thus creates inimitable and non-substitutable resources that enable the firm to fully exploit its competitive advantage.

Frank Knight's theory of monopoly price has received relatively little attention in the literature on Risk, Uncertainty and Profit. We argue that Knight accepted and refined the monopoly price theory of Carl Menger and his followers. Knight highlights the difference between monopoly as an inevitable outcome of departures from perfect competition, and monopoly as a contingent or ‘culture-history fact’. In the latter case, coercive institutional barriers to potential competition shape the choice set of consumers and producers, and provide a crucial method for identifying monopoly gains. There are three benefits to this account of Knight's contributions: it rehabilitates the focus on the institutional determinants of monopoly price, as opposed to the mainstream emphasis on market frictions and imperfections; it opens the way for a Mengerian monopoly price theory that seriously engages the study of institutions; and it adds new evidence and nuance to ongoing debates about Knight's place in economics.

Entrepreneurship, defined as judgmental decision-making under conditions of uncertainty, is studied in many different disciplines across the social sciences and humanities. Despite the growth of the field, however, there is still relatively little research on the philosophical foundations of entrepreneurial action. This chapter highlights some connections between this entrepreneurial judgment and practical wisdom. It first examines the roots of entrepreneurial decision-making as explained through the framework of “Austrian” economics, especially with regard to action, choice, and uncertainty. It then compares entrepreneurial judgment and practical wisdom in light of Aristotle’s five intellectual virtues, noting some similarities and tensions. Finally, it discusses some moral aspects of entrepreneurial action and their relation to human flourishing, and the institutional foundations that support this relationship.

What is now called the judgment-based approach to entrepreneurship (JBA) has a rich pedigree in Austrian economics and continues to grow rapidly in that tradition as well as in various research fields in business and management. The JBA has also attracted some criticisms. Frédéric Sautet’s recent review essay is an example. Sautet’s main concern is that the JBA rejects Israel Kirzner’s alertness/discovery approach which, in Sautet’s view, provides a more compelling basis for theorizing. Unfortunately, we do not find Sautet’s criticisms of the JBA convincing. They frequently ignore our arguments about entrepreneurial judgment and its manifestation in the business firm, fail to address our criticisms of the alertness/discovery approach, and are rooted in a flawed understanding of the history of economic thought.

The video game industry has ignited a global controversy surrounding microtransactions in gaming, especially the use of loot boxes: randomized rewards with potential real-world value. Consumers and legislators are calling for the regulation of these revenue models on the grounds that they are unfair, predatory, or could be considered gambling. This article examines the controversy from a management perspective. First, I outline current regulatory responses to the controversy and what they mean for business practices. Then, I explain ongoing industry-level and firm-level attempts to self-regulate as a way to placate consumers and governments. These tactics highlight a wide range of broader strategies that game developers and other stakeholders can pursue in order to improve customer relations and, more publicly, signal their commitment to self-regulation and avoiding consumer harm. These practices can be applied more broadly to firms that offer controversial products or services that do not yet fit within current regulatory frameworks.

Elert and Henrekson (2019) draw important connections between Austrian economics and the Schumpeterian literatures on “development blocs” and “the experimentally organized economy.” We appreciate their emphasis on experimentation and think that Austrian ideas on the time structure of production and the multiple specificities of capital offer complementary insights into why production is likely to be clustered, localized, and path-dependent. While we agree that Austrian economics can benefit from a “meso” level of analysis between individuals and market outcomes, we do not think their proposed Experimentally Organized Economy framework adds much to existing Austrian theory and policy analysis. We also suggest that, by focusing on Kirzner’s entrepreneurial discovery approach, Elert and Henrekson miss other Austrian approaches to entrepreneurship that can better inform their analysis.

Valve is a “flat” company without a management hierarchy or traditional boss roles: instead of top-down organization and management, Valve employees are free to work on whatever projects they choose and to convince other employees to join collaborative groups. Decision-making is thus “democratized” rather than centralized in key management positions. This peculiar structure, or lack thereof, seems to challenge conventional ideas about organization not only in the video game business but also business in general. We say “seems to” because, as we will explain, the company’s story is more complicated than either its supporters or critics tend to acknowledge. In this chapter, we explore Valve’s economic organization and discuss the challenges it faces. We thereby provide a clearer and more comprehensive story of this organization, while also providing a foundation for future research on the gaming industry as well as on economic organization more generally. In particular, we use our survey of Valve’s unique organization to draw implications for theories of entrepreneurship, projects, strategy formation, and organizational capabilities. To do this, we draw on a range of publicly available data and first-hand accounts of the company, as well as available secondary literature. We also use the case of Half-Life 3, a highly-demanded-yet-never-made game, and Half-Life: Alyx, as examples of challenges organizations such as Valve face.

Valve is a “flat” company without a management hierarchy or traditional boss roles: instead of top-down organization and management, Valve employees are free to work on whatever projects they choose and to convince other employees to join collaborative groups. Decision-making is thus “democratized” rather than centralized in key management positions. This peculiar structure, or lack thereof, seems to challenge conventional ideas about organization not only in the video game business but also business in general. We say “seems to” because, as we will explain, the company’s story is more complicated than either its supporters or critics tend to acknowledge. In this chapter, we explore Valve’s economic organization and discuss the challenges it faces. We thereby provide a clearer and more comprehensive story of this organization, while also providing a foundation for future research on the gaming industry as well as on economic organization more generally. In particular, we use our survey of Valve’s unique organization to draw implications for theories of entrepreneurship, projects, strategy formation, and organizational capabilities. To do this, we draw on a range of publicly available data and first-hand accounts of the company, as well as available secondary literature. We also use the case of Half-Life 3, a highly-demanded-yet-never-made game, and Half-Life: Alyx, as examples of challenges organizations such as Valve face.

Economics has long history of “rehabilitations,” including W.H. Hutt’s rehabilitation of Say’s law, and Alfred Marshall’s attempt to rehabilitate David Ricardo. The rehabilitation of Frank A. Fetter should be as important as either of these, especially for economists working in the contemporary Austrian tradition. The historical records reveal that for the last century there has been underway a nearly unbroken series of efforts, especially by Austrian economists, to rehabilitate Fetter’s contributions and use them to revitalize economic theory. This paper relates this history, which chronicles the rise, decline, and rise again of one of the great American economic theorists. Yet crucially, this is not a story about Fetter alone, but also of the fortunes of the Austrian school and its rise, decline, and renaissance.

Despite numerous calls for integrating entrepreneurship research and firm theory, there has been relatively little work done in this direction. Likewise, despite many discussions, controversy continues to surround core theoretical frameworks in strategic management such as the resource-based view and capabilities theory. This paper uses insights from early research in Austrian economics to resolve both issues. We focus on Viktor Mataja, whose work provides an original, integrated framework for understanding the relationship between entrepreneurs and firms using the judgment-based approach to entrepreneurship, strategic use of resources in the firm, and dynamic capabilities. We show how this view answers various criticisms that have been raised against the resource- and capabilities-based views. This lays a foundation for a more thoroughgoing integration of research in entrepreneurship and strategic management.

The video game industry has long been a source of controversy, and most recently many of its major firms have fallen under especially intense scrutiny on account of their changing business practices. Ihe only point on which all parties in these debates seem to agree is that the industry is changing radically. However, understanding how and why it is changing requires a good deal of research from a variety of disciplines; hence, this book. The ongoing debate about the business of gaming is the focus of several chapters, so there is no doubt that the content is timely. Sadly, on the whole the book fails to live up to its aspirations, and with a few notable exceptions, does not add much to our understanding of the gaming industry or its customers.

As the entrepreneurship discipline grows, it increasingly faces unique research challenges. Recently, “interactive, activity based, cognitively hot, compassionate, and prosocial” approaches to the study of entrepreneurship have arisen to meet these challenges. This paper reflects and builds on recent discussions by emphasizing, in addition, the persistent value of economic foundations for a progressive research agenda in entrepreneurship. A realist economic perspective is both fundamental for entrepreneurship and complements newer research trends. It has also stood the test of time: economic questions relating to methodological individualism, uncertainty, judgment, opportunities, social motivations, and incentives have not only set the tone for past research, but continue to offer starting points and insights for contemporary work. This note thus makes two contributions: first, it explains the relevance of each of these concepts for contemporary work in entrepreneurship studies, and second, it uses them to pose novel research questions. These questions complement the abovementioned emerging trends in entrepreneurship.

Uncertainty and institutions are each vital concepts in entrepreneurship research. However, little work has been done to combine them into a consistent conceptual framework for analyzing the dynamic aspects of entrepreneurial action, uncertainty, and institutional change. Using insights from new institutional economics, we develop a model that explains the institutional uncertainty resulting from conflicts between institutions on different “levels” of social activity. We further explain how entrepreneurs can both cause and mitigate this uncertainty through market and institutional action. Finally, we focus on a special case of institutional uncertainty, “regime uncertainty”, wherein entrepreneurs are left without reliable means to overcome uncertainty in political institutions.

Institutions play a vital role in allocating entrepreneurial talent in society. Specifically, the payoffs to different kinds of innovation influence the allocation of entrepreneurial talent between productive, unproductive, and destructive behavior. I apply this insight to the case of the military classics of China’s Warring States period, 475–221 BCE. The Warring States witnessed political centralization and incessant conflict that helped inspire numerous economic and social innovations. Among these are the appearance of many texts pertaining to governance and public policy, particularly writings on military strategy. Excellence in strategy and planning were highly rewarded during this period, and competing states even developed an interstate market for military talent. However, success in commerce was often not only frowned upon, but harshly punished. This tendency was reinforced by the rise of Legalist policies, which often recommended suppressing the merchant class relative to agricultural pro...

Although moral hazard is a well-known economic concept, there is a long-standing controversy over its moral implications. The language economists use to describe moral hazard is often value-laden, and implies moral judgments about the persons or actions of economic agents. This in turn leads some to question whether it is actually a scientific concept, or simply a convenient tool for criticizing certain public policies. At present, there is no consensus about the moral meaning of moral hazard, or about whether the concept can be salvaged by economists. As a first step toward resolving this problem, I suggest a contracts approach to moral hazard. I use the “title-transfer” theory of contract to clarify the moral content of moral hazard, thereby increasing its value to scholars in numerous disciplines. A contracts view is useful for economic policy discussions because it does not include hidden value judgments. At the same time, however, it is also valuable for ethicists because it directly explains a moral dimension of behavior under moral hazard, namely, the violation of property rights.

Since the global financial crisis, the economics profession has been more publicly visible—and more criticized—than at any other time in its history. Commentaries on the failure of mainstream economics to predict the crisis are ubiquitous, and some critics even place blame for the disaster on the application of misguided economic theories. These reactions have helped turn a spotlight on the role economists play in guiding public policy, and have revealed the underlying power of economic experts over the social and political life of nations. The subject of The Econocracy is a growing tension between economists and society at large that is caused by this power.

Researchers are making progress toward determining some of the psychological implications of video game loot boxes, yet the literature still has a long way to go before it can provide a sound basis for policy recommendations. Despite this limitation, however, early studies of loot boxes and addictive behavior frequently suggest some form of loot box regulation, including by public authorities. I suggest that these proposals are premature, as they do not take account of several fundamental economic challenges facing policymakers. A more cautious approach that takes account of costs and unintended consequences is recommended as a complement to ongoing research.

Frank A. Fetter is often classified as an American representative of the Austrian school, yet surprisingly, there is practically no published record of his views of the Austrians or theirs of him, and there is no indication that he ever seriously interacted with them after the First World War. However, Fetter enjoyed many personal and professional relationships with the Austrians, and they shared a reciprocal influence on each other's ideas that deeply influenced their respective research programs. This paper draws on unpublished archival records to explore Fetter's unique place in the history of economics, in particular, his positive and negative interactions with the leading individuals and institutions of the Austrian school. Their half-century of influence sheds light on Fetter and his role in American economics, but also brings to light a wide range of information about the lives, works, and personal relations of the Austrians that have not been included in their biographies or institutional histories.

This chapter offers a retrospective account of William Baumol’s “Entrepreneurship: Productive, Unproductive, and Destructive” in light of its influence on entrepreneurship studies. The first section describes Baumol’s core arguments about the influence of institutions on the allocation of entrepreneurial talent. The second section then discusses their impact on the entrepreneurship discipline. Following this, the third section explores some criticisms of Baumol and explains how addressing these criticisms can provide paths forward for entrepreneurship studies that do justice to Baumol’s work while at the same time integrating it into important emerging research. In particular, Baumol’s arguments open the way to research on institutional entrepreneurship as well as the judgment-based view of entrepreneurial decision-making. The fourth section then considers the policy implications of Baumol’s work. The final short section concludes.

The problem of economic calculation is relevant outside the extremes of purely for-profit enterprise and socialist central planning: calculation is also a vital lens through which to view alternative forms of economic organization in the market economy. This chapter examines one such example: the growing field of social entrepreneurship. Although it attracts major interest in management studies, social entrepreneurship has received scant attention from economists. This chapter resolves this oversight by placing the theory of social entrepreneurship on an economic foundation. It outlines the economic meaning of social behavior and shows that conventional market entrepreneurship is deeply social, while at the same time, social ventures are inevitably bound up with some kind of profit motive. This implies that the line between social and conventional entrepreneurship is not as clear as is sometimes thought. Importantly, social enterprises must engage in economic calculation if they want to survive in competitive markets. This means they must rely on external prices for the goods and services they produce, as without them they cannot estimate the social opportunity costs of their decisions.

This paper explores the neglected theory of entrepreneurial profit proposed by Eugen von Böhm-Bawerk. Although historians of thought often dismiss Böhm-Bawerk’s writings on this topic, we argue that he did develop a coherent theory of entrepreneurial decision making and profit distinct from his theory of interest. We first discuss Böhm-Bawerk’s ideas about futurity, uncertainty, and expectations in his theory of goods, which help form the foundation of his theory of entrepreneurship. Further, we connect his notion of uncertainty with his thoughts on money. We then turn to several of Böhm-Bawerk’s ideas about entrepreneurial profit. Entrepreneurs purchase and allocate factors of production; these decisions are speculative because production takes time, and therefore entrepreneurs bear the uncertainty of the market. Their judgment thus yields profits or losses based upon the ability to anticipate the future state of consumer demand. Finally, we discuss the views of several of Böhm-Bawerk’s contemporaries, in order to place his theory in historical context.

Mark Casson’s 1982 book The Entrepreneur is well-known for helping to launch the renaissance in entrepreneurial studies of the past 30 years. In this latest volume, he and co-author Catherine Casso...

Joseph Schumpeter’s theory of the entrepreneur is the most well-known approach to be developed in continental Europe at the turn of the century, and has exercised considerable influence on the literature. However, this paper shows that alternative theories of the entrepreneur were developed by scholars close in time and space to Schumpeter’s The Theory of Economic Development. First, the contribution of Rudolf Hilferding is unknown in the literature on entrepreneurship and is important due to the absence of entrepreneurial theory in the Marxist literature upon which Hilferding built. Second, while the later contributions of Ludwig von Mises to entrepreneurial theory have been discussed, the early comments of his 1912 treatise are often passed over, and are a significant foil to Schumpeter’s views. Discussing the early writing of Mises on entrepreneurship also helps show the ambitious scope of Mises’ first book, and furthermore, allows us to properly position his writings in the history of economic thought.

Frank Fetter’s contributions to entrepreneurship and the theory of the firm are usually overlooked although his original treatments are relevant to both the history of economic thought and contemporary entrepreneurship research. This article highlights three ways in which Fetter’s work adds to our understanding of the entrepreneurial process. First, entrepreneurs direct their enterprises through the careful delegation of authority to managers, thereby maintaining residual control over the firm; similar views were pioneered by Frank Knight and the Austrian economists who continue to study cognate problems like judgmental decision making and proxy-entrepreneurship. Second, Fetter foreshadows Knight’s influential distinction between risk and uncertainty by arguing that entrepreneurs bear uncertainty through their investment decisions. However, Fetter extends Knight’s work by explicitly considering the role that chance and luck play in entrepreneurial success, a problem still debated in entrepreneurship studies. Third, Fetter argues that scarcity implies the active investment of resources, and thus the need for entrepreneurship. This view hints at current research on entrepreneurial bricolage as well as work emphasizing investment rather than opportunity as the defining concept of entrepreneurship. It also provides the microfoundations for strategic entrepreneurship research.

Although entrepreneurship education is thriving, it often lacks a substantialfoundation in economic theory and history, and therefore also anappreciation of the overarching social significance of entrepreneurship. Thispaper explores one way economics can enhance entrepreneurship teaching:by discussing the social and institutional basis of entrepreneurship, as wellas its economic meaning and implications. To this end, I provide a list ofeconomic readings that can be used in undergraduate entrepreneurshipcourses, along with brief narratives explaining some of the most importantideas these works communicate. The readings highlight key themes fromthe economics of enterprise, such as the importance of institutions, theroles of risk and uncertainty, the causes of profit, the process ofentrepreneurial decision making, the sovereignty of consumers, and theeffects of entrepreneurial competition.

Although classics of military strategy like Sun Tzu’s Art of War are often studied by business professionals and researchers, many lesser-known works in China’s military canon have been neglected. This article surveys seven major texts in ancient Chinese strategic thought, discussing the contributions of each to the political economy of war, and focusing especially on ideas about peace and the avoidance of conflict. In general, the military writings advocate avoiding war wherever possible, and stress the importance of resolving conflict without fighting. In addition, the classical strategists also consider the role of the state in war making, especially its methods of war finance and attempts to encourage or discourage economic activity. Generally, they warn the state to limit its expenditures and other impositions on the population so as to encourage the production of resources for use in military campaigns.

Sun Tzu’s The Art of War deals with the economic aspects of military operations as well as some more general economic principles. This article studies several of its economic ideas in turn: on war and the state, the effect of war on economic affairs, and the role of incentives in promoting desired behavior within military organizations. It also discusses how the text treats ideal military strategy as a matter of opportunity discovery, analogous to entrepreneurship in the work of Israel Kirzner.

This paper explores the neglected theory of entrepreneurial profit proposed by Eugen von Boehm-Bawerk. Although historians of thought often dismiss Boehm-Bawerk'€™s writings on this topic, we argue that he did develop a coherent theory of entrepreneurial decision making and profit distinct from his theory of interest. We first discuss Boehm-Bawerk'€™s ideas about futurity, uncertainty, and expectations in his theory of goods, which help form the foundation of his theory of entrepreneurship. Further, we connect his notion of uncertainty with his thoughts on money. We then turn to several of Boehm-Bawerk'€™s ideas about entrepreneurial profit. Entrepreneurs purchase and allocate factors of production; these decisions are speculative because production takes time, and therefore entrepreneurs bear the uncertainty of the market. Their judgment thus yields profits or losses based upon the ability to anticipate the future state of consumer demand. Finally, we discuss the views of several of Boehm-Bawerk'€™s contemporaries, in order to place his theory in historical context.

This paper analyzes the theory of "entrepreneurial incentives" in the work of Israel Kirzner. It argues that there is a logical problem with the notion of profit opportunities as exogenous causal agents: Without additional assumptions, the existence of opportunities alone does not sufficiently explain the alertness of entrepreneurs. The paper considers both stronger and weaker versions of this problem. It also questions the relation between entrepreneurial incentives and the tendency toward entrepreneurial success. Finally, it provides some commentary on the relevance of entrepreneurial incentives for an overall theory of the entrepreneur, and identifies several potential solutions to the problems discussed. © 2013 Baylor University.

This paper critically examines some underlying assumptions of the “popular” economics writing of recent years, e.g. the Freakonomics literature. I examine two problems that emerge from these writings. First, popular economics is myopic in that it views incentives as the fundamental economic concept. This focus can place misleading emphasis on only one relevant economic problem, while neglecting other important facts, such as (a) institutional arrangements that determine the pattern of incentives, and (b) economic laws that render the pattern irrelevant. Second, the literature includes hidden value judgments resulting from assumptions about incentives. As a result, economic analysis is sometimes falsely confused with ethics, or includes normative judgments not implied by economics proper. This problem in turn influences the portrayal of economics as a science.

This paper examines the intellectual heritage of the debate between the Currency and Banking Schools of 19th-century England in regard to three Viennese economists: Rudolf Hilferding, Ludwig von Mises, and Joseph Schumpeter. I first provides a brief summary of the debate between the Currency and Banking Schools, and then explore the influence of the Currency-Banking dispute on the early monetary theories of Hilferding, Mises, and Schumpeter, showing that Hilferding is essentially an orthodox Banking School theorist, Mises is a successor to the Currency School, and Schumpeter lies between the two traditions.

This paper examines several problematic aspects of George Reisman’s Capitalism: A Treatise on Economics, specifically, five problems in the economics of natural resources. I argue first, that Reisman’s work lacks sufficient grounding in economic theory. Second, his exposition neglects important arguments in the environmental literature. Third, it avoids problems of uncertainty, leading to a faulty theory of economic development. Fourth, he does not sufficiently explain or criticize potential fallacies in the environmental movement. Fifth, the rhetoric Reisman deploys in his arguments confounds rather than supports his exposition.

Recently, economics, both as a science and as a profession, has fallen under scrutiny by authors from various fields. A common theme in the critical literature is the idea that economics has morally lost its way and must be reformed. Each of the books discussed in this review studies perceived problems with economics: in economic theory, policy, and in the economics profession itself. I survey the merits and failings of this literature.In short, the books by Joseph Pearce and John D. Mueller are severely lacking in content that is both original and sound. Some of their criticisms of mainstream economics strike home, but such passages are sadly the exception rather than the rule. It is more often the case that confusion, misreading, insufficient evidence, and faulty reasoning cripple their analyses. Robert H. Nelson’s book, on the other hand, provides a well-researched, fascinating study of the evolution of two leading secular religions, economics and environmentalism.

This paper seeks to explore and to critically evaluate, from an economic standpoint, Joseph Schumpeter's theory of the decline of capitalism, as put forward in his Capitalism, Socialism, and Democracy. It begins by exploring and criticizing Schumpeter'€™s entrepreneurial theory, and then explains how this flawed theory led to Schumpeter'€™s conclusion vis-a -vis capitalist evolution into socialism. It then introduces into the theory of capitalist evolution an uncertainty-bearing entrepreneur, and re-examines the theory on this basis, both in general and, in the appendix, for the specific case of artificial increases in the supply of bank credit. The conclusion reached is that Schumpeter'€™s argument cannot hope to explain the decline of capitalism into socialism. However, while not valid for a truly capitalist system, Schumpeter'€™s theory is nevertheless applicable to an interventionist economy.

Entrepreneurs investing for profits in the unknown future are ultimately specialists in bearing uncertainty. This is the traditional definition of entrepreneurship. Yet under conditions where the p...