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An Austrian Theory of the Firm

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Abstract

The modern Theory of the Firm uses the concept of rent and makes implicit assumptions about equilibrium. An Austrian (Market Process) Theory of the Firm should have something to say about each of these. Two strategic perspectives are analyzed, the neoclassical microeconomic perspective (using the Ricardo-Marshall approach to rent) and the Market Process perspective (using the Fetter approach to rent). In a neoclassical world, rents indicate “unsolved” or unexploited “inefficiencies” as every hypothetical outcome is viewed against the standard of perfect competition. By contrast, in the Market Process world there is no single ideal standard by which to measure any particular outcome. All action takes place in an open ended universe in which the future is continually being created, in which competition is a “discovery process.”

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Authors and Affiliations

  1. School of Management, University of Texas at Dallas, Box 830688, Richardson, Texas, 75083-0688, USA

    Peter Lewin

  2. School of Management, University of Texas at Dallas, Box 830688, Richardson, Texas, 75083-0688, USA

    Steven E. Phelan

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  1. Peter Lewin
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  2. Steven E. Phelan
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Lewin, P., Phelan, S.E. An Austrian Theory of the Firm. The Review of Austrian Economics 13, 59–79 (2000). https://doi.org/10.1023/A:1007854129748

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