Original and Derived Judgment An Entrepreneurial Theory of Economic Organization

Recent work links entrepreneurship to the economic theory of firm using the Knightian concept of entrepreneurship as judgment. When judgment is complementary to other assets, and these assets or their services are traded in well-functioning markets, it makes sense for entrepreneurs to hire labor and own assets. The entrepreneur’s role, then, is to arrange or organize the human and capital assets under his control. We extend this Knightian concept of the firm by developing a theory of delegation under Knightian uncertainty. What we call original judgment belongs exclusively to owners, but owners may delegate a wide range of decision rights to subordinates, who exercise derived judgment. We call these employees “proxy-entrepreneurs,” and ask how the firm’s organizational structure — its formal and informal systems of rewards and punishments, rules for settling disputes and renegotiating agreements, means of evaluating performance, and so on — can be designed to encourage forms of proxy-entrepreneurship that increase firm value while discouraging actions that destroy value. Building on key ideas from the entrepreneurship literature, Austrian economics, and the economic theory of the firm we develop a framework for analyzing the tradeoff between productive and destructive proxy-entrepreneurship. We link this analysis to the employment relation and ownership structure, providing new insights into these and related issues in the economic theory of the firm.Judgment, entrepreneur, delegation, employment relation, ownership

Heterogeneous Capital, Entrepreneurship, and Economic Organization

We outline an Austrian approach to economic organization based on the entrepreneur and the Austrian idea of capital as heterogeneous and time-dimensioned, tow themes associated with Israel Kirzner's contributions. We provide a novel interpretation of capital heterogeneity based on the notion of attributes, argue that attributes are costly to measure and that this links directly to the theory of economic organization. In particular, we develop insights in economic organization based on the notion that entrepreneurs will often have to experiment with capital assets to gauge the value of these assets when deployed in production.Austrian Economics, capital, knowledge

The Theory of the Firm and Its Critics A Stocktaking and Assessment

Ever since its emergence in the 1970s the modern economic or Coasian theory of the firm has been discussed and challenged by sociologists, heterodox economists, management scholars, and other critics. This chapter reviews and assesses these critiques, focusing on behavioral issues (bounded rationality and motivation), process (including path dependence and the selection argument), entrepreneurship, and the challenge from knowledge-based theories of the firm.

Entrepreneurshoip and the Economic Theory of the Firm Any Gains from Trade?

Although they have developed very much in isolation from each other, we argue the theory of entrepreneurship and the economic theory of the firm are closely related, and each has much to learn from the other. In particular, the notion of entrepreneurship as judgment associated with Frank Knight and some Austrian school economists aligns naturally with the theory of the firm. In this perspective, the entrepreneur needs a firm, that is, a set of alienable assets he controls, to carry out his function. We further show how this notion of judgment adds to the key themes in the modern theory of the firm (i.e., the existence, boundaries, and internal organization). In our approach, resource uses are not data, but are created as entrepreneurs envision new ways of using assets to produce goods. The entrepreneur’s decision problem is aggravated by the fact that capital assets are heterogeneous. Asset ownership facilitates experimenting entrepreneurship: Acquiring a bundle of property rights is a low cost means of carrying out commercial experimentation. In this approach, the existence of the firm may be understood in terms of limits to the market for judgment relating to novel uses of heterogeneous assets; and the boundaries of the firm, as well as aspects of internal organization, may be understood as being responsive to entrepreneurial processes of experimentation.Entrepreneurship, heterogeneous assets, judgment, ownership, firm boundaries, internal organization

Entrepreneurship and the Economic Theory of the Firm: Any Gains from Trade?

Prepared for Rajshree Agarwal, Sharon A. Alvarez, and Olav Sorenson, eds., Handbook of Entrepreneurship: Disciplinary Perspectives (Kluwer, forthcoming)Includes bibliographical references.Though they developed in isolation, the theory of entrepreneurship and the economic theory of the firm can be usefully integrated. In particular, the concept of entrepreneurship as judgment associated with Knight (1921) and some Austrian school economists aligns naturally with the theory of the firm. Because judgment cannot be purchased on the market, the entrepreneur needs a firm — a set of alienable assets he controls — to carry out his function. We show how this notion of judgment illuminates key themes in the modern theory of the firm (existence, boundaries, and internal organization). In our approach, resource uses are not data, but are created as entrepreneurs envision new ways of using assets to produce final goods. The entrepreneur's problem is aggravated by the fact that capital assets are heterogeneous. Asset ownership allows the entrepreneur to experiment with novel combinations of heterogeneous assets. The boundaries of the firm, as well as aspects of internal organization, may also be understood as responses to entrepreneurial processes of experimentation

An Experimental Study of the Near Field Region of a Free Jet with Passive Mixing Tabs

An experimental study was performed to determine the flow characteristics of a tabbed free jet. Results were acquired in the near field (nominally 2 tab widths upstream to 2 tab widths downstream of the exit plane) of a tabbed jet. Upstream pressure results showed static pressure distributions in both the x-and y-directions along the top surface of the tunnel. Hot-wire measurements showed rapid expansion of the core fluid into the ambient region. Two counter rotating regions of streamwise vorticity were shown on each side of the primary tab. An enhancement of the tabbed jet concept was proposed and tested. Specifically, two tabs, half the scale of the primary tab, were added to the primary tab to provide attachment surfaces for the normally occurring ejection of fluid. The secondary tabs caused a slight increase in the streamwise vorticity created from the upstream static pressure gradient while significantly increasing the re-oriented boundary layer vorticity. The combined pumping effect of the two counter rotating regions of vorticity caused a significant increase in the transport of the jet core fluid into the surrounding region

An Entrepreneurial Theory of Economic Organization

Recent work links entrepreneurship to the economic theory of firm using the Knightian concept of entrepreneurship as judgment. When judgment is complementary to other as-sets, and these assets or their services are traded in well-functioning markets, it makes sense for entrepreneurs to hire labor and own assets. The entrepreneur’s role, then, is to arrange or organize the human and capital assets under his control. We extend this Knightian concept of the firm by developing a theory of delegation under Knightian uncertainty. What we call original judgment belongs exclusively to owners, but owners may delegate a wide range of decision rights to subordinates, who exercise derived judgment. We call these employees "proxy-entrepreneurs," and ask how the firm’s or-ganizational structure — its formal and informal systems of rewards and punishments, rules for settling disputes and renegotiating agreements, means of evaluating perform-ance, and so on — can be designed to encourage forms of proxy-entrepreneurship that increase firm value while discouraging actions that destroy value. Building on key ideas from the entrepreneurship literature, Austrian economics, and the economic theory of the firm we develop a framework for analyzing the tradeoff between productive and de-structive proxy-entrepreneurship. We link this analysis to the employment relation and ownership structure, providing new insights into these and related issues in the eco-nomic theory of the firm. Keywords: Judgment, entrepreneur, delegation, employment relation, ownership. JEL Codes: B53, D23, L

Langevin approach to synchronization of hyperchaotic time-delay dynamics

In this paper, we characterize the synchronization phenomenon of hyperchaotic scalar non-linear delay dynamics in a fully-developed chaos regime. Our results rely on the observation that, in that regime, the stationary statistical properties of a class of hyperchaotic attractors can be reproduced with a linear Langevin equation, defined by replacing the non-linear delay force by a delta-correlated noise. Therefore, the synchronization phenomenon can be analytically characterized by a set of coupled Langevin equations. We apply this formalism to study anticipated synchronization dynamics subject to external noise fluctuations as well as for characterizing the effects of parameter mismatch in a hyperchaotic communication scheme. The same procedure is applied to second order differential delay equations associated to synchronization in electro-optical devices. In all cases, the departure with respect to perfect synchronization is measured through a similarity function. Numerical simulations in discrete maps associated to the hyperchaotic dynamics support the formalism.Comment: 12 pages, 6 figure