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The “Alternative” Theories of Knight and Coase, and the Modern Theory of the Firm

Published online by Cambridge University Press:  11 June 2009

Nicolai J. Foss
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Extract

In his contribution to the 1987 conference that celebrated the fiftieth anniversary of Ronald Coase's “The Nature of the Firm” (1937), Harold Demsetz noted that from the birth of modern economics to 1970, “only two works seem to have been written about the theory of the firm that have altered the perspectives of the profession: Knight's Risk, Uncertainty, and Profit (1921) and Coase's ‘The Nature of the Firm’” (Demsetz 1993, in Williamson and Winter 1993, p. 159). It is easy to feel uncomfortable with this observation. First, Coase's article was ignored for decades. Second, Knight's book did not receive much attention because of its theory of economic organization, but because of its statement of the theory of perfect competition (Stigler 1957; Machovec 1995), its distinction between risk and uncertainty, and its theory of profits (see, e.g., Boulding 1942 and Papandreou 1952).'

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Articles
Information
Journal of the History of Economic Thought , Volume 18 , Issue 1 , Spring 1996 , pp. 76 - 95
Copyright
Copyright © Cambridge University Press 1996

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References

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