Good afternoon, everyone.
I would first and foremost like to thank the Mises Institute
for this great opportunity.
I am honored and very happy to be here.
My task today is a most difficult one.
Firstly, because I stand between you and a very nice break.
Secondly, because I speak in front
of a very important part of my all-time bibliography
or list of references, if I'm allowed to say so.
So I'm a bit nervous.
And thirdly, I will speak about the Rothbardian concept,
the ownership decision-making function,
and the corresponding decision-making grants,
a concept which I ended up considering problematic.
So I argue against Rothbard of all people.
Although I hope to do so only in letter and not in spirit, I almost wish I were wrong, but I cannot help thinking that I might be right.
Therefore, the place to start for me is what I would call the Mises-Rothbard theory of entrepreneurship as uncertainty bearing.
And I might as well say that in my view, whatever the theory of the firm will look in the future, the correct theory of the firm will look in the future, it will most definitely be a build-up from this Mises-Rothbard framework.
Briefly stated, this theory says the following, entrepreneurs act based on entrepreneurial judgments,
they allocate scarce resources based on entrepreneurial judgments, these entrepreneurial judgments refer to particular circumstances of time, place and persons from the future.
So consumer demand, their taste, the shifting of this taste, prices, costs, technologies, so on and so forth.
So particular circumstances of time, place and persons from the future.
And the future is uncertain and this renders these judgments unscientific.
They are not scientific in what sense.
they cannot be delivered together with, here and now,
hick et nunc, as the Latin say, with their test of validity,
together with their test of validity.
Therefore, a special role that businessmen have to fulfill
is unavoidable, and that is the ultimate bearing
of uncertainty, roughly put, successful actions
based on correct entrepreneurial judgments
lead to profits while unsuccessful actions based on wrong entrepreneurial judgments lead
to losses.
Now going on to Rothbard's treatment before proceeding to my PowerPoints, I would like
to emphasize or to point the fact that Rothbard is very careful not to deprive the real world
for a businessman of any feature that he might have.
So therefore, he's not so much concerned
about the so-called catalytic functions or economic functions.
Of course, he speaks about them, he treats them correctly.
But for him, for Rothbard, the entrepreneur,
of course, he's a property owner, necessarily.
He's a capitalist, he advances resources
within a time horizon, implying waiting and it is more than a capitalist and an owner,
it is capitalist plus so to speak in the sense that he bears the previously mentioned uncertainty.
So he speaks of the businessman, of the investor, of the capitalist entrepreneur or simply of
the entrepreneur referring to this real world entrepreneur.
And now, proceeding to my power points, in Man Economy and State, in one point, he introduces
an additional element or just highlights another way of seeing this element, this ownership
function or the ultimate decision function.
My presentation from now on will follow this structure.
I will briefly present Rothbard's introduction of the concept,
then other places where Rothbard uses the concept,
a bit about Rothbard's source of inspiration,
what would be the main contribution, if it is one,
of my paper, and some conclusions.
Well, this is an inadequate slide, so to speak,
but I just wanted to put the whole quote there and the summary of this quote would be, if you would allow me,
there is a function that the entrepreneurs, real entrepreneurs fulfill, an economic function, a catalactic function in Misesian terminology that has the following features.
Of course, the suggested content is this ultimate responsibility and control of production, decision of the nature of how much capital to invest and in what particular processes, and of course thereby the choice of managers.
One particular feature of this function is that it continues in equilibrium, in the Misesian-Rothbardian version of the general equilibrium, the even rotating economy.
So therefore, this function is supposedly different from the entrepreneurial catalactic function, and the income which is correspondent therefore has to be different from profit and loss.
Of course, it has to be different from mere capital advancing and managerial work, and therefore the decision-making rents are different from interest and wage, pure interest and an implicit wage.
An implicit income for these rents cannot be computed by real-world entrepreneurs because this function cannot be isolated, it cannot be hired on the market, it's something very specific to the entrepreneur, so it cannot be bought and sold, therefore no implicit price for it.
No price on the market, therefore no implicit price for it in the calculations of the entrepreneur.
And this function, it's specific, this is a very attractive feature of this function,
because it can lead to an explanation of the variety of firms and of business ventures on the real market, in the real market.
When I first read an article by Professor Salerno in which he appointed this element, the entrepreneur, real and imagined, I said, while I was working on my PhD on the theory of the firm, an Austrian perspective on the multinational firm, I said, well, this is the solution.
With this catalytic function, a theory of the firm can be built.
And then I started looking for other places where Rothbard uses the concept in his works.
And of course, those places are not very numerous, and searching for them I discovered that he employed the concept differently.
Mostly, and I have some quotes here, he includes decision-making under some form of labor.
He considers it some form of labor.
The first quote might not be so striking in this sense, but the second quote, he says
for instance, a brand name therefore is an attribute of a labor factor, specifically
The owner or owners of the firm, or considered catallactically, the brand name represents
the decision-making rent accruing to the owner and his name.
So labor factor, decision-making as a labor factor, if I correctly interpret him.
And a few other places, most of them in Man Economy and State, and only one other place
I managed to found in an earlier article,
not connected with the special issues.
But again, here he said, for instance,
wages can include wages of decision-making.
So here, in these quotes, I read him making the point
that decision-making, nevertheless,
might be included under labor.
so it would not be a different distinct catalactic function.
So this is attention, either different catalactic function
or labor.
Rothbard's source of inspiration is a quote from a passage
from Boehm-Bawerk, from Capital and Interest,
And he gives this portion of the Boehm-Bawerk quote.
Boehm-Bawerk says that even in equilibrium,
even when the entrepreneur does not personally take
part in the production process, he
contributes a certain amount of trouble
in the shape of intellectual superintendents.
And even more, at least an act of will
by which he devotes his means of production to a definite undertaking.
And this idea of a mere act of will, of course,
is the very source of the idea of decision making as a function.
But then I looked at the whole passage there.
And there is, again, at least attention.
After saying this, Boehm-Bawerk goes on.
I will only present the last part of what Boehm-Bawerk is saying there, that in his view, what he has said previously, included that part,
for the subject of an independent problem of no little difficulty, the problem of the undertaker's profit.
And he says that he purposely refrains to enter on a very complicated and a complicating for him new venture,
because he was trying to explain interest
and he didn't want to complicate with profit.
That might suggest that Boehm-Bawerk
would interpret this problem, this function
as included under the theory of profit
and of entrepreneurship.
So not necessarily a different function,
so a decision-making function.
although that's the debate in itself.
And now, if I may proceed to what I probably pretentiously call the analytical critique of the concept,
I would like to point the following things and then try to conclude.
At first, at least it seems that if ownership decision-making becomes a distinct catalytic function,
That implies a separation in terms of catalytic functions,
of economic functions, between ownership and entrepreneurship.
And this is a surprising withdrawal bug,
because if I correctly understand the matter,
he was bothered by this fact in the works of Israel Kirzner.
He was bothered not only by the practical possible separation
of Entrepreneurship and Ownership,
but even by the theoretical separation.
Actually, Rothbard, if I correctly read him,
never separates ownership as a special function
from anything, so the worker is a owner,
the capitalist is an owner, the entrepreneur is an owner,
so ownership is never separated,
apart from this decision-making issue,
from any other catalytic function.
Of course, a question remains after reading that part of Rothbard, what are entrepreneurship and uncertainty bearing still supposed to mean?
Because if you try to give content to the decision making in equilibrium, you necessarily get to include things from uncertainty bearing.
Can decision making rents be negative?
The Rothbardian answer is no, and is based on his standard analysis of rent.
But then a problem appears.
What is rewarded through these positive rents when there are losses?
And on the one hand, in his capacity as entrepreneur, the owner has failed to correctly forecast the relevant market data.
So, for the same thing, a decision, first you reward with a positive income the entrepreneur
and then you punish him, first you reward him as a decision maker and then you punish
him as an entrepreneur.
I won't dwell upon this, I argue that this is a different case than the one with the
implicit wage.
Okay, I looked in other places where Rothbard implies that decision making and uncertainty
bearing cannot be meaningfully separated, although you might accuse me of hand-picking
in Quotes.
I hope it's not the case.
I also touch the idea of decision-making under certainty.
And I found a quote by Rothbard in which he suggests
that there's not much left in it.
Decision-making without uncertainty
vanishes into the idea of passive waiting
that such as the capitalist function.
OK, because I'm trying to, one more thing,
and then I will really conclude.
I apologize.
I'm not a very good time manager, it seems.
Our decision making grants operational, the answer was no.
This is a problem, but then another fundamental question
arises.
Can they be independently derived, praxeologically,
even if they are not operational?
It is my opinion that they cannot.
I would argue, in the toughest case,
that Rothbard almost merely stipulates them.
Even the terminology is a little bit question begging.
You have decision making.
Why for decision making?
Although that might be me.
He himself criticized the idea in another place
that decision-making could be considered labor.
How many things I left out?
Well, the conclusion would be that, in my opinion,
contrary to the attractiveness of this theoretical device
of the decision-making grants, it
is problematic to separate decision-making from uncertainty bearing even at the level
of catalectical function analysis.
So therefore, the Austrian theory of the firm will not be a decision-making and entrepreneurial
theory of the firm or a decision-making theory of the firm.
It will be just an entrepreneurial theory of the firm, again, based on the Mises-Rothbard
theory.
Having made a mess of my presentation, I stop here.
Thank you very much.