 I'd like to welcome everybody to the Austrian Scholars Conference 2012. My name is Mark Thornton, and I'll be chairing the opening session, which is a session where the authors of new books that are of interest in Austrian economics get a chance to tell you about their work and where you get a chance to ask them questions about their work and their new books. This actually began as an impromptu authors forum. People would show up early for the Austrian Scholars Conference and basically get in the way of the staff who were trying to get ready for the conference. So one year we just pushed everybody into a classroom and had people get up and talk about their new books or their forthcoming works. Before we begin, I'd like to just make a request that if you are working on a book or a colleague of yours is working on a book that's going to be forthcoming over the next year, that you alert us to that fact so that we can get you on the program for either the next year or in future years. Okay so our first presentation is going to be a book by Peter Klein and Nikolai Faust. The title of their book is Organizing Entrepreneurial Judgment, A New Approach to the Firm. Good morning all. My name is Nikolai Faust. I'm one of the two authors of this book. You know the other one, Peter Klein. So a few words about myself. I'm a professor at the Copenhagen Business School, Europe's largest business school and I'm heading the Department of Strategic Management. I'm known Peter Klein for 15 plus years and we have rather similar, rather converging research interests. We share an interest in the economics of organizational, the economic theory of the firm if you like and of course we also share a deep interest in Austrian economics, not the least the theory of entrepreneurship and as you all know one of the strong selling points as it were in the Austrian Renaissance in the beginning of the 1970s was that the Austrians much in contrast to mainstream economists had a clearly articulated theory of entrepreneurship. Now that competitive advantage may have ceased somewhat over the years because we have witnessed an economics and also in other social science fields like sociology and anthropology really a renaissance on increasing interest at least for thinking about entrepreneurship. So in management we have a thinking on strategic entrepreneurship, economics is mainstream economics is intensely preoccupied with understanding new firm formation and so on. And again Peter and I we have shared for many years an interest in entrepreneurship and the economics of the firm and it pleases us that we have witnessed this search of interest in the economics of entrepreneurship and in the management of entrepreneurship and there's been a parallel development of course in the economics of the firm with a lot of exciting developments all building on Ronekosis Seminole 1937 paper The Nature of the Firm. And of course we welcome all these developments but we also think that these two literatures may have most important insights from the other and our book is essentially written to address these gaps and it's written for say it's a light book it's non-technical no mathematical notation whatsoever no game theory it can be written by ordinary human beings we think particularly of course if these are scholars with some interest in the economics of the firm and in entrepreneurship but you really don't need to be an entrepreneurship or a theory of the firm scholar to be able to benefit from the book is this when I should wave this with the order form is our copy circulating so what we do in order to bridge these two fields of entrepreneurship and the theory of the firm is to return to an idea that was really first what launched by Kantillon in the 18th century very much present in the thinking of Frank Knight certainly present in the thinking of Ludwig von Mises namely the idea of entrepreneurship as judgment the judgment is of the cognitive faculty that you apply in situations where there is no clear decision rule I'll do that I'll do the trick for you and of course entrepreneurial decisions are examples of such decision there's a need to make decisions over the use of scarce heterogeneous resources including heterogeneous capital assets and deploy them for the purpose of servicing future consumer preferences under conditions of uncertainty and for a profit and quite a substantial part of the book at least at least two chapters are preoccupied with detailing the differences between the Knight Mises you of judgment and contrasting it with the cursinary and discovery you because we think there are fundamental differences here and particularly we criticize I guess the management literature that has taken its cue from Kirsten's notion of entrepreneurship as alertness and discovery and we argue that Knight in and Misesian judgment is a much better foundation for thinking about entrepreneurship and also for linking the economics of organization and the theory of entrepreneurship very briefly the story we tried to tell is that judgment is non-tradable so in order to exploit his judgment the entrepreneur needs to set up a firm that gives us a basic take on why firms exist why firms emerge why firms arise in the market economy and we extend this kind of reasoning to classical issues in the theory of the firm like the boundaries of the firm and the internal organization of the firm and I think we really have something new to bring to the table in terms of new insights for economic organization I think the division of labor is that Peter would walk you very briefly through the concepts so Nikolai is the idea man and I handle practicalities like telling you how to buy the book actually we I only received the first hard copies they were sent to my office on Tuesday the publishers website publishers Cambridge University Press according to their website the book is now available for purchase in the United Kingdom the US version of the site indicates in April 30th publication date I don't know what that means you can pre-order on Amazon either the on the US site and you can order on the UK Amazon site I understand that we there will be copies available in the Mises Institute bookstore and from you will be able to order from the Mises store online at some point when the books are available if you just can't wait until then you'll find on the book table downstairs excuse me some order forms where you can place your order directly with the publisher and receive a discount the paperback edition can be yours for only $29.59 which is pretty good for an academic text there also is a hardback available for those of you who would prefer to spend $79.20 for the same thing with a little more durable cover let me just say a word or two about the contents of the book so I can get this if I can get this all to fit I'm sorry I can't I can't get it all on one page just to give you a sense of sort of the structure of the book and maybe a better idea of the intended audience for the book as Nikolai mentioned this is a scholarly book it's aimed at researchers and teachers and lay readers who may have an academic interest or a scholarly interest in the theory of entrepreneurship in Austrian economics in the economic theory of the firm as Nikolai mentioned it does not presuppose any specialized knowledge in the areas of entrepreneurship or economic organization the introductory chapters for example the second and third chapters provide fairly wide ranging reviews of the contemporary entrepreneurship literature in management and in economics and then an overview of how various scholars within the Austrian tradition have approached the entrepreneur placing particular emphasis on figures like Mises and Kersner of course and then contrasting or using that as a way of positioning our own approach which builds on Mises of course but also as Nikolai mentioned on Frank Knight the third chapter for example is a bit of a critique of the contemporary management literature which has very strongly adopted the so-called opportunity discovery perspective which is based on Kersner's notion of entrepreneurship as alertness to exogenously given profit opportunities a perspective which we think offers potentially much insight into processes of market clearing but we argue it's in other ways is misleading in terms of understanding what entrepreneurship is and what entrepreneurship does we describe this idea of judgment which comes from Frank Knight in somewhat greater detail whoops sorry so the fourth chapter is all about how Knight approaches judgment and how we from using various insights from other approaches within economics cognition theory and so forth try to unpack the concept of judgment a little bit more we have a chapter on Austrian capital theory that's the chapter was chapter five criticizes contemporary economics and some parts of management theory for adopting an inappropriately undifferentiated notion of capital so building on classic works in the Austrian tradition we explain the importance of capital heterogeneity for understanding what the entrepreneur does we frequently quote a line from Ludwig Lachman whose 1956 book capital and its structure contains a number of insights on entrepreneurial processes that have not been widely adopted even within the Austrian school Lachman says he says we're living in a world of unexpected change hence capital combinations tell me if I get this right we'll be continually forming and reforming in this activity we find the real function of the entrepreneur so we characterize the real function of the entrepreneur following Lachman is the continual combination and recombination of heterogeneous capital resources under conditions of genuine uncertainty night in uncertainty if you like or what Mises calls case probability instead of class probability and we also develop a number of implications excuse me for the economic theory of the firm in the sixth seventh and eight chapters and in the conclusion we discussed some implications not only for academic work but also for public policy some critique of contemporary economic policy on the grounds that it fails to take into account things like heterogeneity of resources tacit knowledge of course entrepreneurial judgment and so forth would be happy to take any any questions I think we have market if it's okay if anyone has a question or a comment excuse me what something I meant to mention before in terms of audience some people have asked would this be suitable for a textbook for textbook use in the classroom I certainly think it would I mean again it it's aim the intended audience is would be you know students with some prior exposure to a little bit of basic economics so maybe not a freshman level undergraduate course but an intermediate or advanced undergraduate course we think the book in entrepreneurship in Austrian economics in the theory of the firm and strategic management we think it would be very suitable for those uses and even more so for graduate level courses masters or doctoral courses in any of these areas and we think the book you know it offers an original contribution but also quite a lot of review and synthesis of prior contributions so we think it could be very effective as a textbook for advanced undergraduate or graduate classes yes someone in the back had a question yes yes yes I don't want to get too much into the substance of the arguments but we do address that point in the book and for now I'll simply say that we we distinguish between sort of think of a very broad general notion of entrepreneurship and Mises talks about this that he says entrepreneurship is deals with acting man under conditions of uncertainty which of course includes all human action right but there's also a narrower more specific notion of entrepreneurship focusing on individuals who are acting in the market in the commercial realm attempting to earn money profits and avoid money losses and typically when we talk about entrepreneurial activity in a capitalist economy we have in mind that narrower more specific kind of business entrepreneurship notion so many of the concepts do generalize you know to all aspects of human behavior yes I would say Schumpeter plays a smaller role in our argument than night or Mises but yes we do talk about Schumpeterian creative destruction we see Schumpeter in this context as while providing tremendous insight standing a little bit outside the mangarian tradition and really coming from more of a Valerian perspective but we certainly recognize the significance of his insights and we do discuss them in the book I mean if I suppose I should look at the flip to the index right now and see how many times people like Schumpeter mention but I won't do that in case in case what I'm saying is off the mark I mean right one interpretation of Kirchner is that what you know Kirchner's interest is not entrepreneurship per se but equilibration right how to we get from conditions of disequilibrium to equilibrium how to markets clear and Kirchner invokes the entrepreneur in a very kind of indirect almost you know a sort of instrumental way entrepreneurship is that which takes markets from disequilibrium to equilibrium because if they're in equilibrium there must be profit opportunities we think they tend to be exploited that's why markets clear I mean one can criticize that argument even on its own terms and we do offer a little a little bit of criticism about how the way we think that argument is situated in a particular understanding of the market that could be challenged even from within the Austrian perspective but holding that aside we also criticize the modern entrepreneurship literature first thing that look you know that perspective may have maybe significantly limited in the extent to which it offers insight into entrepreneurship itself and we for to justify this claim we we rely on none other than Israel M. Kirchner who has written two management scholars something along the lines of roughly paraphrasing you guys didn't understand me at all you don't know what you're talking about my work is really not all that relevant for you he didn't say it in exactly those words but in a interesting published article in 2009 he criticized entrepreneurship scholars for misunderstanding what his project was all about namely about explaining equal equilibration not explaining entrepreneurship but we do have some discussion of that in the text it maybe just one more so we have time for everybody else okay well Professor Foss and I would be happy to answer questions or talk to you about the book at any time during the rest of the conference thank you