This article outlines the “fundamental myth” about the structure of property rights in a capitalist economy, namely the idea that being the residual claimant in a productive opportunity is part of a bundle of property rights known as the “ownership of the firm.” Residual claimancy is contractually determined so there is no such “ownership.” The fundamental myth exposes a basic fallacy in capital theory that has hitherto escaped attention in the capital theory debates.
Alchian, A., and H. Demsetz.1972. Production, information costs, and economic organization. American Economic Review62: 777-795.
2.
Arrow, K. J.1971. The firm in general equilibrium theory. In The corporate economy, ed. R. Marris and A. Woods. Cambridge, MA: Harvard University Press.
3.
Arrow, K. J., and G. Debreu.1954. Existence of an equilibrium for a competitive economy. Econometrica22: 265-290.
4.
Black, H.1968. Black’s law dictionary. St. Paul, MN: West.
5.
Catlett, G., and N. Olson1968. ARS No. 10: Accounting for goodwill. New York: American Institute of Certified Public Accountants.
6.
Christ, C. F.1975. The competitive market and optimal allocative efficiency. In Competing philosophies in American political economics, ed. J. Elliott and J. Cownie, 332-338. Santa Monica, CA: Goodyear.
7.
Dow, G.1993. Why capital hires labor: A bargaining perspective. American Economic Review83 (1): 118-134.
8.
Dow, G.2003. Governing the firm: Workers’ control in theory and practice. Cambridge, UK: Cambridge University Press.
9.
Ellerman, D.1972. Introduction to normative property theory. Review of Radical Political Economics4 (2 Summer): 49-67.
10.
Ellerman, D.. 1973. Capitalism and workers’ self-management. In Workers’ control: A reader on labor and social change, ed. G. Hunnius, D. Garson, and J. Case, 3-21. New York: Random House.
11.
Ellerman, D.1982. Economics, accounting, and property theory. Lexington, MA: D. C. Heath.
12.
Ellerman, D.. 1986. Horizon problems and property rights in labor-managed firms. Journal of Comparative Economics10 (March 1986): 62-78.
13.
Ellerman, D.. 1992. Property & contract in economics: The case for economic democracy. Cambridge, MA: Blackwell. [Out-of-print with rights reverted to the author, so the full text is available at: www.ellerman.org.]
14.
Ellerman, D.. 1995. Intellectual trespassing as a way of life: Essays in philosophy, economics, and mathematics. Lanham, MD: Rowman & Littlefield.
15.
Fama, E., and M. Jensen.1996. Organizational forms and investment decisions. In The economic nature of the firm, 2nd ed., ed. L. Putterman and R. Kroszner, 336-344. Cambridge, UK: Cambridge University Press.
16.
Furubotn, E., and S. Pejovich.1970. Property rights and the behavior of the firm in a socialist state: The example of Yugoslavia. Zeitschrift fur Nationalokonomie30 (3-4): 431-454.
17.
Furubotn, E., eds. 1974. The economics of property rights. Cambridge, MA: Ballinger.
18.
Goodwyn, L.1978. The populist moment. New York: Oxford University Press.
19.
Grob, G.1969. Workers and utopia. Chicago: Quadrangle.
20.
Haavelmo, T.1960. A study in the theory of investment. Chicago: University of Chicago Press.
21.
Hansmann, H.1990. Ownership of the firm. In Corporate law and economic analysis, ed. L. A. Bebchuk, 281-313. Cambridge, UK: Cambridge University Press.
22.
Hansmann, H.. 1996. The ownership of enterprise. Cambridge: Harvard University Press.
23.
Hart, O.1995. Firms, contracts, and financial structure. Oxford, UK: Clarendon.
24.
Hart, O., and J. Moore.1990. Property rights and the nature of the firm. Journal of Political Economy98: 1119-1159.
25.
Hirshleifer, J.1970. Investment, interest, and capital. Upper Saddle River, NJ: Prentice Hall.
26.
Holmstrom, B., and J. Tirole.1989. The theory of the firm. In Handbook of industrial organization, vol. 1, ed. R. Schmalensee and R. Willig, 63-133. Amsterdam, North-Holland: Elsevier.
27.
Keynes, J. M.1936. The general theory of employment, interest, and money. New York: Harcourt, Brace & World.
28.
Lasch, C.1991. The true and only heaven. New York: Norton.
29.
Maitland, F. W.1960. Frederic William Maitland: Historian, ed. R. L. Schuyler.Berkeley: University of California Press.
30.
Marx, K. [1867] 1967. Capital: A critique of political economy, vol. 1, trans. S. Moore and E. Aveling. New York: International Publishers.
31.
Menger, A.1899. The right to the whole produce of labour: The origin and development of the theory of labour’s claim to the whole product of industry, trans. M. E. Tanner, intro. H. S. Foxwell. London: Macmillan and Co. (repr. Augustus Kelley).
32.
Miller, M. H., and F. Modigliani.1961. Dividend policy, growth, and the valuation of shares. The Journal of Business34 (October): 411-433.
33.
Montias, J. M.1976. The structure of economic systems. New Haven, CT: Yale University Press.
34.
Putterman, L.1996. Ownership and the nature of the firm. In The economic nature of the firm, ed. L. Putterman and R. Kroszner, 361-369. Cambridge, UK: Cambridge University Press.
35.
Putterman, L., and R. S. Kroszner, eds. 1996. The economic nature of the firm, 2nd ed.Cambridge, UK: Cambridge University Press.
36.
Samuelson, P. A.1976. Economics, 10th ed.New York: McGraw-Hill.
37.
Vanek, J.1970. The general theory of labor-managed market economies. Ithaca, NY: Cornell University Press.
38.
Vanek, J.. 1975. The basic theory of financing of participatory firms. In Self-management, ed. J. Vanek, 445-455. New York: Penguin.
39.
Vanek, J.. 1977. The labor-managed economy. Ithaca, NY: Cornell University Press.
40.
Varian, H.1984. Microeconomic analysis, 2nd ed.New York: W. W. Norton.
41.
von Gierke, O.1958. Political theories of the middle age, trans. F. W. Maitland. Boston: Beacon.
