Reply To: Proprietary vs. Open Source


The extent of assets under the supervision of an entrepreneurial group, just like all other production decisions, is subject to the constraint of economic calculation. Larger combinations of assets are sustainable if they increase net worth, i.e., if the acquired assets have greater monetary value under the supervision of acquiring entrepreneurial group than they did under the supervision of the dis-investing entrepreneurial group. The market value of different combinations of assets under the control of an entrepreneurial group is determined by investors at large and not by either the acquiring or dis-investing entrepreneurial group.

Moreover, for a business enterprise to remain efficient once its combination of assets is too large for the entrepreneurial group that formed it to directly oversee it, the entrepreneurs must divide it into profit centers and hire managers over each center with the instruction to earn profit and pay each manager a share of the profit earned by the center he oversees. In this way, collectivism is not implied in bigness of private enterprise.

In the unhampered market economy, if an enlarging enterprise or an emerging cartel of enterprises is becoming less efficient in satisfying consumer preference, then the monetary value of the assets of these enterprises will decline. Profit and equity can then be earned by breaking up combination. In contrast, if government intervention supports enlarging enterprises, then inefficiency and collectivism (or at least, bureaucratization) will go along with bigness.