Michael Jensen's late-career work on integrity is often interpreted as a departure from agency theory or as an attempt to introduce ethical considerations into a positive framework. This paper argues instead that integrity can be reconstructed as an extension internal to agency theory itself. Drawing on the Jensen and Meckling decomposition of agency costs, integrity is modelled as a bonding cost; a self-imposed constraint that raises the private cost of opportunistic behaviour and thereby economises on monitoring and reduces residual loss. Incorporating Buchanan's constitutional-stage logic, the analysis shows that integrity relocates rational optimisation to the choice of rules rather than to particular transactions. Integrity is further classified as an informal institution whose effectiveness depends on decentralised enforcement and institutional context. The paper concludes that integrity is neither an ethical supplement nor a scalable substitute for formal governance, but a bounded informal bonding mechanism whose effectiveness attenuates with organisational scale.

This paper proposes a Hayekian flatcoin, i.e. a blockchain-based currency whose value is defined by a continuously adjusted basket of commodities and maintained through competitive private issuance. It begins from the observation that contemporary stablecoins reproduce the inflationary bias of state-issued money by pegging to fiat currencies. Much of the cryptocurrency literature draws on F. A. Hayek’s 1970s writings, notably Choice in Currency and Denationalisation of Money, to justify this practice, yet it neglects his 1943 essay A Commodity Reserve Currency, which offers a concrete mechanism for a money of stable purchasing power. Revisiting that earlier proposal and drawing on later Austrian monetary theory and historical evidence of commodity standards, the paper shows how modern blockchain technology can implement Hayek’s rule-bound design. The result is a proposed monetary standard that would use blockchain infrastructure to implement Hayek’s commodity-reserve logic. A Hayekian flatcoin could offer an inflation-resistant alternative to fiat-backed stablecoins and illustrate how entrepreneurial innovation can extend the market order in the digital age.

This paper argues that artificial intelligence cannot replace the entrepreneurial function in a market economy. Drawing on Austrian economic arguments, it shows that AI lacks the judgment, imagination, and evaluative agency required to navigate uncertainty and discover new opportunities. While AI excels at pattern recognition and optimisation within defined problem spaces, it does not overcome the knowledge problem. Using Koppl et al.’s Theory of the Adjacent Possible, the paper demonstrates that innovation still depends on human selection and purpose. The institutional implications reinforce the importance of decentralised experimentation and entrepreneurial judgment in sustaining innovation within an AI-enhanced economy.

This paper explores the nature of governance both within and by blockchains and the economies they support. There is a widespread assumption that the proper governance model for these economies is political. In this paper, I make an alternative claim, namely that a more accurate model for blockchain governance is as a species of corporate governance. Political and corporate governance are similar, but they solve different problems with different incentives. Political governance, at its base, seeks to create legitimacy for coercive acts. Corporate governance is about solving agency problems with voluntary agreement. I explain why crypto governance is more like the latter, and in so doing draw out some of the lessons of the theory of modern corporate governance that might then usefully apply to the design of blockchain governance mechanisms.

Using the Coasean theory of the firm, this paper explores the concept of decentralised autonomous organisations (DAOs), which are blockchain-based organisations that are intended to operate without a central authority or management hierarchy. The paper compares and contrasts DAOs with a stylised notion of 'centralised autonomous organisations' (CAOs), which are defined as being conventional organisations that rely on bureaucratic systems and human authority. DAOs may have the potential to outperform CAOs in some situations, but as yet there are many open questions and uncertainties about their viability and impact. The paper isolates the crucial assumption underpinning the viability of DAOs as being that DAOs must suppress agency costs. Whether they do so is an empirical question that remains to be answered.

Decentralised autonomous organisations (DAOs) represent a novel organisational form made possible by blockchain technology. This article summarises a research project that sets out to establish an intellectually coherent, consistent, and academically robust theoretical framework that locates DAOs within a theory of organisation. I examine the unique characteristics of DAOs, focusing on their ability to facilitate coordination and cooperation without traditional hierarchical structures. By leveraging market-like mechanisms and token-based governance, DAOs aim to reduce agency costs and promote inclusive decision-making. The efficacy of these mechanisms, however, in achieving effective governance remains an empirical question. This research provides a theoretical framework to understand DAOs within the context of organisational theory, offering insights for researchers, practitioners, and policymakers on the potential and challenges of this emerging form of organisation.

Abstract This paper explores the role of artificial intelligence (AI) within economic institutions, focusing on bounded rationality as understood by Herbert Simon. Artificial Intelligence can do many things in the economy, such as increasing productivity, enhancing innovation, creating new sectors and jobs, and improving living standards. One of the ways that AI can disrupt the economy is by reducing the problem of bounded rationality. AI can help overcome this problem by processing large amounts of data, finding patterns and insights, and making predictions and recommendations. This insight raises the question: can AI overcome planning problems – could it be that central planning is now a viable option for economic organisation? This paper argues that AI does not make central planning viable at either the nation-state level or the firm level, simply because AI cannot resolve the knowledge problem as described by Ludwig von Mises and Friedrich Hayek.

Download This Paper Open PDF in Browser Add Paper to My Library Share: Permalink Using these links will ensure access to this page indefinitely Copy URL Copy DOI

This paper offers a critical examination of the recent evolutionary theory of technological change proposed by Koppl et.al (2023). Their theory, centred on the concept of 'tinkering' and formalised in the Theory of the Adjacent Possible (TAP) equation, presents an intriguing explanation for the 'great enrichment' and the industrial revolution. While acknowledging the theory's strengths, particularly its ability to replicate historical patterns of economic growth, this critique argues that Koppl et al.'s model simultaneously over-complicates and oversimplifies key aspects of technological evolution. The paper concludes by recommending a more nuanced approach that integrates empirical evidence and historical context to better understand the determinants of technological innovation and economic growth.

In this paper I examine governance from a corporate perspective and then apply some of those ideas to blockchain governance. There is no need to re-discover or reinvent governance. The principles of governance have been established and understood for a long time – what is new is blockchain technology. The technical innovation associated with blockchain masks some commonalities with the industrial economy. Organisations in need of governance are a nexus of contracts. Blockchain applications as organisations are a nexus of smart contracts. Once this perspective is adopted, it is very clear that blockchain governance cannot simply be a strategy to decentralise and then vote as a group on all decisions. I then explain why a hypothetical blockchain foundation would have concentrated control and would be a non-profit organisation.

This paper helps allocate shared capital effectively in the Cosmos ecosystem by examining a range of different allocation mechanisms. We identify the core challenges of allocating shared capital – with a focus on knowledge, opportunism and coordination problems. We outline four mechanisms that capital allocation DAOs can use to allocate capital in different contexts: grants, prizes, tenders and in-house production. Each have implications for the transparency and accountability of capital allocation. Our findings help capital allocation DAOs make decisions about how to allocate shared capital across the Cosmos ecosystem.

Interchain security (ICS) allows the Cosmos Hub to provide security to other blockchains (‘consumer chains’) and represents a significant revenue model for the Cosmos Hub. This paper investigates the economic and governance aspects of these ICS agreements with a focus on ensuring that the agreements are value adding and robust. The paper identifies potential risks such as vertical integration, challenges in adapting to incomplete contracts, and opportunism in asset-specific investments. It proposes recommendations to enhance the sustainability of ICS relationships, including the establishment of individual governance bodies for each ICS agreement, strategies to manage foreign exchange risks, and a decision tree for the Cosmos Hub to assess new consumer chains. A draft template for consumer chain onboarding is also presented, detailing essential elements like governance, payment terms, and exit clauses. This paper aims to offer actionable insights for improving the governance structures in ICS agreements, thereby fostering robust and enduring interchain security dynamics.

This paper explores the concept of decentralised autonomous organisations (DAOs), which are blockchain-based organisations that operate without a central authority or management hierarchy. The paper compares and contrasts DAOs with centralised autonomous organisations (CAOs), which are conventional organisations that rely on bureaucratic systems and human authority. DAOs may have the potential to outperform CAOs in some situations, but as yet there are many open questions and uncertainties about their viability and impact. The paper isolates the crucial assumption underpinning the viability of DAOs as being that smart contracts must suppress agency costs. Whether they do so is an empirical question that remains to be answered.

This paper investigates the industrial organization of casino gambling and develops a theory of the casino as an economic institution which emerges to reduce transaction costs. This theory is based upon the insight that the play of table games – typically seen as a production process or as a consumption behaviour – is comprised of agents making financial transactions with each other according to specific terms. In other words, financial contracts are being made and executed. Transacting-contracting is a process with costs, and governance structures are developed to manage these costs. Governance structures, however, have costs of their own, and consequently there are different kinds of governance structure (each with their own patterns of cost) to manage different kinds of transaction-contract. This paper draws from the New Institutional Economics tradition, and thus centres upon the optimal matching of transaction-contract with governance structure.

Generative AI is a very powerful new computing technology, but the problem of how to make it economically useful (Alice: “hello LLM, please send an email to Bob”) is limited by its inherent unpredictability. It might send the email, but it might do something else too. As a consequence, the large language models that underpin generative AI are not safe to use for most economically useful and valuable interactions with the world. This is the ‘economic alignment’ problem between the AI as an ‘agent’ and the human ‘principal’ who wants the LLM to interact in the world on their behalf. The answer we propose is smart contracts that can take LLM outputs and filter them as deterministic constraints. With smart contracts, LLMs can interact safely in the real world, and can unlock the vast economic opportunity of economically aligned and artificially intelligent agents.

Compensation within DAOs presents unique challenges, particularly regarding aligning contributors’ interests and motivation with organisational goals. Traditional time-based vesting schedules may not incentivise long-term commitment or performance, leading to potential misalignment and unfairness. This paper proposes an alternative approach to vesting schedules, based on the value accrual to the underlying asset. We argue that a value-based vesting schedule offers a more meritocratic and performance-driven approach to compensation that aligns contributors’ interests with the DAO’s long-term success.