35to institutional Cryptoeconomics. Edward Elgar. Coase, R. (1974). The lighthouse in economics. Journal of Law and Economics, 17(2), 357–376. Davidson, S., de Filippi, P., & Potts, J. (2018). Blockchains and the economics institutions of

capitalism. Journal of Institutional Economics, 14(4), 639–658. Demsetz, H. (1968). The technostructure, 46 years later. Yale Law Journal (March). Reproduced in

Harold Demsetz. (1989). Efficiency, competition, and policy. Basil Blackwell. Dorsey, E., Manne, G., Rybnicek, J., Stout, K., & Wright, J. (2020). Consumer welfare & the rule

of law: The case against the new populist antitrust movement. Pepperdine Law Review, 47,

861–916. Foldvary, F. (2002). Site-value taxation and the rule of law. In D. Racheter & R. Wagner (Eds.),

Politics, taxation, and the rule of law: The power to tax in constitutional perspective. Kluwer

Academic Publishers. Foldvary, F. (2004). Public revenue from land rent. In J. Backhaus & R. Wagner (Eds.), Handbook

of public finance. Kluwer Academic Publishers. Galbraith, J. (2001). The essential Galbraith. Edited and selected by Andrea Williams. Houghton

Mifflin Company. Goldfarb, A., & Tucker, C. (2019). Digital economics. Journal of Economic Literature, 57(1),

3–43. Hayek, F. (1960). The constitution of liberty. Liberty Fund. Kahn, L. (2017). Amazon’s antitrust paradox. Yale Law Review, 126, 710–805. Knight, F. (1921). Risk, uncertainty and profit. Augustus M. Kelley. Mazzucato, M. (2013). The entrepreneurial state: Debunking public vs. private sector myths.

Anthem Press.

36S. Davidson and J. Potts

Mazzucato, M., Kattel, R., O’Reilly, T., & Entsminger, J. (2021). Reimagining the platform economy. Project Syndicate. https://www.project-syndicate.org/onpoint/platform-economydata-generation-and-value-extraction-by-mariana-mazzucato-et-al-2021-02? McCloskey, D., & Mingardi, A. (2020). The myth of the entrepreneurial state. American Institute for Economic Research. Mises, L. (1949). Human action: A treatise on economics. Fox & Wilkes. Potts, J. (2011). Evolutionary economics of creative industries. Edward Elgar. Potts, J. (2019). Innovation commons: The origin of economic growth. Oxford University Press. Potts, J., Cunningham, S., Hartley, J., & Ormerod, P. (2008). Social network markets: A new definition of the creative industries. Journal of Cultural Economics, 32(3), 167–185. Ricardo, D. (1996) [1817]). Principles of political economy and taxation. Prometheus Books. Rochet, J., & Tirole, J. (2003). Platform competition in two-sided markets. Journal of the European Economic Association, 1(4), 990–1029. Schrepel, T. (2019). Antitrust without romance. SSRN working paper https://papers.ssrn.com/sol3/ papers.cfm?abstract_id¼3395001 Schumpeter, J. (1939). Business cycles: A theoretical, historical, and statistical analysis of the capitalist process. McGraw-Hill. Schumpeter, J. (1942). Capitalism, socialism, and democracy (3rd ed.). Harper and Brothers. Schumpeter, J. (1954). History of economic analysis. Oxford University Press. Shapiro, C. (2018). Antitrust in a time of populism. International Journal of Industrial Organization, 61, 714–748. Smith, A. (1976) [1776]). An inquiry into the nature and causes of the wealth of nations. University of Chicago Press. Stigler, G. (1976). Do economists matter? Southern Economic Journal, 42(3), 347–354. Wu, T. (2019). The curse of bigness: Antitrust in the new gilded age. Columbia Global Reports.

Open Access This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made. The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

47An Effectual Analysis of Markets and States

Saras D. Sarasvathy

Abstract Entrepreneurial expertise consists in nonpredictive heuristics grouped under the rubric of effectuation. The principles and process of effectuation specify ways to tackle multiple uncertainties, allowing the cocreation of innovative upsides even without large, upfront investments. In focusing attention on the differences between risk and uncertainty, effectuation compels us to rethink the familiar relationships between risk and reward. Entrepreneurs and their stakeholders self-select into the effectual process not only to build products and ventures but also to reshape their environments, including markets and states. An effectual perspective, therefore, offers new frameworks to analyze the role of markets and states in innovation, especially in