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Abstract

In the first and last four chapters (“the Five Chapters”) of The Modern Corporation and Private Property, Adolf Berle, Jr. describes in sweeping terms a fundamental transformation of the American economy. . . . Writing more than ten years before Berle, another seminal scholar, Frank Knight . . . developed a theory of the entrepreneur as part of his larger effort to more carefully explain the theoretical underpinnings of a free-market economy. . . . Given Knight’s prominence and the fact that Knight apparently reached dramatically different conclusions than did Berle concerning the consequences flowing from separation of ownership and control, it is initially surprising to discover that Berle did not directly cite or acknowledge Knight or his work. However, I will show that not only was Berle familiar with Knight’s work and theories, but also that the Five Chapters can be read and understood as intended, in part, as Berle’s response to Knight’s theories. This reading of Berle is hidden from view by our misunderstanding of historical context. . . . First, I summarize the standard reading of the Five Chapters, an interpretation that is distorted by a failure to consider the context within which Berle wrote. Second, I present a standard summary of Frank Knight’s free-market theories. Third, I address the question of how familiar Berle was with Knight’s work. I present an interpretation of the Five Chapters as a response to Frank Knight. Finally, I conclude with some observations concerning perhaps surprising similarities in the views of Knight and Berle and provide a suggestion for how the collective research agenda of corporation law scholars might be reoriented in order to deepen and enrich our ongoing study of the corporation, law, and society.