The two fundamental problems of organization are the assignment of tasks and the apportionment of rewards. In unorganized action each person performs all the tasks by whose performance he benefits, and his reward is the immediate, physical benefit of his own work. But when men work together some machinery must be provided to give each his special work and to determine the amount of the results of others’ effort which he shall obtain and the amount of his own product which he shall give up to others.Frank H. Knight ( 1957). Risk, Uncertainty and Profit, p 55
Modern industrial society, the “existing economic order”, performs this twofold task chiefly through free agreement and voluntary exchange between individuals themselves. Economic theory is the analysis of this mechanism.