<p>A substantial interdisciplinary literature on consciousness considers what it means to be conscious and what are the distinguishing characteristics of conscious behavior. Economists have played almost no role in this literature, despite the fact that the economy operates as a result of the conscious decisions of producers and consumers. This paper explores implications from incorporating conscious behavior into the decisions of entrepreneurs on the nature of firms and the evolution of markets. It explains how small firms are able to build on innovations to gain market share, and why as firms grow larger, the bureaucratic oversight necessary to organize a large firm stifles innovation. As a result, over time firms tend to stagnate and are displaced by rising competitors.</p>