Thursday, February 9, 2017

What's Worse, Monopoly Power Or Corporatism?

The Boothe School of Business at the University of Chicago invited a scholar to discuss the theory of the firm which assumes competitive markets.  He argued that there are two serious omissions to the theory of the firm.  Markets have become more concentrated and this has increased the power of large firms to influence the rules that affect how the markets function.  Donald Trump has also been engaged in a form of corporatism.  That is, a direct connection between corporations and the president.  He was then asked which is the greater problem.  His answer is given below?

am far more worried by Trump. His approach is supportive of business not markets—he is corporatist in the sense that he can create headlines by bullying particular firms to create the appearance of bringing back jobs. Companies will invest more and more in marketing to do things that make him look good and performing actions that benefit his business interests in order to curry favor with him. Perhaps more importantly, he is undermining national (constitution, independent judiciary) and international rules (NATO, WTO, EU, etc.) that have enabled prosperous growth since the Second World War. Generating trade wars and military conflicts is the surest recipe for economic disaster.

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