New Ideas in the Tradition of Galbraith
New Directions in Modern Economics series
Edited by Blandine Laperche, James K. Galbraith and Dimitri Uzunidis
Chapter 6: Galbraith’s Views on Firm and Market: Between Neo-Institutionalism and Evolutionism
Bernadette Madeuf 1. INTRODUCTION The purpose of this chapter is to examine the relationship between market and firm in J.K. Galbraith’s works. Thus, it is concerned with the conditions and institutions which are the foundations of contemporary capitalist economy. As a truly convinced Keynesian economist, J.K. Galbraith questions market functioning and regulation as they are defined – and supported – in mainstream economics. This questioning is the true basis of the development of J.K. Galbraith’s thought in his most famous works. Although the main issue is the relations between market and firm, as they constitute alternative coordination mechanisms of economic activities (the main issue was raised by Coase as far back as 1937), a second issue will also be covered: the balance of power between various market players (market power, consumer sovereignty, as opposed to the power of large firms, and the persuasive power of advertising). Our reflection will mainly focus on The New Industrial State (1967) which deals with the issue of market structures and corporate power in the market as well as within the firm itself. Of course many significant changes have occurred since The New Industrial State was published. Among the most important changes we can mention the globalization of markets and firms, the evolution of managerial power facing the growing weight of shareholders and the evolving relationship between them and the technostructure regarding decision-making in the firm, as shown by the issue of corporate governance, the change in the motivations of managers, increasingly focusing on the pursuit of...
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