The Crisis in the Economic Theory of the Firm
The Crisis in the Economic Theory of the Firm
The conference grows out of conversations among several HBS faculty about what happens to the standard theory of the firm when we incorporate the fact that firms are not only economic actors but political actors as well. The premise of the current economic theory of the firm is profit seeking; but even Milton Friedman assumed that "the basic rules of the game" are off limits to firms’ profit agendas. However, a growing body of literature, including in business fields such as accounting and finance, has shown that these rules of the game are often influenced – and perhaps sometimes even shaped – by firms wishing to extract private benefits. This raises at least two questions: Is it socially optimal for firms to maximize profits by changing the rules of the game through political lobbying and related activity? If not, what does this mean for the theory of the firm – and the maxim of "shareholder-value maximization"– in a world of expansive corporate political activity?
These are some of the questions we hope to take up at the conference. It will be a brainstorming session of sorts, bringing together a handful of scholars in economics and related fields such as history, law, politics, and sociology.
Conference organizers:
- Paul Healy, HBS
- Rebecca Henderson, HBS
- David Moss, HBS
- Karthik Ramanna, HBS
- Luigi Zingales, Chicago Booth