Economic Theories of the Corporation
In a world where large business corporations exercise substantial and real power, how we should conceptualize their power and whether such power can be legitimate within a democratic framework are important questions that political theorists have not given sufficient attention to. Following the recent political turn of economic theories of the corporation in political theory, this subproject examines whether major economic theories of the firm, including but not limited to the widely influential Chicago theory of the firm which conceives the firm as a private actor, can account for the kinds of power that business corporations are holding and exercising. The reason why business corporations are particularly troubling cases as compared to unincorporated firms is because they enjoy rights (such as legal personality, assets shielding, and limited liability) that unincorporated firms do not enjoy, and these rights make business corporations capable of attracting a large amount of capital which enables them to exercise far-reaching economic, social, and political power that is simply unavailable to unincorporated firms. And, unlike public associations, business corporations are increasingly framing themselves as private actors in the market to shield themselves from state regulations. The subproject will first attempt to classify different types of corporate power and clarify whether and on what normative grounds these types of power generate demands for political justification, and by political justification I mean the kind of justification that aims at legitimizing the exercise of power to those who are being affected.
The project also seeks to investigate whether key economic concepts such as externality and efficiency can be refined to account for the effects of corporate power. In economics, an externality is a side effect of a commercial activity that affects other parties without it being calculated in the cost of the goods or services involved. Almost all corporate activities involve positive and negative externalities. The subproject focuses specifically on socio-political externalities of the exercise of corporate power. An example would be business corporation’s power to structure the internal productive system would have general social and political costs that are not reflected and cannot be easily factored into the costs of production (e.g. an implication of Adam Smith’s famous pin factory example is that the way how the workplace is structured would have impacts on workers’ civic capacities that the production process itself would not take into account). The subproject proposes to investigate whether an extended conception of externality that includes socio-political consequences can illuminate the social and political roles of the business corporation in a democratic society and how this extended conception of externality might generate a new understanding of the socio-political responsibilities of the business corporation from a business ethics perspective and also the state’s responsibilities to create a legal framework that requires business corporations to take into account these costs.
This project is researched by Chi Kwok.
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