Ulrich Matter Recommends “Towards a Political Theory of the Firm” by Luigi Zingales

Abstract

Classical economic theory has used the term firm to describe atomic entities in free markets or simply equated the firm with a collection of contracts. Zingales contrasts this view with reality and draws two core conclusions. First, large shares of global economic activity take place within a few dozen firms. Second, he stresses that while this fact is largely ignored in economic theory, it poses the risk of a “Medici vicious circle,” in which economic and political power reinforce each other, threatening both free markets and democracy.