Discussion paper

DP12158 Towards a Political Theory of the Firm

Neoclassical theory assumes that firms have no power of fiat any different from ordinary market contracting, thus a fortiori no power to influence the rules of the game. In the real world, firms have such power. I argue that the more firms have market power, the more they have both the ability and the need to gain political power. Thus, market concentration can easily lead to a “Medici vicious circle, where money is used to get political power and political power is used to make money.


Zingales, L (2017), ‘DP12158 Towards a Political Theory of the Firm‘, CEPR Discussion Paper No. 12158. CEPR Press, Paris & London. https://cepr.org/publications/dp12158