By William Lazonick
This e-book explains the alterations in commercial management from Britain to the us prior during this century and from the U.S. to Japan extra lately, by way of the altering enterprise funding suggestions and organizational constructions in those international locations. the writer criticizes economists for failing to appreciate those old adjustments. The ebook exhibits that this highbrow failure isn't really inherent within the self-discipline of economics; there are very important traditions in fiscal idea that the mainstream of the economics occupation has easily overlooked.
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Extra resources for Business Organization and the Myth of the Market Economy
Although he did not like the term, he took its cause, wage rigidity, as a fact of life, at least in sorne circumstances. The only difference between the Keynesian and the classical subsystems bears on the slope of the LM curve. In the classical subsystem, it has a positive :~. As Hicks put it in his subsequent artide, "The Classics' Again": "[Rigidiry] is a special assump· tion that can be incorporated into any theory. Certainly the economists of the past cannot be criticized for not making it, for in their time, it would quite dearly, not ha ve been true.
The determination of equilibrium in a given branch first occurs as a thought experiment in the minds of firms' managers. lt becomes an objective observable market experiment at a later date. Marshall's jumped from firms' optimizing planning to market equilibrium, which means that he implicitly assumed that these expectations are correct. This implies that firms ha ve perfect foresight. ' 9 The fact that al! firms are in a state of individual equilibrium also implies that the market for the goods they produce is in equilibrium.
The same dismissive conclusion can be reached differently by confronting 'effective demand a la Keynes' with 'effective demand a la Marshall,' an alternative, more classical, way of extrapolating Marshall's theory of firms' individual equilibrium behavior. One element that they have in common is the perfect foresight assumption. It is here that a clue to the difference between them is to be found. When the strict Marshallian viewpoint is adopted, Keynes's General Theory everything is simple: it is assumed that the aggregate supply price function incorporares wages at their market-clearing magnitude.