by From Peter Radford and the current issue of RWER There is a continuum between the abstraction of economics theory and the practice of business. The two, after all, coexist in the same domain. The one seeks to explain phenomena which are consequences of the other. In the past few decades the highly stylized version of the firm that exists in economic theory has deeply influenced the way in which business is practiced. This is despite the detail excluded in theory, and the evident mischaracterization of the main vehicle of business – the corporation. Economics cannot theorize correctly about the firm until it absorbs the reality of the corporate form that dominates business. Mainstream economics is very good at explaining what might happen with respect to economic transactions in an
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from Peter Radford and the current issue of RWER
There is a continuum between the abstraction of economics theory and the practice of business. The two, after all, coexist in the same domain. The one seeks to explain phenomena which are consequences of the other. In the past few decades the highly stylized version of the firm that exists in economic theory has deeply influenced the way in which business is practiced. This is despite the detail excluded in theory, and the evident mischaracterization of the main vehicle of business – the corporation. Economics cannot theorize correctly about the firm until it absorbs the reality of the corporate form that dominates business.
Mainstream economics is very good at explaining what might happen with respect to economic transactions in an idealized world. That idealized world is created by expunging all manner of irritants that might make it difficult to model or teach. The entire resultant edifice is the tour de force of abstraction that has dominated economic theorizing for many decades. Unfortunately, it is the irritants, the very things removed in the process of abstraction, that are of most importance and interest to those of us trying to explain the real world. And amongst those the modern corporation stands out as a prime example. read more