exchange are farsighted and reflect the relevant hazards in terms of the exchange? (A better price (p+̂ ≪ p+̄) will be offered if the hazards (k ≫ 0) are mitigated by cost-effective contractual safeguards (s ≫ 0).)
Wilson contribution to this volume, The Corporation as a Political
Actor (Chapter 13).
The main reason that we put so much stock in efficiency is that remediable inefficiency invites its own demise. Not only does efficiency operate as a carrot
(immediate benefits accrue to those who realize private efficiency gains), but efficiency is a stick to which rivals are responsive. In the long run, the fitter (to be distinguished from the fittest) have better survival prospects ( Simon 1983, p. 69).
Note in this connection that we concur with Nicholas Georgescu-Roegen
that "the purpose of science in general is not prediction, but knowledge for its own
sake" ( 1971, p. 37). Because, however, plausible explanations and ex post rationalizations in the social sciences are often easy to come by, Georgescu-Roegen goes on
to insist that prediction is "the touchstone of scientific knowledge" ( 1971, p. 37).
Prediction thus plays a vital role in helping to sort the wheat from the chaff.
Discussions with officials in the antitrust division of the U.S. Department
of Justice convince me that the paper Economies as an Antitrust Defense
( Williamson 1968), which displayed the large dead-weight losses that attended the
prevailing inhospitality view of mergers, had a salutary effect on turning that policy
around. (The basic model on which the paper was grounded was first set out in a
memorandum to the then assistant attorney general and his deputy, Donald Turner
and Edwin Zimmerman, respectively.)
The Panglossian form of the remediableness standard is this: All that is is
The unraveling issue is discussed by David Kreps ( 1990); the valuation
problems in any firm, partnership included, are especially severe as assets become
highly specific and firms take on large size ( Williamson 1976). In the degree, therefore, to which large size and specific assets yield productivity gains, creating an organizational form that lives in perpetuity has advantages.
Our interpretation of these three conditions appeals to comparative analysis of a contractual kind. Harold Demsetz ( 1967) has advanced a property rights interpretation of the modern corporation.
Of course, very large and once-successful firms (such as General Motors
and IBM in the 1980s) may be able to defer the reckoning for very long periods of
time. Caution in authorizing growth -- because there may be deferred costs -- is simply part of an intelligent tradeoff. To be successful at one period of time (e.g., when
computing is done on mainframes, customers are unfamiliar with their needs, and
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: The American Corporation Today.
Contributors: Carl Kaysen - Editor.
Publisher: Oxford University Press.
Place of publication: New York.
Publication year: 1996.
Page number: 354.
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