Towards a unified theory of the firm: An historical approach

Most microtheorists have been preoccupied with the productive aspects of the firm, tending to neglect the questions of capital investment and finance. However, the interdependent nature of production, investment, and finance has not gone totally unrecognized. Over the past 50 years, a handful of economists have written on this interdependence. These economists' works form the intellectual background on which this study is based. With the insights thus gained, the essential features of a unified theory of the firm is outlined.     

Paternalistic Capitalism

Brazil’s political-economic structure has rapidly evolved over the past decade, shedding its shallow policy alignment with neoliberalism of the 1990s. Brazil’s large, diversified industrial base was painfully constructed over the course of the twentieth century. A major and sustained political realignment, which began in 2003, has resulted in two essential thrusts in development policy: (i) a “growth with equity” strategy that has dramatically reduced poverty and inequality; and (ii) a state-led “industrial policy” designed to upgrade manufacturing and direct the accumulation process toward specific sectors, highlighting and consolidating the National Innovation System (NIS). Nonetheless, as a result of the commodity boom that swept through Latin America, Brazil’s natural resource sector achieved outsized growth from 2002 to 2012. One result has been a shift toward resource intensive activities and a broad opening to low-cost Chinese manufactures. Utilizing an institutionalist framework and method, this article analyzes the cohesion of the NIS and the emergence of the “deindustrialization” debate. Also, it assesses the instrumental nature of the “growth with equity” strategy. The article hypothesizes the viability of an endogenous “neo-developmentalist” strategy, while acknowledging the emergence of fundamental exogenous forces and structural ceremonial/institutional factors that have impeded the consolidation of a Brazilian social structure of accumulation.     

Theory Choice in Economics: Philosophy and Practice

This article evaluates the factors that influence the opportunistic behavior observed in the automotive fuel distribution sector (ethanol and gasoline) and the way this behavior has affected the stability of transactions between distributors and retail gas stations in the State of São Paulo (Brazil). The methodology we adopt in this study is logistic regression. Contracts analysis showed good results in reducing opportunism through fuel adulteration (-68.6 percent), and enforcement by distributors proved effective in curbing opportunism through noncompliance with agreements. We also found that time in the market is a factor conducive to opportunistic behavior, while the application of higher prices is a factor that discourages opportunism.     

Keynes, population, and equity prices

Keynes in 1937 examined the phenomenon of the Great Depression from a longrun perspective in contradiction to the "General Theory," where the focus was on the shortrun. "Some Economic Consequences of a Declining Population," Keynes' article, reveals the context in which the "General Theory" was written. In the "General Theory," the focus is on short-term fluctuations, i.e., business cycles, but Keynes fails to provide any theoretical explanation as to why the depression of the 1930s was so severe and intractable. In the 1937 article, the depression is seen as the result of the combined effects of a decline in longrun growth due to population growth decline and a shortrun cyclical decline, together producing severe economic consequences. What is important for the purposes of this discussion is the implication, within the context of the 1937 article, that not only was the stock market crash of 1929 related to population change (with its accompanying collapse in expectations) but that, in general, changes in the rate of growth of population are accompanied by stock price movements in the same direction. The remainder of the discussion is devoted to a simple empirical test of this relationship. The data used are population size (POP), defined as the total residential population in the US from 1870-1979, and the Standard and Poor 500 Stock index (SP) for the corresponding 109-year period. In addition, a 3rd series was constructed, a price deflated Standard and Poor index (RSP) with a base period of 1870, to account for possible inflationary distortion of the index. The empirical results do not invalidate the hypothesis that population growth rates affect equity markets. In fact, there seems to be strong evidence that they are related in a manner suggestive of Keynes' intutition, namely, that the stock market crash of 1929 was due to factors more fundamental than those often perceived from a shortrun perspective. According to Keynes (1937), population is the most important determinant of longrun movements in real per capita income (given the state of technology, the real rate of interest, the age structure of the population, and the size share of income). So the focus is on population and its effects on economic growth. Due to the fact that the stock market presumably discounts longrun economic conditions as reflected in equity prices, it would seem that if Keynes were correct in his theoretical speculations, longterm equity price movements should relate to population change. In this sense, the paper may be regarded as an empirical test of a proposition of Keynes. More generally, the paper is suggestive in several ways. The relationship between business cycles and stock market cycles has been understood to the point of being rather obvious, but the effects of population on both has been less clear. It does appear on the basis of the evidence presented that the malaise of the stock market during the past 16 years, especially in real terms, may be due to factors more fundamental than those often perceived.     

Marxian perspectives and modern political economy

Conclusion Taken together, the papers on Marx and Marxism appearing in this issue are apartial representation of a complex and growing literature, much of it characterized by critical reevaluations, reflecting a state of ferment not seen in the discipline since the Keynesian revolution. This intellectual ferment, though independent, coincides with the economic reforms occuring presently in the People's Republic of China and the Soviet Union.Whether or not either or both of these two developments will ultimately lead to a revolution in Marxian thought is not yet clear. In the meantime, the growing literature on Marx and Marxism, as well as the literature of other current heterodox schools, has been generally ignored by practitioners of standard economics. And here again, only time will tell if such neglect is justified.