Economic Activity and the Public Sector: Is Small Beautiful?

Abstract

Some of the traditional concerns of institutionalists have emerged in the area of industrial organization. The field has provided a laboratory framing significant empirical investigations of concern to institutionalism. Here, the distinction between economics and political economy fades readily, because one cannot study the impact of the concentration of power in the economy on the character of emergent values without facing the myriad ways in which the economy is connected to the polity and to society at large. A major tenet in industrial organization is the notion that absolute size is a relatively meaningless concept and that what matters is size relative to the market. The latter is termed concentration, and it is concentration that produces the agglomerations of size cum power that pose a threat in democratic society, including its economy. It is industrial organization that pushed mainstream theory into broadening its focus from competition or pure monopoly to the more commonly found intermediate market structures-oligopoly, imperfect competition, and the like. If microeconomic theory has never been as satisfactory in these areas, and if the theorists' allegiance to the competitive model has remained strong, it must be explained in ways other than the influence of the real world provided to them by industrial organization specialists. If this field produces