Working Paper: NBER ID: w23593
Authors: Luigi Zingales
Abstract: Neoclassical theory assumes that firms have no power of fiat any different from ordinary market contracting, thus a fortiori no power to influence the rules of the game. In the real world, firms have such power. I argue that the more firms have market power, the more they have both the ability and the need to gain political power. Thus, market concentration can easily lead to a “Medici vicious circle,” where money is used to get political power and political power is used to make money.
Keywords: No keywords provided
JEL Codes: G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market Power (L11) | Political Power (D72) |
| Political Power (D72) | Market Power (L11) |
| Corporate Power (G38) | Political Influence (D72) |
| Concentration of Corporate Power (L22) | Threat to Democratic Processes (D72) |
| Concentration of Corporate Power (L22) | Threat to Economic Prosperity (F52) |
| Large Corporations (L20) | Reduction in Competitive Pressures (L11) |