Bigness and Social Efficiency: A Case Study of the U.S. Auto Industry
Author(s)
Adams, Walter; Brock, James W.
Abstract
Giant corporations have come to dominate industrial and other economic activity, a fact that many journalists and commentators have noted. Yet economists have generally declined the challenge of assaying the parameters of corporate bigness and size-based economic power… Despite a monumental revolution in industrial organization over the past century, the economists’ conception of power – defined as the capacity to influence price in a particular market – has remained remarkably unchanged, unidimensional, and, in all, anemic and innocuous. This chapter explores the dimensions of size-based power in a case study of the U.S. automobile industry. Rather than the traditional economic issues of cost minimization and the pace of technical progress, it focuses on the question of social efficiency: Does the exercise of power by large corporations represent an efficient way to achieve society’s goals? A review of four major areas – urban congestion, pollution, automotive safety, and fuel consumption – shows that the answer is largely negative.
