Most people who like the idea of planned economies have not had to live in one (or so I would guess).

I’ve spent almost a third of my life in a “planned economy” and now I sing hymns of praise to the heavens that the bloody thing collapsed, at least in our part of the world.

But to think the demon of the centralised economy is slain would be a gross fallacy. It is still very much alive, even in a “capitalist” country like the US. If you don’t believe me just enter the HQ of a big corporation and ask yourself the question: “what is the economy of this place?”

However in a market economy, I’m also working for my own interests which are in some ways fundamentally opposite to that of the corporation. The more money goes into my bank account, the less money goes into the bank account of the shareholders.

There is this tension between my personal self-interest and those of the corporation that exists in the context of a market economy that makes working within a corporation different from working within a planned economy.

I think a lot of the problem with what is written in academia is that it doesn’t take into account the *intra-corporate* politics. I am not a mindless automaton working for the good of the shareholders, I have my own direct personal interests which fundamentally conflict with those of the shareholders. Also, in day to day work, the interests of the shareholders are so far removed from what I do.

Personally, I *don’t* think that profit maximization is a good description of corporate behavior. The main driver of corporate behavior is “bankruptcy avoidance” which is different. You can maximize profit by increasing risk, and so if you are focused on maximizing profits, the logical thing to do is to go out and buy lottery tickets. Also, if a board of directors doesn’t want to maximize profits, there is nothing that can practically be done in legal terms.

Bankruptcy avoidance is different. If a company goes broke, then it dies.

Also, the reason that corporations do end up trying to make money is that that’s often “making the most money” is the only thing that the people on the board can agree on. I have a list of social goals that I think people ought to spend things on. You have yours. Someone else has there. If we end up on the same board of directors, the only thing that we are likely to agree on is to make a profit.

Ummmm… There are lot of bright economists in the corporate world. Fisher Black just to name one. The typical quantitative research department in a major Wall Street investment bank has got about 50 or so physics and math Ph.D.’s working for them.

By contrast, I’m at the bottom of the corporate hierarchy and things are a lot of fun here. I don’t feel like a serf or an adjunct faculty. Part of the reason for this is that if I am unhappy and someone offers me a better role, I leave.

I think most academics see this as a good thing because all of this brain-power increases the quality of our universities.

As for for-profit corporations, they can always place in their charters various objectives other than profit. So long as investors are informed of these objectives, there is no legal reason it couldn’t work. No legal doctrine prevents me from starting the XYZ Moral Sentiment Co. that makes shoes and guarantees that it only uses union workers in domestic factories. Of course, it will receive no funding from rational investors and/or go out of business pretty quickly unless it can convince customers to pay a lot more for its “morally superior” product. (Lots of people might question whether not employing desperately poor people overseas at higher wages than they would otherwise receive is really “moral,” but that’s a discussion for another time.)