The visible and the invisible hand: Resource allocation in the industrial sector

Abstract

The standard economic analysis holds that resource allocation in the industrial sector is primarily a market process operating through the capital markets. The current political resurgence of free market economics has popularized this approach. Contrary to this approach the authors demonstrate that: (1) trends in the size, diversity and administrative complexity of firms; (2) structural features of the capital markets; and (3) the emergence of the state as a major source of capital in developed countries imply that internal organizational and political/ ideological considerations are also vital to understanding resource allocation in the economy.