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jek's avatar

Reminds me of the joke Henry Farrell told recently in his newsletter: economics is about how people make decisions, sociology is about how there aren't any choices to make at all

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Paul's avatar

I'm somewhat surprised given your example of railroads, that you don't mention how much sheer political corruption was involved in the building of railroads (preeminently in the US). It seems a classic example of how the business of railroads was intimately mixed with the political landscape, with each system having perverse effects on the other.

I would also emphasize the institutional-legal landscape. Railroads and the second IR are intimately bound up with the general availability of the corporate form (crucially with limited liability) that comes about with the various companies acts of the mid-19th century. The very form of the corporation means that politics and organizational forms with their in-built problems of governance and information (the so-called agency problem) were political from the outset. This is perhaps obscured by the fact that the formation of a corporation no longer needed a specific act of Parliament and therefore a clear public interest-political rationale. Also, that corporations were no longer associated with legal monopolies which had been justified by mercantilist strategic-economic considerations in the age of commerce -- the East India Company being the most notorious example.

But there is no second industrial revolution without the general availability of the corporate form allowed by the Companies Acts. Economies of scale demand large organizations despite the loses in managerial efficiency.

Unrelated point: I'm always amused by the French term for a limited liability company: "Societe Anonyme." I believe it just refers to the fact that the shareholders were anonymous. But it sounds like they already had in mind the idea that companies would be "accountability sinks."

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