The correspondence between Baumol and Galbraith (1957–1958) - An unsuspected source of managerial theories of the firm

Alexandre Chirat (alexandre.chirat@univ-fcomte.fr)
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Alexandre Chirat: CRESE, Univ. Bourgogne Franche-Comté

No 2020-07, Working Papers from CRESE

Abstract: Baumol’s impact on the development of managerial theories of the firm is investigated here through material found in Galbraith’s archives. In 1957 Galbraith published a paper claiming that the impact of macroeconomic policies varies with market structures (competitive versus oligopolistic). This publication prompted Baumol (1958b) to send Galbraith a manuscript dealing extensively with a crucial question of managerial theories of the firm, namely, the “trade-off” between sales and profits. I argue that Baumol’s critiques and Galbraith’s answers largely explain the way Baumol (1958a, 1959) framed his alternative model of the behavior of big corporations. He reasoned in terms of maximization of sales with a profit constraint as their main objective. In return, Business Behavior, Value and Growth fostered the development of Marris’s (1964) and Galbraith’s (1967) theories of the corporation. Contrary to the narrative by Tullock (1978) in which the sales maximization hypothesis has two main branches – Baumol for the one and Galbraith-Marris for the other – I argue here that these branches are at least partially connected.

JEL-codes: B21 B22 D21 D43 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2020-10
New Economics Papers: this item is included in nep-com, nep-his, nep-hpe and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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