The Correspondence Between Baumol and Galbraith (1957–1958): An Unsuspected Source of Managerial Theories of the Firm

Alexandre Chirat

A chapter in Research in the History of Economic Thought and Methodology: Including a Symposium on the Work of William J. Baumol: Heterodox Inspirations and Neoclassical Models, 2022, vol. 40B, pp 49-65 from Emerald Group Publishing Limited

Abstract: Baumol’s impact on the development of managerial theories of the firm is investigated here through the material found inGalbraith’s archives. In 1957, Galbraith published a paper claiming that the impact of macroeconomic policies varies with market structures (competitive versus oligopolistic). That publication promptedBaumol (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 wayBaumol (1958a,1959) framed his alternative model of the behavior of corporations. He reasoned in terms of maximization of sales with a profit constraint as their main objective. In return,Business Behavior, Value and Growthfostered the development ofMarris’ (1964) andGalbraith’s (1967) theories of the corporation. WhileTullock (1978) provides a narrative in which the sales maximization hypothesis has two main branches – Baumol for the one and Galbraith–Marris for the other – the paper demonstrates that these branches are intimately connected.

Keywords: Baumol; Galbraith; theory of the firm; managerialism; sales maximization hypothesis; B21; B22; D21; D43 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rhetzz:s0743-41542022000040b005

DOI: 10.1108/S0743-41542022000040B005

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