Towards a Political Theory of the Firm

Question 1

Why does the author argue that the “Medici vicious circle” is a threat to democracy and free markets?
a) It leads to inefficient market outcomes and reduced competition.
b) Economic power reinforces political influence, creating a cycle that undermines both free markets and democratic systems.
c) The government imposes excessive regulations, limiting corporate innovation.
d) Corporations lose their ability to influence policy due to increased competition.

Answer 1

B

Question 2

What is a key reason why the neoclassical view of the firm is considered inadequate for describing modern corporations?

Answer 2

It ignores the power dynamics and political influence of large corporations.

Question 3

According to the paper, how do incomplete contracts contribute to corporate power?

Answer 3

They create opportunities for firms to engage in lobbying, rent-seeking, and power-grabbing.

Question 4

How has the market power of U.S. firms evolved over the past two decades?

Answer 4

It has increased due to rising market concentration, markups, and high merger activity.

Question 5

What role does “framing self-interest as a noble cause” play in corporate political influence?

Answer 5

It aligns corporate goals with socially beneficial narratives, gaining public and political support.

Question 6

What is the “goldilocks” balance between the state and corporations?

Answer 6

A balance where the state enforces property rights without expropriating firms, and firms do not overpower the state.

Question 7

What is a key factor that increases the credibility of corporate lobbying efforts?

Answer 7

Control over specialized talent in niche industries.

Question 8

How does market concentration contribute to the political influence of large corporations?

Answer 8

It amplifies their ability to shape regulations and policies in their favor.

Question 9

What is the most critical non-market factor influencing the extent of the “Medici vicious circle”?

Answer 9

The conditions of the media market and its independence from corporate and state control.

Question 10

Medici vicious circle risk

Answer 10

the greater the market power the firm has, the greater the fear of expropriation by the political power

Question 11

Mechanisms in the formation of the democratic consensus

Answer 11

The world of media - should be not affected by government or corporate censorship, electoral process (mixture of limitations on private donations, matched by some extent by public financing), ideology, the prosecutorial and judiciary powers.

Question 12

In Towards a Political Theory of the Firm by Zingales (2019), what measures does the author propose to mitigate the risks of corporate dominance?


Answer 12

Enhancing transparency, corporate democracy, and antitrust enforcement.

Question 13

In Towards a Political Theory of the Firm by Zingales (2019), what does the author describe as the Medici vicious circle, and what are its implications for economic and political power?

A) A focus on philanthropy without seeking political influence.

B) A cycle where economic and political power reinforce each other, escalating power concentration.
C) A reference to medieval Italian banking, irrelevant to modern corporate dynamics.

D) A cycle of diminishing corporate power due to political regulation.

E) A model suggesting perpetual equilibrium between corporate and state power.

Answer 13

B

Question 14

How does Towards a Political Theory of the Firm define the Goldilocks balance in corporate and political power?


Answer 14

A balance where firms are strong enough to protect property rights but not so strong that they distort democracy and market competition.

Question 15

Which of the following best illustrates an imbalance in the Goldilocks balance described by Zingales (2019)?


Answer 15

A situation where corporate lobbying completely dominates policy decisions.

Question 16

What are the three explanations Zingales (2019) provides for the increasing market power of U.S. firms like Apple, Microsoft, and Alphabet?


Answer 16

Network externalities, winner-take-all dynamics, and reduced antitrust enforcement.

Question 17

Which of the following correctly describes network externalities as a factor contributing to rising corporate market power?


Answer 17

The value of a company’s product or service increases as more people use it.

Question 18

What are five factors that determine the possibility and extent of the Medici vicious cycle in a given jurisdiction?


Answer 18

A) Political power sources, media market conditions, judiciary independence, campaign financing laws, and dominant ideology.

Question 19

What is one of the three main explanations for increasing market power among U.S. firms, according to Zingales?

A) Reduced antitrust enforcement.
B) Increased minimum wage laws.

C) Higher taxation of corporate profits.

D) Stronger labor union protections.

Answer 19

A

Question 20

What best explains the decline in the labor share of income in the U.S. economy?


Answer 20

A shift in corporate profits away from labor compensation.

Question 21

Which factor did NOT contribute to the increasing power of U.S. corporations over the past three decades?

A) Stronger consumer protections.

B) The rise of digital monopolies.

C) The weakening of antitrust policies.

D) Higher regulatory complexity.

Answer 21

A

Question 22

Which of the following statements about corporate political power is FALSE?

A) Corporations spend relatively little on direct political donations.

B) Many corporations exert influence through behind-the-scenes lobbying.

C) Corporate power is limited in democratic countries.
D) Regulatory complexity often benefits large firms over smaller competitors.

Answer 22

C

Question 23

please name and elaborate on 5 factors that determine the possibility and extent of the Medici vicious cycle in a given jurisdiction

Answer 23

The extent of the Medici vicious cycle depends on political institutions, media independence, judicial integrity, lobbying regulations, and public awareness. In jurisdictions where these factors favor corporate interests, firms can entrench their power, shape regulations to their advantage, and erode democratic principles. Conversely, strong checks and balances—including transparent governance, media scrutiny, and engaged citizens—can disrupt the cycle and prevent corporate overreach.

Question 24

The increasing market power of U.S. firms is primarily driven by

Answer 24

Market Concentration & M&A – Larger firms acquiring smaller competitors, reducing competition.
Regulatory Capture & Complexity – Large firms influencing and exploiting regulatory frameworks to their advantage.
Shifting Ideologies & Weak Antitrust Enforcement – A decline in aggressive regulation has allowed firms to maintain and expand their dominance.