Towards a Political Theory of the Firm --- Luigi Zingales, 2019 Flashcards
In Towards a Political Theory of the Firm by Zingales (2019), what measures does the author propose to mitigate the risks of corporate dominance?
A) Encouraging corporations to assume more governmental functions.
B) Decreasing public understanding of corporate influence.
C) Enhancing transparency, corporate democracy, and antitrust enforcement.
D) Reducing corporation sizes through enforced divestitures.
E) Completely segregating corporate influence from political processes.
C
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.
B
In Towards a Political Theory of the Firm, Luigi Zingales discusses the interaction between concentrated corporate power and politics. What consequence does he suggest this interaction has on market economies and democratic institutions?
A) A marginal impact that doesn’t affect the principles of free markets or democracy.
B) A positive force that strengthens democratic institutions and economic stability.
C) A significant threat that undermines free market principles and democratic integrity.
D) An irrelevant phenomenon in democratic contexts, more pertinent to authoritarian regimes.
E) A contemporary issue without substantial historical precedence, not posing significant concerns.
C
How does Towards a Political Theory of the Firm define the Goldilocks balance in corporate and political power?
A) A balance where firms are strong enough to protect property rights but not so strong that they distort democracy and market competition.
B) A system where firms are always subordinate to government decisions.
C) A corporate structure where firms operate with zero political influence.
D) A market equilibrium where all firms have equal influence on politics and regulation.
A
Which of the following best illustrates an imbalance in the Goldilocks balance described by Zingales (2019)?
A) A situation where corporate lobbying completely dominates policy decisions.
B) A competitive market where firms have no influence over politics.
C) A government that nationalizes all major corporations to reduce their market power.
D) A country where small businesses collectively influence legislation more than large firms.
A
What are the three explanations Zingales (2019) provides for the increasing market power of U.S. firms like Apple, Microsoft, and Alphabet?
A) Network externalities, winner-take-all dynamics, and reduced antitrust enforcement.
B) Technological stagnation, increased government intervention, and lower market entry barriers.
C) Declining capital expenditures, stagnant labor markets, and international expansion.
D) Corporate tax benefits, investor short-termism, and deregulation of financial markets.
A
Which of the following correctly describes network externalities as a factor contributing to rising corporate market power?
A) The value of a company’s product or service increases as more people use it.
B) Firms with strong union representation tend to dominate their industries.
C) Larger corporations benefit from higher tax incentives than smaller firms.
D) Companies expand globally, leading to higher levels of competition in home markets.
A
What are five factors that determine the possibility and extent of the Medici vicious cycle in a given jurisdiction?
A) Political power sources, media market conditions, judiciary independence, campaign financing laws, and dominant ideology.
B) Board structure, tax policies, international trade agreements, wage growth, and regulatory complexity.
C) Union strength, GDP growth, media ownership concentration, inflation rate, and market volatility.
D) Firm size, antitrust enforcement, government debt levels, shareholder activism, and firm-level ESG scores.
A
According to Zingales (2019), what is the primary risk of corporate political power?
A) It leads to greater market competition and innovation.
B) It helps corporations reduce their tax burden.
C) It can undermine democratic institutions and distort free markets.
D) It reduces corporate responsibility and accountability.
C
The Goldilocks balance described by Zingales (2019) refers to:
A) The equilibrium between corporate power and political influence.
B) A scenario where firms have zero political influence.
C) The optimal level of corporate taxation.
D) The balance between innovation and regulation.
A
Which of the following best describes the concept of network externalities, as discussed in Zingales (2019)?
A) The ability of firms to bundle products and services together.
B) When the value of a product increases as more people use it.
C) The practice of companies outsourcing production to lower costs.
D) A firm’s capacity to generate data from multiple sources.
B
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.
A
What historical event does Zingales use to illustrate the dangers of corporate political power?
A) The rise of Silicon Valley tech firms.
B) The dominance of the East India Company.
C) The breakup of Standard Oil.
D) The financial crisis of 2008.
B
What are the five key factors that determine the extent of the Medici vicious cycle in a jurisdiction?
A) Media market, judiciary independence, campaign financing laws, dominant ideology, and political power sources.
B) Corporate governance structure, shareholder activism, GDP growth rate, regulatory complexity, and taxation.
C) Government spending, military expenditure, private banking strength, venture capital availability, and monetary policy.
D) Size of labor unions, influence of NGOs, trade agreements, corporate social responsibility, and consumer preferences.
A
What best explains the decline in the labor share of income in the U.S. economy?
A) A shift in corporate profits away from labor compensation.
B) An increase in public-sector employment.
C) Declining education levels among workers.
D) Stronger environmental regulations.
A
