Big Business
The contrarian defence of corporate scale.
Summary
Cowen argues that American business is more trustworthy, more productive and less harmful than the political consensus of both parties now holds, and he makes the case issue by issue: fraud, chief executive pay, monopoly power, the technology companies, finance, and the relationship between business and government.
His specific claims include: corporate fraud is rarer than perceived and businesses are more honest than individuals in most transactions; chief executive pay largely tracks firm size and market value in ways consistent with a competitive market for talent rather than with board capture; market concentration statistics are misleading because national concentration has risen while local concentration, which is what consumers experience, has generally fallen; the large technology companies deliver enormous consumer surplus that no measure captures; and finance's share of the economy reflects real services provided, including to households and to an ageing population managing retirement assets.
His explanation for the hostility is psychological. He argues people relate to companies through a frame borrowed from personal relationships, expecting loyalty and reciprocity that a commercial relationship does not involve, and are then disappointed by behaviour that is simply commercial.
The book is deliberately contrarian and Cowen states counterarguments fairly. The chapters on chief executive pay and on concentration are the most contested, and the empirical literature on both has moved since 2019 in directions less favourable to his position. The consumer surplus argument for technology companies is stronger. Read it as the best available statement of the pro-business case rather than as a settled account.
Key takeaways 7
- Corporate fraud is rarer than public perception suggests, and businesses behave more honestly in transactions than individuals do.
- Chief executive pay tracks firm size and market value in patterns consistent with a competitive market for scarce management talent.
- National market concentration has risen while local concentration, which determines what consumers actually face, has generally fallen.
- Large technology companies generate consumer surplus that no economic measure captures, because the services are free at the point of use.
- Finance's share of the economy reflects genuine services, including managing retirement assets for an ageing population, rather than pure rent extraction.
- People apply expectations of loyalty and reciprocity borrowed from personal relationships to companies, and are then disappointed by ordinary commercial behaviour.
- Business is more constrained by competition and by reputation than critics allow, and the constraints operate without regulation in most cases.
Who should read it
Investors and operators who want the strongest statement of the case that business criticism is overstated, read alongside the contrary evidence.
About Tyler Cowen
Professor of economics at George Mason University, director of the Mercatus Center and co-author of the Marginal Revolution blog.
The books apply price theory to questions operators actually face: which skills complement machines, how large firms really behave, why long-run growth should outrank near-term redistribution. Talent sets out a practical interviewing method for finding underrated people, drawn from his own grant-making at Emergent Ventures.
George Mason University, Mercatus Center, Marginal Revolution
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