Jason Furman's Reviews > Big Business: A Love Letter to an American Anti-Hero

Tyler Cowen’s writes what he calls a “love letter to an American anti-hero”. But it is more honest and balanced than most love letters. This is embodied by his discussion of a book Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients. Cowen says he agrees with just about everything the book documents about, for example, kickbacks to doctors, overprescribing, and keeping trial results secret. His cheeky objection, however, was that the book was titled Not Nearly as Good as It Could Be Pharma: How Corruption Is Diminishing One of Our Great Benefactors and did not include all the good that prescription drugs have done for us.

Similarly his chapter on competition has a lot in common with Thomas Philippon’s book The Great Reversal: How America Gave Up on Free Markets, which was an argument about the problems stemming from increased concentration in the US economy. He identifies much the same areas where competition is insufficient and consumers are hurt, including health care, cellular and cable. But he also spends much more space on the parts of the economy where competition has increased, especially retail, and the many ways in which we have more choices and better ability to compare than ever before.

Other topics get similar treatment: Cowen documents the evidence that larger corporations tend to be more honest because they have reputations at stake while also discussing cases of dishonesty as well as industries built on it and he describes the wonders of the tech industry while expressing substantial concerns about privacy (some of which go well beyond my own personal tastes for privacy0. He is much more unqualified in his defense of CEO pay (it is linked to firm size and the scarce pool of talent) and finance (critical not just for economic development but also global power).

Cowen’s most creative but perhaps least convincing chapter was his speculation that the reason people hate businesses is that they anthropomorphize them. This has the advantage of making them more relatable but the disadvantage that we judge them by the same standards we judge people, something they can never live up to because they are not in fact our cuddly friends.

At the root of some of the book is an alternative theory of the firm to the Coase-Williamson minimize transaction costs view, instead it is businesses as social capital bundling trust, relationships and culture. This leads him to criticize Milton Friedman’s view that corporations should just maximize profits and instead argue that they need to imbue their workers with a sense of mission and purpose that goes beyond profit maximization.

Overall I found myself largely in agreement with the book. It is a good reminder that the average contribution of corporations is enormously beneficial—they make the goods and services we rely on and love (including the Kindle I read the book on and the MacBook I’m typing this review on) and they also employ most of us (not me, I work for a nonprofit and previously worked for the government). The book does not shy away from the many negative marginal contributions corporations make, and in fact endorses holding them to account and making them better, it just does include them to the exclusion of everything else.