Financial Markets and Williamson’s Theory of Governance: Efficiency Versus Concentration Versus Power

  • Louise Davidson


The orthodox theory of the firm and of markets assumes structural rationality, that is, the organization is capable of the efficient translation of purpose into action. In orthodox analysis the purpose is assumed to be self-evident; for the firm it is to produce goods for the market in order to maximize profits, and for the market it is to bring buyers and sellers together to maximize utility in consumption. The firm and the market are conceived of as ‘black boxes’ and little analysis is done as to what is happening in those real world black boxes - or even whether the black boxes exist in the real world.


Financial Market Rational Expectation Financial Asset Liquid Asset Real Asset 
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© Paul Davidson 1990

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  • Louise Davidson

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