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Corporations #3

From the times of the hunting-gathering societies until the present, there has been a long chain of behaviors that have pushed out out of the stone age and into this modern world. Individuals born into groups and learn both the value of individuality and of group cooperation, increasing specialization of skills and the cooperative grouping of those skills, and the use of technology (which includes creating money and finance). Skill specialization is not the use of technology since such skills differ in quality or individual ability. But when special skills are enhanced with machinery or systems that improve the quality of the work while reducing the amount of time needed to produce that quality of work, that is the essence of technology or innovation. I know, some will wish to argue the difference.

Economists can rare discuss invention, technology, and innovation with any intelligence. Invention does not suddenly spring from the mind and then waltz its way into production. As children we all "invent" solutions to problems as we see them. We see a problem and then try to create a solution to solve that problem. Transistors were use in electronics, the old vacuum tube that had to heat up to an operating temperature, something anyone under sixty will not remember today. Bell Labs created the first silicon transistor that was one hundredth the size of the old tube type. The Japanese reduced that size by a factor of ten for the first transistor radio I had in 1962. But the invention of the transistor came long before any of that, it came from experimentation in electrical circuits. You know, it took four thousand experiments before Edison and his team found the right combination for the electric light bulb. So much for overnight inventions.

So why mention this part of human history? Because invention and innovation are two sides of the same coin, technology. How does this relate to corporations? They are the basic technology of a market based economy. Remember skill specialization? Same animal. What do all these technologies do? Increase human productivity through the use of additional capital (sometimes it's sweat equity) or additional labor (sometimes in the form of labor saving devices). Technology helps us to do more with less resources. But surely that does not apply to corporations. Why not? The idea of a legal structure that comes into being for the production of goods and services on a scale that is prohibited by the single owner or small partnership when raising the capital (finances) needed on a scale beyond their reach is the corporations reason for existence. It has leverage in the financial and labor and raw material/semi-finished goods markets that the other two cannot hope to have.

Imagine if there were no corporate structures allowed by law. How would the Hoover Dam have gotten built? An Army Corp of Engineers job? Oh please, the damn thing would only be half way finished by now, and the cost overruns in the trillions.

Let me stop here. Tomorrow we will consider the amplification effect of corporations in their many markets.

Marta-Amance 7 Apr 1
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