In the field of economics much has been said on the nature of commerce organizations and their role in the economy, but most mainstream approaches fall short in their attempts to form a realistic model of the economy. The standard view of business is that of the firm, a homogeneous entity that produces homogeneous widgets with the use of perfectly substitutable homogeneous capital and labor; occasionally discussions will mention “The Entrepreneur”, an all-knowing master coordinator. (Kasper et al., 2012) In The Theory of Business Enterprise, Thorstein Veblen provides an alternative approach using his intuitionalist-based analysis, most famously developed in The Theory of the Leisure Class, to the structure of business and industry of the late 1800’s and early 1900’s. Veblen’s analysis reveals that the interests of businessmen and industry do not always align with and can be detrimental to the community or society as a whole. (Veblen, 1899, 1904)
This paper will review Veblen’s history, theory, and analysis and attempt to offer appraisals and critiques of Veblen’s view of the relationship between businessmen, industry, and society as a whole. In an attempt to accomplish this, this paper will be organized into 3 parts:
1. Veblen's general view of businesses in the Industrial Age
2. The machine process & Veblen's view of the end
3. A final conclusion
2. Veblen v. mainstream economic theory
(1) Veblen’s general view of businesses in the Industrial Age
In contrast to the standard view of the firm, Veblen recognized that the industrial age brought with it a new type economic organization much different from the single owner businesses and small partnerships that are closer to the standard idea of the firm. Historically, the rapid increase in machine technology during the early years of the Industrial Revolution led to an increase in business turnover as new competitors with new and better machines were able to sell more at a lower price than those with outdated machines or processes. The vested financial interests then began to form pools or cartels in order to curb competition and maintain higher prices. Informal cartels are prone to internal cheating of the cartel agreement and often fail without an enforcement mechanism. To achieve economic stability for themselves businessmen began to seek monopolies via combination and to lobby for special privileges and regulations from the government. (Veblen, 1904)
Veblen recognized several characteristics about economy in the industrial age that the traditional view of the firm cannot address. For instance, Veblen noted that as the “machine process” became more prevalent in everyday life, the economy itself became more like a machine, which is vulnerable to mechanical failures. A point he would later build on when predicting the rise of technocracy, which advocates the scientific control of the economy.
“...the modern industrial system is a concatenation of processes which...