Chicago economist Luigi Zingales explains that “new ideas are like new drugs”. We have “orphan drugs” when few would be helped by them or (as in the case of malaria) potential beneficiaries cannot afford to pay. We have “orphan ideas” for much the same reason.
Here is perhaps the biggest orphan idea: pro-market does not necessarily mean pro-business. A pro-business agenda aims at maximizing the profits of existing firms; a pro-market agenda, by contrast, seeks to encourage the best business conditions for everyone. Who benefits from evidence that an industry is too concentrated, its profit margins are too high, and consumers are being ripped off?
As with malaria drugs, millions of people would benefit from such an idea, but their ability to pay is limited. And, sure enough, in most of what we economists write – and, more important, in what we teach in business schools – it is hard to tell the difference between being pro-market and being pro-business. The battle against crony capitalism starts in the classroom, and we professors are inevitably implicated. If we are not part of the solution, we are part of the problem.
Luigi Zingales, “Orphan Ideas“, Project Syndicate, 13 July 2012.
Professor Zingales is author of A Capitalism for the People: Recapturing the Lost Genius of American Prosperity (Basic Books, 2012). He teaches Entrepreneurship and Finance at the University of Chicago’s Booth School of Business.