This document discusses several thinkers and their critiques of neoclassical economics, including Thorstein Veblen, Karl Polanyi, Piero Sraffa, and John Kenneth Galbraith. It presents Galbraith's alternative conceptualization called the Multi-Centric Organizational (MCO) model, which views major organizations like corporations and governments as the main actors, with interactions driven by power and objectives of increasing wealth and control. The MCO model leads to different outcomes than the neoclassical market model, with issues like inequality, environment abuse, and the chilling effect on democracy. Galbraith advocated for reform through redistribution rather than revolution.

1. • Bilal Yousaf
• MS Political Science 1st Semester

2. Topic
The Multi-Centric
Organizational
Model and
World View

3. Introduction
• This Chapter discusses
Challenges of institutionalism and Neo-
Ricardianism to the market world view
Critiques of Veblen, Karl Polanyi, and Sraffa
Critique of neoclassical economics by John
Kenneth Galbraith
Galbraith’s alternative conceptualizations of the
modern political economy as a model with
premises, and outcomes.
Finally, the Comparison of MCO Model and
Market Model.

4. ThorSteIn VeBlen 1857–1929
• Norwegian-American founder of the Institutionalist
school of Political Economy.
• Brilliant writer and social critic.
• His most famous book is The Theory of the Leisure
Class (1898)

5. • The first major intellectual challenge to the
dominance of neoclassical economics.
• Instead of the benign, harmonious, efficient
market that is central to neoclassical
economics, Veblen saw an excessive, wasteful,
and predatory system.
• He directly challenged the realism of the
neoclassical model.
• He believed, for instance, that contemporary
society could be understood only within its
historical and cultural context.

6. • He saw capitalists as ancient warrior class, who
gain wealth and power through
predatory manipulations and he called them
“captains of industry” or “captains of finance.”
• Veblen was also highly skeptical of the
neoclassical economists’ assumption of the free
and rational individual consumer. According to
his observations, people were more interested in
showing off their wealth in as ostentatious a
fashion as possible, which he called “conspicuous
consumption”.
• He put major emphasis on technology as the
driver of social change.

7. Karl Polanyi 1886–1964
• An Austrian-Hungarian economic anthropologist who
migrated to England and then the United States in order
to escape Nazism.
• His most well-known book is The Great Transformation
(1944), in which he argues that the market is embedded
in the broader cultural and political context and that,
furthermore, the market’s transformation of workers,
nature, and monetary gold into “fictional commodities”
is responsible for the destruction of community, the
environment, and democracy.

8. • In contrast to Veblen, who put major emphasis
on technology as the driver of social change,
Polanyi focused on the cultural idea of the
market itself.
• He argued that Up until modern times,
decisions about production and distribution
were made by custom or central authority.
• Laissez-faire policy, according to Polanyi,
was imposed by the government on behalf of
the capitalists so that they could make more
profit.

9. • Laissez-faire really meant the removal of
restrictions on merchants and industrialists.
• Polanyi argued that over the course of the
nineteenth and early twentieth centuries the
market actually turned real things into
“fictional commodities” that had harmful
consequences.
• Once something has been turned into a
commodity, it can be bought and sold for
whatever price comes from the market process.

10. PIero SraFFa 1898–1983
• Italian economist who joined Cambridge University in the
1920s at John Maynard Keynes’s invitation in order to escape
imprisonment by the fascist dictator Mussolini.
• Besides Keynes, Sraffa also personally knew and influenced
the Italian Marxist Antonio Gramsci and the philosopher
Ludwig Wittgenstein.
• After editing Ricardo’s papers, Sraffa wrote a small but
influential book, The Production of Commodities by Means of
Commodities (1960), which is the foundation of the neo-
Ricardian school of thought.

11. John Kenneth GalBraIth 1908–2006
• Canadian-born but spent most of his academic life at Harvard
University and became a U.S citizen in 1937.
• Prolific and popular advocate of institutional political
economics. Follower of Thorstein Veblen and John Maynard
Keynes and opponent of Milton Friedman.
• Held high positions in the Roosevelt and Kennedy
administrations.
• Major books that presented his alternative views are The
Affluent Society (1958), The New Industrial State (1967), and
Economics and the Public Purpose (1973).

12. • He believed that his approach provided greater
insight into contemporary reality, especially that
part of the political economy dominated by large
private corporations.
• Galbraith noted that the evolution of capitalism
from multiple small firms into a system with
larger and more powerful business organizations
was greatly facilitated by the development of the
modern corporation.
• In Galbraith’s view, developments in technology
were primarily responsible for production being
carried out in increasingly bigger organizations.

13. • Galbraith contended that power is the corporation’s number-
one objective.
• Corporations want to control everything affecting their
operations, including supply and demand for their products.
However, firms in a competitive market cannot control either
of these.
• Galbraith believed that in the next stage of corporate
evolution, teams of knowledge specialists would become more
influential in the decision-making processes.
• Those specialists would include scientists, engineers, lawyers,
accountants, marketing specialists, government liaison
officers, and so on.
• When fewer than ten corporations control most of the
production in an industrial field, a special type of decision-
making structure exists. It is called an oligopolistic market
(few sellers).

14. Galbraith identified eight controlling strategies
for oligopolistic corporate managers
1. Control of consumer demand.
2. Control over profit.
3. Control over labor.
4. Control over prices.
5. Control over growth.
6. Control over the universities.
7. Control over the government.
8. Control over the popular culture.

15. Premises of MCO Model
1. Basic actors are organizations.
2. Choices are made through the exercise of
organizational power.
3. Money represents power.
4. Wealth and power are the driving objectives.
5. Power rivalries characterize interaction.
6. Institutional power controls access.
7. Government is a major organizational player.

16. NGOs*
Corporations
(financial and non-financial)
Government
agencies
Labor unions
POLITICAL
•Legislatures
• Regulators
• Courts
ECONOMIC
Oligopolistic
business
structures
• Greater wealth
• Greater income
• Greater control
(Power)
Multi-Centric Organizational World View
Players Decision-Making
(National and international) Arenas Objectives

17. Outcomes
1. Inequality.
2. Market-defying movements in price levels.
3. Symbiotic relationship between major
corporations and government.
4. Chilling effect on democracy.
5. The natural environment is abused and
overused.
6. The highest social goal is the production and
consumption of more “stuff.

18. The MCO and Market Model Comparison
1. Outcomes are
determined by
2. “Sovereign”
player is
3. Central actors are
4. Interactions are
5. Access is
6. Government role
is
• Power
• Corporate
management
(“producer
sovereignty”)
• Organizations
• Power rivalries
• controlled and
unequal
• As major player
• Market efficiency
• Consumer
(“consumer
sovereignty”)
• Individuals
• Competitive
• Open and equal
• Limited
MCO Model Market Model

19. 7. Economy is
8. Wealth
concentration is
9. Resource allocation
is
10. Price (value) is
established by
• Prone to instability,
Requiring
government
Intervention
• Inevitable
• For optimum gain
of big
corporations, not
the public or
the environment
• Power negotiation
process
• Naturally stable,
with full
employment
• Limited by
competition
• Optimum in
response to
consumer
preferences
• Interaction of
demand and
supply

20. A better way?
• Galbraith was unhappy with many of the real-world
consequences of the corporate-dominated multi-centric
organizational system that he described.
• But he remained optimistic that improvements were possible
within the current system.
• In other words, he, like others of this school of thought,
advocated reform, not revolution.
• The key strategy is redistribution, the basic principle of
President Franklin Roosevelt’s New Deal, which opponents of
interventionist government continue to resist.

21. • Redistribution implies progressive taxation, which takes
wealth from those best-off and shares it with those not so
fortunate, both nationally and internationally.
Example:
 The Scandinavian countries have been much more
effective in the use of this strategy than has the United
States.
• But in order for this vision to assert itself, significant
restrictions have to be imposed on the acquisition of too
much power by any segment of the political economy.

22. • The End….
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