Jamie Galbraith, in the forward to the new edition of John Kenneth Galbraith's "The New Industrial State":
Large business firms often even replace the market altogether. This they do by integration: Replacing activity previously mediated by open purchase and sale with activity either internal to the corporation, or between a large, stable enterprise and its small, specialized suppliers, to whom risk is transferred. People reduce uncertainty neither through clairvoyance ("perfect foresight"), nor by confident exploitation of probabilities ("portfolio diversification"). They do it by forming up into structured groups large enough to forge the future for themselves. In politics these are countries and parties; in economics, corporations.
Once control passes to the organization, Galbraith wrote, it passes completely; the economics developed to describe the small firm and its owner-entrepreneur become obsolete. That form of economics celebrates the rational act of maximization, which consists of finding the shortest path to a given destination. But organizations do not have destinations. They have members, participants, stakeholders, all with a diversity of interests, talents, and purposes. Decisions are made by committees; the leadership of those on top is circumscribed by the need to get the underlings to go along. Individuals, the very focal point of traditional economics, no longer matter very much. Power in the firm belongs to what Galbraith called the "technostructure."
It's always worth saying that "economics," as a discipline, has thought about many of these issues in great depth, and developed cunning and complex models to express some, if not all, of these developments. But economics as it's deployed in common discourse -- often by self-interested interlocutors -- tends towards simplistic neoclassical arguments, which are in fact quite poor at describing the behavior of an economy as complex as ours.
Update: On a slightly less dry note, you gotta love the Galbraith style. He argues that profits aren't maximized merely for shareholder gain, as the shareholders are abstractions rather than voices around the table, and the natural inclination of individuals is to wrest gains for themselves. To think otherwise, Galbraith writes, "one must imagine a man of vigorous, lusty, and reassuringly heterosexual inclination eschews the lovely and available women by whom he is intimately surrounded in order to maximize the opportunities of other men whose existence he only knows through hearsay." This, incidentally, is exactly what's going on with the skyrocketing CEO pay approved by comfy, nepotistic boards of directors. They're advantaging those at the table, not the nameless masses known as "shareholders."
