Political Standards: Accounting for Legitimacy

I develop the notion of “thin political markets.” These are esoteric areas of market rule-making where corporate managers possess the technical expertise necessary for informed regulation, enjoy strong economic interests in the outcome, and face little political opposition. The motivating phenomenon for thin political markets is the political process of accounting rule-making. I present evidence suggesting that managers use their political and substantive advantage in thin political markets to subtly structure the rules of the game to their advantage. On one level, this action is entirely consistent with the capitalist spirit a la Milton Friedman – “The social responsibility of business is to increase its profits.” But there are serious questions as to whether such actions sustain the long-term legitimacy of market capitalism. In the conclusion, I offer some suggestions on how we might address this problem.