ABSTRACT
Corporate decisions substitute internal bureaucratic processes for markets. American corporations usually pay out less than half of their earnings in dividends. Corporations and markets evolve together in the growth of the economy. Modern corporations receive the privilege of corporate powers from the state and have a corresponding obligation to the general welfare. Shareholders provide the finance necessary to outfit the corporation with its material assets. The corporation is a legal fiction allowing ownership to be separated from management. In recent years, the "New Institutional Economics" (NIE), an interdisciplinary combination of economics, organization theory and the law, has created a more realistic theory of the corporation than that in neoclassical economics. NIE presents many valuable insights and clearly helps towards the understanding of the corporation. Corporate divisions and other units often have their own internal agendas that may supersede the drive to maximum efficiency. Economists now acknowledge that rent-seeking or parasitism exists in government; it exists within corporations as well.
