By Morris Pearl and William Lazonick “Without significant oversight, Congress’s economic relief bill will leave millions of everyday Americans in financial peril Amid a humanitarian crisis compounded by mass layoffs and collapsing economic activity, the last course our legislators should be following is the one they appear to be on right now: bailing out shareholders and […]
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By Mandy Smithberger and Ryan Summers March 31th, 2020 “The coronavirus epidemic has already transformed the country, disrupting industries nationwide and causing thousands of Americans to lose their jobs. Congress recently approved over $2 trillion in spending to help businesses, large and small, and families cope with this crisis. But this level of spending also […]
By Öner Tulum & William Lazonick ◊ There are widespread claims that a productivity crisis afflicts the U.S. pharmaceutical industry despite the fact that the U.S. institutional environment provides unique advantages for drug R&D. We argue that the explanation for this productivity paradox is the “financialization” of the U.S. pharmaceutical industry. Driven by shareholder-value ideology, the U.S. pharmaceutical industry has adopted a highly financialized business model…
By William Lazonick ♦ Since the late 1980s, the dominant ideology of corporate governance in the United States has been that, for the sake of superior economic performance, companies should “maximize shareholder value” (MSV). As promulgated by agency theorists, however, MSV is an ideology of value extraction that lacks a theory of value creation. As a theory of value creation, I have constructed “The Theory of Innovative Enterprise”—an analytical framework for understanding how a business enterprise can generate a good or service that is of higher quality and lower cost than products previously available. In this essay, I use innovation theory to provide both a general theoretical critique and a selective empirical critique of agency theory.
By William Lazonick, Matt Hopkins, Ken Jacobson, Mustafa Erdem Sakinç & Öner Tulum ◊ Price gouging in the US pharmaceutical drug industry goes back more than three decades. In 1985 US Representative Henry Waxman, chair of the House Subcommittee on Health and the Environment, accused the pharmaceutical industry of “gouging the American public” with “outrageous” price increases, driven by “greed on a massive scale.” Even in the wake of the many Congressional inquiries that have taken place since the 1980s, including one inspired by the extortionate prices that Gilead Sciences has placed on its Hepatitis-C drugs Sovaldi since 2013 and Harvoni since 2014, the US government has not seen fit to regulate drug prices. UK Prescription Price Regulation Scheme data for 1996 through 2010 show that, while drug prices in other advanced nations were close to the UK’s regulated prices, those in the United States were between 74 percent and 181 percent higher.