At some point in their economics curriculum, every undergraduate will learn the “guns and butter” model of trade. The idea is simple: Countries have limited resources and can devote them either to military production or to consumer goods. Moving along a production-possibilities frontier requires giving up one of these to produce more of the other. This simple model highlights the concept of opportunity cost and teaches the reality of trade-offs in a way that sticks. Despite the fact that nobody has traded guns for butter (or vice versa) in at least 150 years and that societies produce far more than just “guns” or “butter,” the model is still useful. It is an abstraction of reality and, because of this, it allows us to focus on a particular facet of society and explore it more meaningfully. Surely we can agree it would be misguided to chastise the guns-and-butter model for being an incomplete representation of the world.
I say all this because in The Price of the Common Good, Notre Dame political theorist Mark Hoipkemier commits exactly this type of error, confusing a model’s simplifying assumptions with its claims about reality. The result is a book that wins arguments against straw men while leading the reader toward conclusions that are far more interventionist than the author may admit.
For example, Hoipkemier offers a mostly fair but, by his own admission, too brief sketch of the Chicago School’s view of the corporation. But then, on page 27, he writes, “Despite its clarity and coherence, the Chicago theory of business enterprise has one signal disadvantage: it’s wrong.… The firm is not just a nexus of contracts and is not owned or otherwise rightfully controlled by shareholders.”
But do Chicago economists literally think that firms are “just a nexus of contracts”? The answer is a resounding “no.” Analyzing firms as if they were a nexus of contracts is a simplifying assumption that economists sometimes make so as to shed light on particular aspects of how a firm is organized and how workers interact with one another. This abstraction has never been presented or held up as the ultimate description of all aspects of the workings of a firm.
On a positive note, the corporate law section on stockholder non-ownership is genuinely well done and helps to clarify important distinctions. Briefly, owning a share of a company is completely different from owning the company in any meaningful legal sense. While this isn’t a new insight in and of itself, Hoipkemier’s explanation, while not overly deep, is one of the clearest and best I’ve ever read.
But then he makes the leap from “stockholders do not legally own the company” to “therefore, stockholders do not control the firm in any way” without defending it. While he gives a footnote citation on page 25 to Henry Manne’s 1965 Mergers and the Market for Control, it’s clear that he gives zero merit to this paper’s argument without any real explanation as to why he does not find it convincing other than that it does not have surface-level appeal to his preferred outcome of promoting “the common goods.”
Economists have long extolled the power of “the market” through, for example, supply and demand or perhaps “the higgling and biggling of buyers and sellers” as the means through which prices are determined. Hoipkemier’s dismissal of Manne’s work is akin to someone saying, “Well that’s not true because I saw a worker putting price tags on foodstuffs at the grocery store, therefore the store is determining price, not some ephemeral thing called ‘the market.’” While true in the narrowest of senses, this fundamentally misrepresents what economics is teaching. When we say that “the market determines prices,” what we’re really referring to are the complex interactions of buyers and sellers who generate feedback about the relative scarcity of goods (and services) that then creates the impetus behind the grocery store owner’s decision to raise or lower prices.
Manne’s “market for control” works in much the same way. When he argues that stockholders essentially control a corporation, he’s not speaking in legal terms. He’s arguing, very clearly, that when stock prices fall sufficiently below what they could reasonably be with better management, powerful market-like forces will impel people to purchase sufficient shares and improve the firm’s operations. Current stockholders may not exercise explicit control over the day-to-day operations of the company, but the credible threat of people purchasing sufficient stocks (and therefore becoming stockowners) so as to “take over” the firm does impose discipline on corporate executives. Hoipkemier never seriously engages with this mechanism; instead, he simply waves it away.
Likewise, Hoipkemier’s treatment of Eddie Lampert’s disastrous attempt to run Sears as an internal market of competing divisions is a genuinely good illustration that real businesses require trust, loyalty, and shared culture, not just “price signals” contained within a “nexus of contracts” to function. While this insight is important, it’s hardly new and certainly not one that economists have somehow missed. Adam Smith, for example, brought this up across his twin volumes The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). Hayek addressed this as well in The Fatal Conceit (1988) with his distinction between the macro-cosmos and the micro-cosmos. Prices and incomes are good guides at the macro-level, but, as Hayek points out, if we use prices and incomes in the micro-level, we would destroy it. Workers walk in both worlds simultaneously where prices and incomes are relevant, but they are hardly the be-all-end-all.
In fairness, Hoipkemier acknowledges this distinction, at least a little bit. But he fails to acknowledge that economists do too, and worse, implies throughout the book that we don’t.
The problems of hierarchical structures are not new to economists either. Hoipkemier points to “the hierarchical model of business” (emphasis added) repeatedly throughout the book. The emphasis was added because it suggests that the author believes there is but one hierarchical model of business and that this hierarchy is either outright bad or, at the very least, probably bad. But here again Hoipkemier fundamentally misses the mark. Gary J. Miller’s 1991 book, Managerial Dilemmas: The Political Economy of Hierarchy, is not a defense of hierarchy. It’s an exploration, using the lens of economics, into the different hierarchical structures of firms. Why is it that some firms have a very “vertical” organizational structure while others are much more flat? Rather than view the choice as being “hierarchy or not,” Miller’s work explores the continuum of “hierarchy” that exists in the world by examining the incentive structures that different forms of hierarchy create and how they solve (or fail to solve) problems that firms actually face. Workplace democracy is certainly one form of corporate structure, and it would be foolish to think otherwise. But it has serious problems that render it destructive to workers in certain (though not all) situations. Hoipkemier explores none of this.
But what is perhaps the most frustrating part of the book is that Hoipkemier seems to want to have his cake and eat it, too. He readily admits that “the market” is quite good at delivering what it is oriented toward delivering. The challenge, then, is orienting it toward producing “the common goods.” But the idea of “common goods” is doing far too much work without clear operational content. Poll anyone on the question, “Yes or no, should society promote the common goods?” It would be surprising if this was met with anything other than “yes.” Now ask, “What, specifically, are the common goods?” And here the problems begin. Who gets to determine what “the common goods” are and by what process? Should we let Donald Trump or Pope Leo XIV do it? If we use majority rule, should it be a simple majority or require some supermajority, given its importance? How often, if ever, should we revisit this decision? These questions are important to Hoipkemier’s work but are left conspicuously unanswered.
Hoipkemier is not wrong to point out that firms and markets involve something more than the cold arithmetic of private gain. Trust, culture, and shared practice are real, as he so eloquently lays out. Fortunately for us, no serious economist (Chicago School or otherwise) denies this.
Likewise, The Price of the Common Good ignores the history of attempts to orient markets and corporations toward “common goods,” which is really a story of regulatory capture, incumbent protection, and concentrated power dressed up in the language of public interest. Hoipkemier understands this. On page 16 he notes that “absent an ecosystem of virtuous citizens and mature institutions, the risks of politicizing exchange would be liable to outweigh the social benefits of a civil market.” This is an incredible sentence to include in a book that goes on to spend another 220 pages explaining why we need to politicize exchange anyway without ever telling us where these virtuous citizens and mature institutions are supposed to come from or how we would recognize them when they arose.
The guns-and-butter model has survived for generations not because economists literally think that all trade involves firearms and dairy products. It has survived because it isolates a real phenomenon with enough clarity to teach to college students. Hoipkemier mistakes the abstraction for the claim. The result is a book that fights mostly phantom opponents, arrives at conclusions that point consistently toward more intervention without quite saying so, and leaves unanswered the hardest question about what happens when the people charged with promoting the common good pursue their own.
That question, as anyone who has lived through 2025 can attest, is not a trivial one.
