Corporations in the economy of esteem

Even in a regulated and competitive market economy the behavior of firms leaves much to be desired. Beyond the invisible hand of the market and the iron hand of the law, this chapter outlines arguments for an intangible hand of civil society. The central mechanisms in the model rely on social esteem and self-esteem. These depend on assessments of true intentions and dispositions for costly pro-social actions. Instrumental pro-social actions matter little in the economy of esteem. What is required is a common belief that conformity to certain costly standards benefits all; and that conformity is observable and elicits social approval (and vice versa). Challenges are considerable for the intangible hand model. Moralizing the firm’s agents, inducting the voice of affected parties in the deliberation of firms, delayed disclosure of internal deliberations, and public commitments by leaders all offer promise.