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In a recent interview I watched a economist say something along the lines of:

"There is a distinction between being pro-business and being pro-market. There should be rules in place so that businesses can compete in a way that is good for the economy and not just good for their shareholders."

Question: What is this distinction exactly? In other words, what is he probably referring to?

The only thing that comes to mind when I think about that statement is how many corporations are using large amounts of profits to buy back their shares as opposed to investing in capital. Am I on the right track, or is there more to it than that?

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    $\begingroup$ What can we say about profits in a perfectly competitive market in long-term equilibrium? $\endgroup$ – 410 gone Jan 22 '18 at 13:32
  • $\begingroup$ @EnergyNumbers If I'm not mistaken, the profits would approach zero. The economist never mentioned which market he was talking about. I presume he was referring to the economy as a whole. In the case of the US, there are some markets that are saturated enough to be considered near perfect, however I'm not sure how this generalizes in the grand scheme of things. Correct me if I'm wrong though $\endgroup$ – Arash Howaida Jan 22 '18 at 17:36
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    $\begingroup$ ok, so given that, do you see how there might be a distinction between being pro-business and pro-market? $\endgroup$ – 410 gone Jan 22 '18 at 18:01
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In a nutshell, pro-business policies help currently existing businesses and their shareholders. Pro-market economies are those that follow the tenets of the free market - competition, no barriers to entry and so on. Pro-business policies may not imply a pro-market environment.

This is discussed at length for the case of India in Rodrick, D. and Subramanian, A., 2004. From “Hindu growth” to productivity surge: the mystery of the Indian growth transition, NBER Working Paper Series, WP 10376.

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  • $\begingroup$ Isn't it ironic that the economist from the OP is suggesting even more interference by the very institutions that create the pro-business over pro-market environment to begin with. The end result will most assuredly be an even more pro-business and less pro-market environment. $\endgroup$ – Dunk Jan 25 '18 at 16:30

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