In 1792, William Pitt told parliament that Adam Smith’s “extensive knowledge of detail … will …furnish the best solution to every question … of political economy.” Since then it’s been downhill all the way. For Smith, the industrial firm (his famous pin factory) was the key to economic progress, with the market only serving to enable the division of labour. But economists have always given primacy to the market, almost ignoring the industrial firm, because they don’t begin to understand it. In late nineteenth century, economists adopted differential calculus to model the economy, which meant describing the firm as a “production function” comprising two variables, price and quantity, and seeking to maximise profit. This was not just stupid, but hugely damaging. Maximising one thing requires the neglect of everything else, which has done great damage to Anglo-Saxon industry. Finally, in the 1980s, still completely unable to conceive of what a firm involves, they adopted the agency idea, claiming that the managers of a firm were the agents of its shareholders and should not therefore be maximising profit but maximising shareholder wealth. It is a lie. Managers have no contract with shareholders, but with the firm which is a legal entity in its own right. Shareholders do not own the firm – if they did they would not enjoy limited liability. They own shares which entitle them to dividends and capital growth, both at risk. Maximising shareholder wealth, as required by Friedman and followers, requires neglecting everything else. When specific decisions have to be taken, notably in the case of hostile takeovers, this is crucial. It has destroyed much of what remains of Anglo-Saxon industry, the latest British example being Cadbury. It has also justified the obscenity of top executive share option bonuses, which unless reversed will be the source of what is called euphemistically, social unrest.