3 ms·

You have identified a incentive towards vertical integration. But then we might ask ourselves what is stopping it. Is there some counter-incentive that causes

You have identified a incentive towards vertical integration. But then we might ask ourselves what is stopping it. Is there some counter-incentive that causes the hierarchy of contractors? Is there some regulation that forces it? You might claim that there are no state-run construction companies because of free-market ideology or some such bogeyman. But that doesn't explain why the private contractors don't integrate vertically. My own guess is that even a vertically integrated entity would be risk averse and have to create expensive, slow, internal sign-off procedures.

CydeWeys 9y ago
My guess is regulatory capture, corruption, and knock-on effects from corporations being granted the rights of people, including money equaling free speech (see Citizens United). There's more money to be made if there are lots of different contractors and subcontractors that can all take a cut, and so the politicians are paid off through campaign contributions to allow the inefficient system to continue. Everyone involved makes lots of money, more than if they were vertically integrated and did construction efficiently, except for us taxpayers who are footing the bill, of course. It's basic rent-seeking by the construction industry.