How to Tackle an Open Question in Your Oxbridge Economics Interview in 2024
How to Prepare for Your Economics Interview
An open question is an opportunity to explore your opinions and thoughts on a particular matter. There are no right or wrong answers to this type of question. Take advantage of the chance they offer to demonstrate your ideas rather than opting for a safe or generic response. Make sure you have something interesting to say, build upon your existing Economics knowledge base, and consider your response before beginning. This blog will take you through an open question that was put in front of a former Economics candidate at Cambridge. Now as a U2 Economics applications mentor, he provides tips on how to go about answering the question as well as discussion points to bring up at interview.
NB: this question is also applicable if you are applying to any Economics-related course at Oxford i.e. Economics & Management (E&M), History & Economics, or Philosophy, Politics & Economics (PPE).
The question: “What are some of the economic reasons behind the development of the modern capitalist corporation? Do you expect such a form of economic organisation to continue to persist into the future?”
Factors to consider before responding:
How are you going to structure your response?
Do you need to disassemble the question and tackle one part at a time?
Do you need to define any terms / words first?
Do you need to ask your interviewer for any clarifications?
Can you mentally relate the question to any relevant topics in your A-Level course or your wider reading?
How are you going to consider your answer from different angles?
What evidence, graphs, theories, or economic terms could you use to back up your arguments?
Tips to solve part 1 of the question:
Tell your interviewer that you would like to start with the first part of the question before diving into what may happen in the future
As part of this, it may be important to define what is meant by a “modern capitalist corporation”. Characteristics you may want to mention are:
Distinct operating units: production, marketing, R&D, finance etc.
Led by salaried managers
The modern company is often legally separate from its owners - the assets are legally owned by the business itself - managers determine the business’ objectives and implements the necessary procedures to secure them
A small number of firms can meet market demand globally i.e. oligopolistic markets (N.B. The classic example of an oligopoly would be American auto makers until the 1980s. Ford, Chrysler, and General Motors manufactured nearly all vehicles built in America). These companies invested in managerial capabilities and organisational structure thereby increasing competitive advantage
Now: what are the economic reasons behind the development of a modern capitalist corporation? In my interview, I discussed three areas:
Economies of scale (increased output leads to lower average costs)
Nature of industries changed from labour intensive to capital intensive (i.e. requiring a high percentage of investment in fixed assets such as machines, capital, plants to produce). N.B. you could provide examples in the Chemicals or Automotive industry whereby these capital intensive production processes have a high ratio of fixed costs to variable costs, resulting in economies of scale
Think about technologies for production and implications for economies of scale: this links to key trends in e.g. revolutions in transportation, communications, globalisation
Revolution in transportation: Mass transportation was possible, and corporations could have access to international markets
Revolution in communication: more geographically dispersed companies can exist
—> Firms could grow to exploit economies of scale in these capital intensive industries
Economies of scope
Breadth: Firms could produce more than one product using the same materials or production facility, enabled by advancements in technology
Organisational capabilities
Potential and actual economies of scale and scope is determined by organisational capabilities
Firms invested in these organisational forms e.g. in production / distribution / marketing
Trends in communications and globalisation all required a change in organisational structure
Tips to solve part 2 of the question:
Do you expect such a form of economic organisation to continue to persist into the future?
There is no right answer to the second part of the question. Your interviewer will also likely make sure you are on the right track and introduce you to new ideas and concepts that could change the way in which you think about the question
In my interview we started to talk about the move towards a knowledge economy:
The key factor of production in a knowledge economy is knowledge itself, and the workers that hold such knowledge. Without such workers, the corporation is unlikely to succeed. As such, the balance of power between the business and workers in today’s economy is becoming far more equal
In a knowledge driven economy, businesses must now look beyond their own industry if they are to develop and grow. We frequently see partnerships and joint ventures between businesses that cut across industry types and technology
Preferences are changing to more boutique goods rather than mass-produced
I had to think about how this move may massively disrupt organisational structures and industry structures, and also make it harder to take advantage of economies of scale
Organisationally, businesses need to be more flexible, enabling them to respond to the ever-changing market conditions
Businesses must learn to work with others, either through outsourcing specialist tasks, or through more formal strategic partnerships
Specialist workers in the organisation are key assets. How will the business attract, retain and motivate the best? Will financial rewards be sufficient, or will workers seek more from their work and the organisation they work for?
I concluded that with such issues facing the corporation we can expect to see a radical re-interpretation of what business looks like and how it is practised over the coming years. The modern capitalist corporation may survive, but it will be different.
N.B. your conclusion could be entirely different and that is 100% okay! The interviewer wants to see a logical thought process and a rational evidence-based argument, even if you have been launched into a new intellectual arena!
Interested in learning more about some of these topics?
Read “Scale and Scope: the Dynamics of Industrial Capitalism” by Chandler, A.D (1990). You can either read the select chapters below or find an in-depth review of the chapters via Google Search or on JSTOR
Chapter 7: The continuing commitment to personal capitalism in British Industry
Chapter 9: Creating organisational capabilities: success and failure in dynamic industries
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