The Misunderstanding at the Core of Economics - "In a system where virtually all resources are available for a price, economic power can be translated into political power by channels too obvious for mention. In a capitalist society, economic power is very unequally distributed, and hence democratic government is inevitably something of a sham." [1,2] (via)
'Superstar Firms' May Have Shrunk Workers' Share of Income - "It was long Keynesian dogma that two-thirds of economic output goes to labor. That truism has come undone, and corporate consolidation may be a cause."
'Superstar' Companies Are Eating Into Workers' Wealth, Study Finds - "Companies that capture markets but don't need big staffs help explain American workers' shrinking share of the economic pie, economists say."
Blame Monopolies for Short-Changing U.S. Workers - "If industries are shifting from many players toward a winner-take-most situation, where the big successful companies can charge higher prices, that would cause capital to take more of the pie and labor to take less... profit -- which in a perfectly competitive economy would be zero -- has gone from just over 2 percent of the economy in the early 1980s to more than 15 percent today."
Monopolies Are Worse Than We Thought - "If technology is behind the increase in monopoly power, it's going to be a tough problem to solve. The old remedies of antitrust enforcement and increased competition won't work -- the superstars will win and take most of the market, and it will be back to square one. Meeting the challenge of tech-powered monopoly would require radically new policy ideas."
Amazon's Antitrust Paradox - "Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm's structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny."
This Note argues that the current framework in antitrust—specifically its pegging competition to "consumer welfare," defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon's dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.
This Note maps out facets of Amazon's dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon's structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon's power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.
Market Failure Looks Like the Culprit in Rising Costs - "Scott Alexander has a long, excellent rundown of high costs in five areas -- K-12 education, college, health care, infrastructure and housing. He's right. Americans pay much more for a university education than do people in Europe or East Asia. They pay about twice as much for health care, even though the quality is about the same. And the U.S. pays about twice as much for infrastructure, again without any clear difference in quality. I'd add one more sector: finance... In Akerlof and Shiller's reckoning, markets don't just sometimes fail -- they are inherently subject to both deceit and mistakes."
America's Monopolies Are Holding Back the Economy - "Consolidated corporate power is keeping many products' prices high and quality low. Why aren't more politicians opposing it?"
Financialization and the Political Economy of Corporations - "For corporations to serve the economy best, those who control them and those who set and enforce the rules for the economy must be able to address market frictions and the potential for excessive rent extraction, fraud, and negative externalities. Bargains between those who control corporations and those who control government institutions to benefit themselves even at the expense of others can maintain distortions, inefficiencies and harm. Such bargains are particularly pervasive in the financial sector, contributing to the inefficiencies brought about by the financialization of corporate governance. By recognizing political realities, and exposing situations where policies based on inappropriate assumptions distort markets and cause harm, economists can help hold governments accountable to the public."
Stuart Dreyfus on Richard Bellman, Dynamic Programming, Quants and Financial Engineering - "The place that [dynamic programming] is used the most upsets me greatly — and I don't know how Dick would feel — but that's in the so-called 'quants' doing so-called 'financial engineering' that designed derivatives that brought down the financial system. That's all dynamic programming mathematics basically. I have a feeling Dick would have thought that's immoral. The financial world doesn't produce any useful thing. It's just like poker; it's just a game. You're taking money away from other people and getting yourself things. And to encourage our graduate students to learn how to apply dynamic programming in that area, I think is a sin."
Nobel Laureates: Eliminating Rent Seeking and Tougher Antitrust Enforcement Are Critical to Reducing Inequality - "A lot of the inequality in the U.S. comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government."
Political Engagement by Corporations Derives from and is Focused on Seeking Monopolistic Power - "The neo-classical model simply does not comprehend the modern corporation. But if we are talking about a theory carefully constructed on a set of axioms, the theory really can't consider political engagements. The essence of the neo-classical theory is the constraint on choice imposed by given and widely shared technology and competitive markets for resources and vendors. Political engagement derives from and is focused on seeking monopolistic power. The various theories of monopolistic competition are instructive but fall far short of the standard sought by neoclassical theory."
From the Great Transformation to the Great Financialization - "Levitt aptly uses the term 'The Great Financialization' to describe the regime that took over after the Keynesian order inscribed in the Bretton Woods arrangements collapsed... that once again raised the market – and financial markets in particular – above the needs of society. Europe, America, and eventually most middle-income developing nations embraced financial globalization. Free flows of finance across borders, they were led to believe, would allocate savings and investment where they could be used most profitably. Domestic economic management became hostage to the whims of financial markets."
A New Narrative for a Complex Age - "If 2008 was the year of the financial crash, 2016 was the year of the political crash. In that year we witnessed the collapse of the last of the four major economic-political ideologies that dominated the 20th century: nationalism; Keynesian Pragmatism; socialism; and neoliberalism. In the 1970s and 80s the centre-right in many countries abandoned Keynesianism and adopted neoliberalism. In the 1980s and 90s the centre-left followed, largely abandoning democratic socialism and adopting a softer version of neoliberalism."
Unless It Changes, Capitalism Will Starve Humanity By 2050 - "Capitalism has generated massive wealth for some, but it's devastated the planet and has failed to improve human well-being at scale... Corporate capitalism is committed to the relentless pursuit of growth, even if it ravages the planet and threatens human health. We need to build a new system: one that will balance economic growth with sustainability and human flourishing."
Nickel-And-Dime Socialism - "Socialism is the idea that capital (the means of production) should be owned collectively. There are divergent ideas about how to achieve this in reality. One approach is to have the government hold it collectively in social wealth funds. This is (more or less) the socialism of Yanis Varoufakis, Rudolf Meidner, and John E. Roemer."