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book spotlight: culture and commerce by mukti khaire

khaire_book

A very,  very long time ago, Mukti Khaire was a guest blogger at orgtheory. Since then, she’s been a successful management researcher at the Harvard Business School and Cornell Tech. It is thus a great pleasure for me to read her new book Culture and Commerce: The Value of Entrepreneurship in Creative Industries. The book is a contribution to both the study of art markets and the study of entrepreneurship. The book’s premise is that art and business exist in a sort of fundamental tension. Khaire’s goal is to offer an account of what entrepreneurship means in the world of artistic markets.

The key element of Khaire’s theory is that artistic goods are not only introduced by entrepreneurs, but entrepreneurs do a lot of work to reshape markets so they can accept radically new categories of goods. For example, getting people to accept high quality, but expensive, produce is the work that Whole Foods did in the grocery market about twenty years ago. Such people, who reshape old markets into new markets, Khaire calls “pioneer entrepreneurs.” Similarly, Khaire identifies people who add value because of their ability to provide commentary to products that need explanation.

The strong point of Culture and Commerce is that Khaire digs deeper into the production chain of artistic goods. There are market actors who specialize in bringing in the new products, those who specialize in educating the audience, and those who add quality signals (e.g., giving awards). It’s a very rich account of entrepreneurship that many blog reader will enjoy. Recommended!

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street / Read Contexts Magazine– It’s Awesome!

 

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Written by fabiorojas

November 28, 2017 at 5:08 am

does piketty replicate?

Richard Sutch reports in Social Science History that Piketty does not replicate very well:

This exercise reproduces and assesses the historical time series on the top shares of the wealth distribution for the United States presented by Thomas Piketty in Capital in the Twenty-First Century. Piketty’s best-selling book has gained as much attention for its extensive presentation of detailed historical statistics on inequality as for its bold and provocative predictions about a continuing rise in inequality in the twenty-first century. Here I examine Piketty’s US data for the period 1810 to 2010 for the top 10 percent and the top 1 percent of the wealth distribution. I conclude that Piketty’s data for the wealth share of the top 10 percent for the period 1870 to 1970 are unreliable. The values he reported are manufactured from the observations for the top 1 percent inflated by a constant 36 percentage points. Piketty’s data for the top 1 percent of the distribution for the nineteenth century (1810–1910) are also unreliable. They are based on a single mid-century observation that provides no guidance about the antebellum trend and only tenuous information about the trend in inequality during the Gilded Age. The values Piketty reported for the twentieth century (1910–2010) are based on more solid ground, but have the disadvantage of muting the marked rise of inequality during the Roaring Twenties and the decline associated with the Great Depression. This article offers an alternative picture of the trend in inequality based on newly available data and a reanalysis of the 1870 Census of Wealth. This article does not question Piketty’s integrity.

The point isn’t that income inequality hasn’t risen. Like most social scientists, I am of the view that, for various reasons, income inequality has risen, but it is important to get the magnitudes right, which can support or undermine other hypotheses about wealth accumulation. Sutch’s article shows that Piketty made a good effort, but it depends on some questionable choices. Let there be more discussion of this issue.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street / Read Contexts Magazine– It’s Awesome!

 

Written by fabiorojas

November 13, 2017 at 5:44 am

book spotlight: the inner lives of markets by ray fisman and tim sullivan

inner lives

The Inner Lives of Markets: How People Shape Them and They Shape Us is a “popular economics” book by Ray Fisman and Tim Sullivan. The book is a lively discussion of what one might call the “greatest” theoretical hits of economics. Starting from the early 20th century, Fisman and Sullivan review a number of the major insights from the field of economics. The goal is to give the average person a sense of the interesting insights that economists have come up with as they have worked through various problems such as auction design, thinking about social welfare, behavioral economics, and allocation in a world without prices.

I’ve taken a bit of economics in my life, and I’m somewhat of a rational choicer, so I am quite familiar with the issues that Fisman and Sullivan talk about. I think the best reader for the book might a smart undergrad or a non-economic social scientist/policy researcher who wants a fun and easy tour of more advanced economics. They’ll get lots of interesting stories, like how baseball teams auction off player contracts and how algorithms are used to manage online dating websites.

What I like a lot about the book is that it doesn’t employ the condescending “economic imperialist” approach to economic communication, nor does it offer a Levitt-esque “cute-o-nomics” approach. Rather, Fisman and Sullivan explain the problems that actually occur in real life and then describe how economists have proposed to analyze or solve such issues. In that way, modern economics comes off in a good light – it’s an important toolbox for thinking about the choices that individuals, firms and policy makers must encounter. Definitely good reading for the orgtheorist. Recommended!

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street / Read Contexts Magazine– It’s Awesome

Written by fabiorojas

October 19, 2017 at 4:08 am

when was the last time an economist rocked the social sciences?

Question: When was the last time an economist had big impact outside economics? It’s been a while. Gary Becker might be the best example, but that was in the 1970s – forty years ago!!! Of course, there are individual papers or research findings that attract interest (e.g., Deaton’s recent work on mortality), but more recent examples of work that change areas outside economics are hard to find. For example, Steve Levitt is hugely popular, but he hasn’t changed the way people think about areas outside of economics. At best, the big message of early 2000s “cute-o-nomics” is that we can try harder to find clean identification in naturally occurring data. Not a bad message, but not epic, either. And a lot of people were kind of doing that already.

More recently, one might think of Daron Acemoglu, for his massive work on development, or Esther Duflo for field experiments. Both are clearly high impact scholars, but I’d guess that they are high impact within specific areas. You don’t see conferences on the theoretical implications of Duflo or Acemoglu on other disciplines, or even on areas outside of their expertise. Their work doesn’t travel the way Becker’s did, or the way game theory or early econometrics did

Why? Unclear to me. In terms of quality, the average economist is probably stronger than in the past. On the other hand, most of the training in economics programs is on model building. Culturally, economists have developed a disdain for other areas, so they have little incentive to produce work that speaks to anyone except themselves. Then, there are financial incentives. If your salary is way above other disciplines, and you have great job prospects, influencing other fields probably isn’t worth your time. The only thing worth your time is really impressing elites within the field. Not a bad thing per se, but it is not the right environment for work that will reverberate across the academy. Maybe the simplest explanation is low hanging fruit – you have a big impact by bringing a simple idea to an adjacent area. Once that is done, all you are left with are hard problems that only insiders care about.

That’s too bad. I love sociology but I also feel excitement and challenge when a major figure steps up and offers a new way forward. I’d like to see more of it. Not just from sociology, but also from other fields.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street / Read Contexts Magazine– It’s Awesome

Written by fabiorojas

August 29, 2017 at 12:01 am

democracy in chains symposium

Over at Policy Trajectories Josh McCabe has organized a great symposium on Nancy MacLean’s Democracy in Chains, the most dramatic book on public choice theory you are ever likely to read.

Featuring economist Sandy Darity, political scientist Phil Rocco, and your truly, the essays try to get beyond some of the sturm und drang associated with the book’s initially glowing critical reception and intense subsequent backlash. Instead, they ask: How is political orthodoxy produced and challenged? What responsibility do individuals bear when their actions reinforce institutionalized racism? And what explains increasing efforts to put limits on democracy itself?

MacLean’s book may itself be highly polarizing. But the conversations she has opened up will be with us for a long time to come. Check it out.

Written by epopp

August 24, 2017 at 12:15 pm

the democrats can’t decide how radical they want to be on antitrust

The other day I wrote about the current moment in the spotlight for antitrust. (Here’s the latest along these lines from Noah Smith.) Today I’ll say something about the new Democratic proposals on antitrust and how to think about them in terms of the larger policy space.

The Democrats are basically proposing three things. First, they want to limit large mergers. Second, they want active post-merger review. Third, they want a new agency to recommend investigations into anticompetitive behavior. None of these—as long as you don’t go too far with the first—is totally out of keeping with the current antitrust regime. And by that I mean however politically unlikely these proposals may be, they don’t challenge the expert and legal consensus about the purpose of antitrust.

But the language they use certainly does. The proposal’s subhead is “Cracking Down on Corporate Monopolies and the Abuse of Economic and Political Power”. The first paragraph says that concentration “hurts wages, undermines job growth, and threatens to squeeze out small businesses, suppliers, and new, innovative competitors.” The next one states that “concentrated market power leads to concentrated political power.” This is political language, and it goes strongly against the grain of actual antitrust policy.

Economic antitrust versus political antitrust

Antitrust has always had multiple, competing purposes. The original Progressive-Era antitrust movement was partly about the power of trusts like Standard Oil to keep prices high. But it was also about more diffuse forms of power—the power of demanding favorable treatment by banks, or the power to influence Congress. That’s why the cartoons of the day show the trusts as octopuses, or as about to throw Uncle Sam overboard.

The Sherman Act (1890) and the Clayton Act (1914), the two major pieces of antitrust legislation, are pretty vague on what antitrust is trying to accomplish. The former outlaws combinations and conspiracies in restraint of trade, and monopolizing or attempt to monopolize. The latter outlaws various behaviors if their effect is “substantially to lessen competition, or to tend to create a monopoly.” The courts have always played the major role in deciding what that means.

Throughout the last century, the courts have mostly tried to address the ability of firms to raise prices above competitive levels—the economic side of antitrust. For the last forty years, they have focused specifically on maximizing consumer welfare, often (though not always) defined as allocative efficiency. Since the late 1970s, this has been pretty locked in, both through court decisions, and through strong professional consensus that makes antitrust officials very unlikely to challenge it.

Before the 1970s, though, two things were different. For one thing, the focus was more on protecting competition, and less on consumer welfare per se (the latter was assumed to follow from the former, and was thought of a little more broadly). For another, the courts sometimes took concerns into account other than keeping prices low.

The most common such concern was the fate of small business. Concern for small business motivated the Robinson-Patman Act of 1936, which prohibited anticompetitive price discrimination. It was clear in the Celler-Kefauver Act of 1950, which restricted mergers out of fear that chain stores would eliminate local competition. And the courts acknowledged it in cases like Brown Shoe (1962), which prevented a merger that would have controlled 7% of the shoe market by pointing to Congress’s concern with preserving an “economic way of life” and protecting “local control of industry” and “small business.”

Today, Brown Shoe is seen as part of the bad old days of antitrust, when it was used to protect inefficient small businesses and to pursue confused social goals. This is a strong consensus position among antitrust experts across the political spectrum. While no one thinks that low prices for consumers are the only thing worth pursuing in life, they are the appropriate goal for antitrust because they make it coherent and administrable. Since those experts’ views dominate the antitrust agencies, and have been codified into law through court decisions, they are very resistant to change.

The Democrats’ proposal: radical language, incremental proposals

So when the Democrats start talking about “the abuse of economic and political power,” the effects of concentration on small business, and limiting mergers that “reduce wages, cut jobs, [or] lower product quality,” they are doing two things. First, they are hearkening back to the original antitrust movement, with its complex mix of concerns and its fear of unadulterated corporate power.

Second, they are very much talking about political antitrust, and political antitrust is deeply challenging to the status quo. But their actual proposals are considerably tamer than the fiery language at the beginning, and are structured in a way that doesn’t push very hard on the current consensus. New merger guidelines could make some difference around the margins. Post-merger review would definitely be good, since there’s currently no enforcement of pre-merger conditions that firms agree to, and no good way to figure out which merger approvals had negative effects. I have a hard time seeing a new review agency having much effect, though, since it’s just supposed to make recommendations to other agencies. Even I don’t like bureaucracy that much.

So my read on this is that the Democrats feel like they need a new issue, and it needs to look like it helps the little guy, and they want to sound like populist firebrands. But when you get down to the nitty gritty, they aren’t really so interested in challenging the status quo. That is, basically, they’re Democrats. Still, that the language is in there at all is remarkable, and reflects a changing set of political possibilities.

Next time I’ll look at some of the problems people are suggesting antitrust can solve. Because there are a lot of them, and they’re a diverse group. Tying them together under the umbrella of “antitrust” gives an eclectic political project some nominal coherence. But is it politically practicable? And could it actually work?

Final note: If you are interested in the grand historical sweep of antitrust in capitalism, I recommend Brett Christophers’ The Great Leveler. Among other things, he totally called the emerging wave of interest before it actually happened. Sometimes the very long lens is the right one to use.

Written by epopp

August 3, 2017 at 3:04 pm

why antitrust now?

Antitrust is having a moment. A couple of years ago, with the possible exception of complaining about never-ending airline mergers, no one paid attention to antitrust debates. Today, it’s all over the place. A few months ago, it was the Economist proclaiming “America Needs a Giant Dose of Competition.” Last month it was Amazon and Whole Foods. And now antitrust has become a key plank of the new Democratic platform.

I’ve been thinking about this for a while, but this antitrust explainer written by Matt Yglesias yesterday (which is generally quite good) motivated me to put fingers to keyboard. So I’m going to break this reflection up into three parts: Why antitrust now? What does the new antitrust debate mean? And what would it take for it to succeed? Today, I’ll tackle the first.

At one level, the rise of antitrust interest is just a perfect convening of streams, in the Kingdon sense. A problem (or loose collection of problems) rises to public attention, people are already out there advocating a solution, even if so far unsuccessfully, and—the moment we’re in now—politicians have the motivation to grab that solution and turn it into policy, or at least a platform. It’s just about timing, and it’s not predictable.

At the same time, I think we can unpack a couple of different factors that help us think about “why now”. Some of this is covered in the Yglesias piece. But there are a few things I’d add, and some different angles I’d highlight. So without further ado, here are four reasons antitrust is suddenly getting attention.

1. It’s a reaction to a change in objective conditions.

There is a degree of consensus that market concentration is increasing across the economy. Even if you don’t think concentration is a problem, it wouldn’t be surprising that an increase would lead some people to challenge it, and make media more open to hearing that claim. This is probably a contributing factor. But market concentration has been increasing for a long time, and the link between concentration and exercise of power, whether market power or political power, is at best complicated. I don’t think the rise in concentration explains much of the antitrust attention.

Other phenomena are emerging that are objectively new, and raise new questions about how to govern them. Amazon now controls 43% of internet retail sales in the U.S. That’s astonishing, and at least a little alarming. But we’ve now seen several generations of various platforms (operating systems, browsers, social networks) rise to dominance and sometimes fall, mostly without a lot of antitrust attention—Microsoft, at the turn of the millennium, being the significant exception. These objective changes are a necessary but definitely not sufficient for public attention to rise.

2. New actors are organizing around this issue.

A lot of the noise around antitrust is coming from a relative handful of people. Until the Democrats came on board, it was Elizabeth Warren on the political side, and before that Zephyr Teachout, the Fordham law professor who gave Andrew Cuomo a run for his money in 2014.

On the think tank side, as Yglesias notes, it’s the Open Markets Program at New America. Fellow Lina Khan, once of the Teachout campaign, landed an NYT op-ed on Amazon and Whole Foods. Fellow Matt Stoller’s Atlantic article on antitrust, “How Democrats Killed Their Populist Soul,” got a lot of attention when it came out last fall. Barry Lynn, who runs the program, has been working on this issue for a decade.

The Roosevelt Institute is the other significant player in this space. (Here’s a good, if now difficult to read, piece from last summer explaining the history of Roosevelt.) Marshall Steinbaum and others have made the case for a range of antitrust issues on a variety of grounds, and the influence of both these organizations on the new Democratic congressional platform is clearly visible.

There’s no question that this kind of policy advocacy—talking to policymakers, writing articles and op-eds—is making a difference. But its impact has been facilitated by two other things.

3. The space of expertise is changing in unexpected ways.

Antitrust policy is a space heavily dominated by experts. Congress rarely touches antitrust issues. The public rarely pays attention. Presidents generally talk a good antitrust game, and may care more or less about appointing antitrust officials who will pursue a particular policy line. But for the most part, antitrust is dominated by the lawyers and economists who serve in the Antitrust Division and FTC, consult on antitrust cases, write academic articles, and a handful of whom become judges.

And there is bipartisan consensus among these experts that concentration isn’t generally a problem. Markets are contestable. Predatory pricing is irrational, because firms know that if they drive out competitors then jack up prices, they’ll just attract some new entrant into the market. There’s really no point. Yes, there may be a little more antitrust enforcement among Democrats than Republicans. But it’s a game played “between the 45 yard lines.” As Richard Posner said recently, “Antitrust is dead, isn’t it?”

But this space is changing in interesting ways. The change doesn’t seem to be coming from the antitrust community itself, exactly. But it’s coming from people with the academic clout to be taken seriously.

From one direction, you have people like Jason Furman and Joseph Stiglitz making arguments about labor market monopsony contributing to lower wages and arguing that economic changes require new kinds of antitrust solutions. From another, you have Luigi Zingales overseeing an effort (at the University of Chicago’s Stigler Center, no less) to advocate for stronger antitrust, calling his position “pro-market” rather than “pro-business”. Zingales’ efforts are also notable for bringing in historians, political scientists and other experts usually not privy to the antitrust policy conversation.

None of these people work primarily on antitrust issues or even industrial organization, but they have the status to be taken seriously even if they are not among the usual suspects of antitrust. Their novel arguments have the capacity to shift the expert consensus about antitrust—either mildly, as in Furman’s arguments about the importance of labor monopsony (which don’t require a radical rethinking of the current approach), or more radically, as in Zingales’s advocacy of an antitrust that takes political power seriously.

I’ll discuss these changes more in the next couple of posts, but in terms of explaining “why antitrust now,” the point is that these insider/outsider dissenters are amplifying new voices and new issues, and thus contributing to the current wave of attention.

4. The cultural moment is right for other reasons.

If there’s one belief that seems to unite Americans across the political spectrum these days, it’s that the game is rigged against the ordinary person. For the many Americans who think big business is doing at least some of the rigging, this produces a new openness to arguments about concentration and corporate control. As much as anything else, I think this explains the current interest in antitrust. People are receptive to arguments that purport to explain why they’re being screwed.

Antitrust is a protean issue. It can channel many different types of fears and at least theoretically respond to many different kinds of problems. Whether it can do so effectively, and whether antitrust is the right tool for the job, is a different question. In my next post I’ll try to unpack some of those different problems, why they’re now being linked together under the umbrella of “antitrust,” and draw on some antitrust history to think about what current efforts mean.

Written by epopp

August 1, 2017 at 1:51 pm