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what problems do people think antitrust is going to solve?

Last week, I asked why antitrust is having a moment (it’s continued, on Planet Money and elsewhere), and why Democrats are using radical language to make fairly modest proposals. In this post, I’m going to ask what problems people think antitrust is going to solve, anyway.

Certainly a lot of the current concern about antitrust comes from a broad sense that corporations are too economically and politically powerful, that our economy has been restructured in ways that make ordinary people worse off, and that massive tech companies are able to use our data in ways that we have little control over. That’s political antitrust. And those are totally real issues.

But I want to explore some new questions being raised that are not exactly within the current scope of economic antitrust, but that are still kind of speaking its language—that are pushing to change the antitrust technocracy, not up-end it. To recap, as it has been construed for the last thirty-plus years, the purpose of antitrust is to promote consumer welfare, generally by trying to keep firms from being able to raise and keep prices above a competitive level. The focus is consumers, and prices.

Increasingly, though, people at least adjacent to the space of antitrust expertise are making claims about economic problems they think are being caused by lax antitrust enforcement, or that antitrust should be addressing. And those proposals are worth keeping an eye on, because as hard as it might be to change the expert consensus, it’s still more likely than a new anti-monopoly movement. (Though the two could certainly reinforce each other.) I see these new arguments as falling into basically three categories.

Market power has effects we didn’t realize

Market power is the ability to keep prices above a competitive level (i.e. above marginal cost). Once upon a time, people thought there was a fairly close relationship between how concentrated a market is—that is, how many companies control what share of the market—and how much market power firms have. Since the 1970s, there has been much less of a presumption that concentration, on its own, indicates market power. That means that there’s been less concern about whether we’ve got four airlines controlling 70% of the U.S. market, or that four carriers control 99% of the U.S. wireless market.

Increasingly, though, people are raising flags about other problems that might result from market power. One of these is labor monopsony—the idea that firms have market power, but as purchasers of labor, not sellers of products, and that this is driving wages down. The Council of Economic Advisers put out a report last fall suggesting this might be happening, and Democrats’ mention of “bargaining power for workers” implies this is part of what they’re trying to address. There are related arguments about market power in supply chains and the emergence of “winner take most” industries that also suggest links between concentration or market power and wages.

In theory, monopsony can be handled within the current legal framework, though it is rarely addressed in practice. So developing arguments about the effects of market power on workers, and a legal framework for addressing that within antitrust, is one conceivable new direction for antitrust.

Others are arguing that market power can lead firms to attach undesirable conditions to products that make them lower quality, even as price remains the same. In particular, some scholars, including Nobel Laureate Joe Stiglitz, have framed privacy as an antitrust issue: the product may be free, but consumers have no choice about how their data is used (and in the case of platforms like Facebook, no equivalent competitors). Privacy is hard to address within a framework focused purely on price. But in Europe, competition policy is increasingly tackling privacy issues, and Germany is currently investigating whether Facebook’s dominant position is forcing consumers to give up their privacy without having an alternative choice.

Market power has causes we didn’t realize

The Atlantic just featured a story with the dramatic title, “Are Index Funds Evil?” The article discusses the rise of large institutional investors—index funds, though not only index funds—and what it means that, increasingly, big chunks of competitors in a specific market are actually owned by the same few corporations. It goes on to discuss work by José Azar, Martin Schmalz, and Isabel Tecu that finds that this common ownership enhances market power, and that airline ticket prices are 3-7% higher than they would be under separate ownership.

In this story, index funds were the hook, but it just as easily could have been framed around antitrust. In a way, common ownership was the original antitrust question: the big trusts of the late 19th century were not single-firm monopolies, but competitors that had turned over ownership to a group of trustees that made unified governance decisions. And while research in this area is still new and findings tentative, legal scholars are already making the case that antitrust law can cover the anticompetitive effects of these horizontal shareholdings. If this work continues to hold up, this seems potentially transformative.

Technological change is creating new threats to competition

Finally, a fair bit of the recent chatter is basically arguing, “it’s the technology, stupid.” The dynamics of competition change as more of the economy shifts to online platforms. Because of network effects, companies like Facebook, Google, Apple, and Amazon are hard to compete with—much of their value comes from their existing user base. And because they aren’t just selling products to consumers, but connecting consumers with producers, they aren’t acquiring market power in the traditional sense. Facebook and Google are free products, after all.

But the power of network effects means that they have a tendency towards monopoly. And the fact that the four largest companies by market capitalization are platforms suggests how central platforms have become to our economy.

So we have these new companies that have become very large, and that appear monopolistic, though they also create great value for consumers. From an antitrust perspective, they don’t really appear to be a problem, because they aren’t raising prices. And the history of rapid technological change over the past 25 years, including the rise and fall of a number of once-dominant platforms, raises the question of whether even platforms behaving in anticompetitive ways pose much of a long-term threat.

Recent scholarship, though, argues that monopolistic platforms are in fact anticompetitive, that it is a problem, and that current law is poorly equipped to handle. Lina Khan’s much-circulated note in the Yale Law Journal, for example, argues that 1) platforms encourage predatory pricing—generally seen as irrational (and thus not an issue) within antitrust law—because network effects encourage pursuit of growth over profit, and 2) platforms collect data on rivals that give them an unfair competitive advantage. These sorts of issues clearly fit within the broad scope of “protecting competition,” but don’t fit easily with a consumer welfare, market power conception of antitrust.

Changing that would be a significant project, but if we have an economy that is dominated by firms whose potentially anticompetitive activity is essentially beyond the scope of antitrust, there’s not much left to antitrust. And again, the massive fine the E.U. just levied on Google—for favoring its own shopping service, consisting of companies that pay Google to be on it, over competitors in search results—suggests what this could look like. So far, the U.S. has not demonstrated much enthusiasm about expanding antitrust in this direction. But it’s not inconceivable that it could happen, and it could be done within a framework that was focused solely on competition, if not only on consumer welfare.

Again, all these challenges to the current antitrust framework are at least in the ballpark of its conversation, even if they would require pushing the law in new directions or advancing the acceptance of new economic theories. And they are not the only arguments that are in play here. For example, the question of whether inequality is facilitated by concentration or market power, or whether it has become such a central economic problem that antitrust should try to address it, have prompted enough discussion that two leading antitrust scholars have felt the need to argue that antitrust should leave inequality alone.

Unlike political antitrust, which would probably require a social movement to move it forward, these antitrust arguments have the potential to gain traction without necessarily requiring legislation or a revolution against the current antitrust regime. The 1970s shift toward Chicago-style antitrust happened, to a considerable extent, because the old economic framework seemed increasingly inadequate for explaining the world people found themselves in. As the current framework comes to seem similarly dated, this could be another moment when such change is possible.

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Written by epopp

August 10, 2017 at 1:33 pm

we should thank malcolm gladwell and send him flowers

What if I told you that a popular writer recently published a book that neatly summarizes modern inequality research for the masses and depicts sociology in a very positive light? You’d be happy, right? And you might want to know who that person is, right?

Well, I just spent some time rereading Malcolm Gladwell’s Outliers, his summary of the social science research on high achievement. The public discussion of the book focused way too much on one chapter that discusses the “10,000 hour rule” (experts usually need about four years of full time immersion in a topic to get really good at it). But if you read the book, the message is much more expansive than that and it completely draws on a lot of standard sociology.

For example, Gladwell has a chapter dedicated to Lareau’s theory of class and culture as a factor in status attainment. He talks about how working class people often have an oppositional view of institutions and he directly talks about Lareau. In multiple chapters on family and achievement, he cites sociological studies that trace how families transmit specific knowledge and skills to their children, which allow for social mobility. He is also a fan of ecological theories of success (being in a city where business is booming – New York in the 1910s) and cohort theories of success (being part of the computer revolution in the 1980s). In discussing cultural differences, he offers a fairly conventional Swidler/Weber approach. He argues that work skills that are advantageous in Asian agriculture are also advantageous in Western industrial economies.

So why don’t we pay more attention to Outliers as a great “public sociology” book? The ASA did give Gladwell an outreach award, but the profession seems to have moved on. I think it may have to do with the 10,000 hours chapter. The chapter is a little bit sloppy and slides into exuberant rhetoric. A lot of people focused on it and tried to tear it down. For example, he does actually write that “10,000 hours is the magic number,” which mistakenly gives the impression that anyone can win an Olympic medal if they just practice enough.

This is a false impression if you actually read the entire chapter (and book) and approach the claim with a charitable mind. For example, at multiple points, he openly admits that people have “talent” and that you need that for the coaching and practice to get you to a world class level. The other chapters all suggest that contextual factors matter a great deal as well. Also, many of the critics committed their own errors. For example, they would often point to studies of elite athletes that show that extra practice doesn’t explain success. Yes, but by selecting only elite athletes, you are looking at a group where everyone has already done their “10,000” hours. That is selection bias!

In regards to sloppy writing, what I think Gladwell was trying to say was that yes, people have talent, but you also need to add in other structural factors, such as deep immersion in the field. No one is “born” a genius. High achievement is the result of social structure and individual gifts. If I were Gladwell, I would also add that deep practice would improve almost anyone in absolute terms and make you an “expert” but it wouldn’t erase relative differences between people who have invested the time in practice. For example, if I studied basketball for 10,000 with a pro-level coach, I bet my lay-ups would be amazing – if I did them by myself!! If I had to plow through other taller players on defense, I probably wouldn’t do as well. My innate traits don’t disappear completely and neither do relative difference. But I would still be massively better compared to a person with no training and I would still possess “expert level” knowledge and execution of skills. In my view, Gladwell should have focused a little more on the difference between absolute improvements and relative performance.

Is Outliers perfect? No, but it is a very fair summary of how sociologists think about status attainment and I think it would be a great way to teach undergrads. If you need a nice popular book for an intro course or stratification, this is a good one.

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Written by fabiorojas

August 3, 2017 at 4:39 am

the 80th percentile isn’t the problem

Okay, so I know three days is like a thousand years in internet time. But this Sunday Times op-ed, “Stop Pretending You’re Not Rich,” is still bugging me. The title is perfect guilty liberal upper-middle-class New-York-Times-reader clickbait. And sure enough, it was all over my social media feed.

But I think the piece gets things wrong in a particularly pernicious way.

The thrust of the op-ed, and presumably the book it’s promoting, is that upper-middle-class Americans—the top 20% by income—are the real problem, not the top 1%. They are capturing most of the income gains, hoarding opportunities, and they don’t even acknowledge their luck in being there.

A lot of the specific points, particularly about policies that benefit the moderately well-off at the expense of others, are easy to agree with. Exclusionary zoning is bad. 529 plans benefit the well-to-do almost entirely. The mortgage interest deduction is terrible policy.

But the real problem with the U.S. economic system isn’t the self-interested behavior of those in the top 20% of the income distribution. It’s that 1% of the population holds 40% of the wealth, and that GDP increases aren’t translating into higher incomes for most of the population.

The op-ed misdirects our attention away from these factors in multiple ways. First, it paints a misleading picture of this person in the top 20%.

Most obviously, it says that the average income of this group is $200,000, which I admit does sound pretty high. But using the average income to describe this fifth of the population is a problem, given the shape of the income distribution.

The median, which would be the 90th percentile, is $162,000. The 80th percentile is $117,000. (Here’s a quick calculator based on CPS data.) Very healthy, but not $200,000. The anecdotal illustration—the author’s friends who pay $30,000 a year for their kid’s high school tuition—also seems to point to someone with an income on the high end of this range.

Second, while the second decile is doing reasonably well, both its wealth and income are quite proportionate with its actual numbers. This paper is now slightly dated, but it does break out that decile—to show that in 2007 at least, it held 12% of total net worth, and made 14% of total income (see Table 2). You’d have to be pretty damn egalitarian to think that was unreasonably high for the next-to-top 10%.

Finally, yeah, the top 20% has seen more income gains than the rest. But the issue is less that they’re gradually getting better off, than that wages in general aren’t keeping up with either GDP growth or productivity. If you look at pre-tax income of the top 20%, exclusive of the top 1%, it’s increased by 65% since 1979 (see Table 1). Sounds like a lot—until you realize that real GDP per capita increased almost 80% during the same period.

So sure, the top 20% is unquestionably well-off, and indeed rich in global terms. And doubtless people in this group could show a little more self-awareness of their relative good fortune. And it would be nice if the mortgage interest deduction wasn’t the third rail of tax policy.

But the problem isn’t that the top 20% is doing reasonably well. It’s that the rest of the population should be doing that well, too. Ultimately, pointing a finger at the fortunate fifth is a sleight-of-hand that keeps our attention away from where it should be: on a much richer, more rarified group, and the broken system that allows it to capture the bulk of the gains that we as a society produce.

 

 

 

Written by epopp

June 14, 2017 at 12:15 pm

commentary on “an austrian approach to class structure” by jayme s. lemke

I saw a link to an article called “An Austrian Approach to Class Structure.” It attracted my interest since it is rare for economists to delve into theories of social class. In this article, Lemke offers a theory of social class based on Austrian economics. It is an interesting choice given that Austrians are committed methodological individualists, and class analysis (usually) relies on holism.

So what does the paper offer? The core of the paper is an attempt to rebuild social in terms of methodological individualism. Class (page 179) emerges when:

  • Rules and norms apply to some people and not others.
  • Group membership is sticky.
  • Some people hold authority over people in other groups.

There are a few things happening in this definition. First, it doesn’t match up terribly well with traditional notions of social class, which are usually economic. For example, an ethnic group is a “class” in this definition. However, an ethnic group is usually not considered a class in the Marxian or Weberian sense of the word (“position in the mode of production” or “market position”). I think in Lemke’s definition is closer to Weber’s notion of status group, but adds the idea that that rules are not uniformly applied in society. It’s a bit closer to Shils’ notion of deference or DuBois’ analysis of Black/White inequality, which focused on the forms of privilege that White people enjoy.

Second, the definition is especially suited to the issues that Austrian might care about, such as how states grant benefits to specific people and not others. Sadly, the traditional sociological literature on class and status more generally treats this as an after thought. Lemke’s definition works well, for example, if you want to talk about people in the state, or those who enjoy favors (special interest groups, lobbyists). This does come up in neo-Marxist political economy, but I don’t think it has much of an impact in the broader world of sociology.

Interesting read for anyone interested in the contact point between sociology and heterodox economics.

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Written by fabiorojas

February 17, 2017 at 12:48 am

cfp: “Seeking a More Just and Egalitarian Economy: Realizing the Future via Co-operatives, Communes, and Other Collectives” at SASE in Lyon, France- cfp deadline extended to Feb. 17, 2017!

The Society for the Advancement of Socio-Economics (SASE) has extended the abstract submission deadline for all the mini-conferences and networks to Feb. 17, 2017!*

Just as a reminder: Joyce Rothschild and I are co-organizing a mini-conference at the Society for the Advancement of Socio-Economics (SASE) in Lyon, France.  Please consider submitting an abstract, due to the SASE submission site by Feb. 17, 2017 (updated deadline!).  Accepted presenters will need to provide a full paper by June 1, 2017 for discussion.  Please circulate to this cfp to interested persons!

Seeking a More Just and Egalitarian Economy: Realizing the Future via Co-operatives, Communes, and Other Collectives

Forty years ago, as the most recent wave of economic collectives and cooperatives emerged, they advocated a model of egalitarian organization so contrary to bureaucracy that they were widely called “alternative institutions” (Rothschild 1979). Today, the practices of cooperative organizations appear in many movement organizations, non-governmental organizations (NGOs), and even “sharing” firms. Cooperative practices are more relevant than ever, especially as recent political changes in the US and Europe threaten to crush rather than cultivate economic opportunities.

Cooperative groups engage in more “just” economic relations, defined as relations that are more equal, communalistic, or mutually supportive.  The oldest collectives – utopian communes, worker co-operatives, free schools, and feminist groups – sought authentic relations otherwise suppressed in a hierarchical, capitalist system.  Similar practices shape newer forms: co-housing, communities and companies promoting the “sharing economy,” giving circles, self-help groups, and artistic and social movement groups including Burning Man and OCCUPY. While some cooperatives enact transformative values such as ethically responsible consumerism and collective ownership, other groups’ practices reproduce an increasingly stratified society marked by precarity. Submitted papers might analyze the reasons for such differences, or they might examine conditions that encourage the development of more egalitarian forms of organization.

Submitted papers could also cover, but are not limited, to exploring:

  • What is the nature of “relational work” (cf. Zelizer 2012) conducted in these groups, and how it differs – or is similar to – from relational work undertaken in conventional capitalist systems?
  • How do collectivities that engage in alternative economic relations confront challenges that threaten – or buttress – their existence? These challenges include recruiting and retaining members, making decisions, and managing relations with the state and other organizations. Moreover, how do these groups construct distinct identities and practices, beyond defining what they are not?
  • How are various firms attempting to incorporate alternative values without fully applying them? For instance, how are companies that claim to advance the sharing economy – Uber, airbnb, and the like – borrowing the ideology and practices of alternative economic relations for profit rather than authentic empowerment? What are the implications of this co-optation for people, organizations, and society at large?
  • How do new organizations, especially high tech firms, address or elide inequality issues? How do organizing practices and values affect recognition and action on such issues?
  • What can we learn from 19th century historical examples of communes and cooperatives that can shed insight on their keys to successful operation today? Similarly, how might new cooperatives emerge as egalitarian and collective responses to on-going immigration issues or economic crisis generated by policies favoring the already wealthy?
  • Are collectives, cooperatives and/or firms that require creativity, such as artists’ cooperatives or high tech firms, most effective when they are organized along more egalitarian principles? How do aspects of these new modes of economic organization make them more supportive of individual and group creativity?

Bibliography

Graeber, David.   2009. Direct Action: An Ethnography.   Oakland, CA: AK Press.

Rothschild, Joyce. 1979. “The Collectivist Organization: An Alternative to Rational-Bureaucratic Models.” American Sociological Review 44(4): 509-527.

Rothschild, Joyce and J. Allen Whitt. 1986. The Cooperative Workplace: Potentials and Dilemmas of Organizational Democracy and Participation. New York: Cambridge University Press.

Zelizer, Vivianna A. 2012. “How I Became a Relational Economic Sociologist and What Does That Mean?” Politics & Society 40(2): 145-174.

Questions about the above cfp may be directed to Joyce and myself.

Here is info about the mini-conference format:

Each mini-conference will consist of 3 to 6 panels, which will be featured as a separate stream in the program. Each panel will have a discussant, meaning that selected participants must submit a completed paper in advance, by 1 June 2017. Submissions for panels will be open to all scholars on the basis of an extended abstract. If a paper proposal cannot be accommodated within a mini-conference, organizers will forward it to the most appropriate research network as a regular submission.

More info about mini-conferences here.

The 2017 SASE conference in Lyon, France, hosted by the University of Lyon I from 29 June to 1 July 2017, will welcome contributions that explore new forms of economy, their particularities, their impact, their potential development, and their regulation.

More info about the SASE conference theme, a critical perspective on the sharing economy, is available at “What’s Next? Disruptive/Collaborative Economy or Business as Usual?

Joyce and I look forward to reading your submissions!

*Note: If you have problems with submitting your abstract for our mini-conference, please let us and the SASE/Confex staff know.

Bonus: Curious about how contemporary worker cooperatives operate?  This website has video and other resources that profiles several cooperatives.

 

 

 

 

Written by katherinechen

February 3, 2017 at 4:12 pm

just in time for Nov. 8, election day in the US

Hot off the press, a study about how interactions with law enforcement and prison impact political participation in the US:

“RACE, JUSTICE, POLICING, AND THE 2016 AMERICAN PRESIDENTIAL ELECTION”

by Kevin Drakulich, John Hagan, Devon Johnson, and Kevin H. Wozniak

  • DOI: https://doi.org/10.1017/S1742058X1600031X
  • Abstract

    Scholars have long been interested in the intersection of race, crime, justice, and presidential politics, focusing particularly on the “southern strategy” and the “war on crime.” A recent string of highly-publicized citizen deaths at the hands of police and the emergence of the Black Lives Matter movement have brought renewed visibility to this racially-driven intersection, and in particular to issues involving contact with and attitudes toward the police. Using data from the 2016 Pilot Study of the American National Election Studies, this study explores how contact with the criminal justice system and perceptions of police injustice shape political behavior in the modern era, with a specific emphasis on prospective participation and candidate choice in the 2016 presidential election. The results indicate that being stopped by the police—an experience that can feel invasive and unjust—may motivate political participation, while spending time in jail or prison—an experience associated with a marginalization from mainstream civic life—appears to discourage political participation. Perceiving the police as discriminatory also seems to motivate political engagement and participation, though in opposite directions for conservative versus liberal voters. In addition, perceptions of police injustice were related to candidate choice, driving voters away from Donald Trump. Affective feelings about the police were not associated with candidate choice. Perceptions of the police appear to act in part as a proxy for racial resentments, at least among potential voters in the Republican primary. In sum, the intersection of race, justice, and policing remains highly relevant in U.S. politics.

Written by katherinechen

November 7, 2016 at 5:44 pm

putting limits on the academic workday

Today, among the various administrative tasks of scheduling meetings with students and other responsibilities, I decided to RSVP yes for an upcoming evening talk.  I didn’t make this decision lightly, as it involved coordinating schedules with another party (i.e., fellow dual career parent).

With the use of technology such as email, increasing job precarity, and belief in facetime as signalling productivity and commitment, the workday in the US has elongated, blurring boundaries to the point that work can crowd out other responsibilities to family, community, hobbies, and self-care.  However, one Ivy  institution is exhorting its members to rethink making evening events and meetings the norm.

In this nuanced statement issued to department chairs, Brown University’s provost outlines the stakes and consequences of an elongated workday:

This burden [of juggling work and family commitments] may disproportionately affect female faculty members. Although data on Brown’s faculty is not available, national statistics indicate that male faculty members (of every rank) are more likely than female faculty members (of every rank) to have a spouse or partner whose comparably flexible work schedule allows that spouse or partner to handle the bulk of evening-time household responsibilities. Put differently, male faculty members are more likely than female faculty members to have the household support to attend campus events after 5:30. We must be attuned to issues of gender equity when we think about program scheduling. We must also take into consideration the particular challenges faced by single parents on the faculty when required to attend events outside the regular hours of childcare.

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Written by katherinechen

September 28, 2016 at 7:16 pm