tag:blogger.com,1999:blog-17232051.post2895340072594419708..comments2024-03-18T22:32:52.802-04:00Comments on Noahpinion: The Market Power StoryNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-17232051.post-73733649207692655562017-09-05T19:33:38.314-04:002017-09-05T19:33:38.314-04:00I consider the Market Power theory entirely valid....I consider the Market Power theory entirely valid. It's consistent with the notion from Sapped Economy theory that as unit costs of production continue to fall that firms will seek to maximize profits by minimizing marginal costs. I believe that in cases where a firm chooses to limit the availability of a good or service, the reason for that choice may be found in the Microeconomic models of corporate bean-counters. Willfully limiting the availability of a product is only possible when oligopolistic market control, and a generally high degree of informal collusion cemented by common membership in industry think tanks and attendance at conferences, prevents the emergence of price wars that would throw off corporate revenue models. The Contentious Otterhttps://www.scribd.com/document/353289783/Sapped-Economynoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-69978485181226946292017-09-04T18:26:09.159-04:002017-09-04T18:26:09.159-04:00You need to read this article.
https://stuartjeann...You need to read this article.<br />https://stuartjeannebramhall.com/2017/09/04/why-growth-is-the-main-cause-of-poverty/<br /><br />Please note the constant lies - we need economic growth. We need mass 3d world immigration to continue with economic growth. Now read this. Divide and conquer and keep the scam going:<br /><br /><br />In this presentation, environmentalist and anti-globalization activist Vendana Shiva challenges the Wall Street mythology that economic growth reduces poverty. Using her own country India as an example, she demonstrates how poverty (and inequality) increase in direct correlation to GDP increases.<br /><br />The examples she offers clearly apply to the US, UK and New Zealand. All three countries are experiencing alarming increases in poverty and inequality as GDP increases. As in India, the quality and availability of health, education and other public services have declined steeply as “growth” has increased.<br /><br />She goes on to demonstrate what GDP growth really represents: the privatization (ie theft) of natural and public resources by a small number of elites.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31219946878199960072017-09-04T00:51:19.858-04:002017-09-04T00:51:19.858-04:00Basic microeconomic theory works with the assumpti...Basic microeconomic theory works with the assumption that rent is fixed in the short term. However, as firms move into the long term, rent becomes a variable cost.Anonymoushttps://www.blogger.com/profile/06023916272431606851noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84378963357766191242017-09-04T00:44:43.181-04:002017-09-04T00:44:43.181-04:00Oh yes. Most would agree the benefit of product di...Oh yes. Most would agree the benefit of product differentiation outweighs the dead weight loss that monopolistic competition causes.Anonymoushttps://www.blogger.com/profile/06023916272431606851noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-55798894964850961572017-09-04T00:35:24.690-04:002017-09-04T00:35:24.690-04:00Basic microeconomic theory describes rent as a fix...Basic microeconomic theory describes rent as a fixed cost in the short term. However, in the long term, rent becomes a variable cost.Anonymoushttps://www.blogger.com/profile/06023916272431606851noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-65743829124238386092017-09-01T23:09:30.951-04:002017-09-01T23:09:30.951-04:00My opinion is there's a third option not being...My opinion is there's a third option not being considered. <br /><br />The rise in markups seems to match the rise in wealth innequalty. capitalist market pricing theory predicts if you have a larger difference between rich and poor shoppers then you raise your price. There's a big difference between a capitalist market where all your customers have exactly the same amount of money and supply vs a capitalist market where your customers are made of a few very very rich people and a lot of very poor people. Think about what happens as a retailer when you have a customer base of 1000 people who all earn $10/hr and how you price that product. Then think about what happens as a retailer when you havea customer base of 900 people who all earn $1/hr and 100 people who earn $900/hr. How does that change the most profitable price you want put on your price tag to make the most money as a retailer? A smart retailer would incrase the markup whenever innequality increases. <br /><br /><br /><br />And that's what I think is happening mostly, but the other things are probably happening too and the objections and alternatives presented in your link are worth consideration and probably valid as far as I can tell. I just think the natural profit seeking behavior of the retailer in a highly wealth innequality marketplace explains most of the data.Unknownhttps://www.blogger.com/profile/11067335396478304398noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31235915339907897102017-09-01T13:00:10.036-04:002017-09-01T13:00:10.036-04:00We need an entirely new understanding of market po...We need an entirely new understanding of market power for the digital age. U.S. regulators have always used consumer prices as a proxy for monopolistic behavior, but by that standard, Google and Facebook literally can't be doing anything wrong since their services are free. And yet they are clearly engaging in anticompetitive practices. For an excellent discussion see https://stratechery.com/2017/ends-means-and-antitrust/Rob Lewishttps://www.blogger.com/profile/16964918034993374294noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-12663998976279030982017-09-01T12:44:27.653-04:002017-09-01T12:44:27.653-04:00It is worth pointing out that every businessman wa...It is worth pointing out that every businessman wants to be a monopolist (as Adam Smith pointed out). As CurmudgeonlyTroll writes, the official policy of most venture capitalists today is to only invest in would-be monopolies or oligopolies -- and they're pretty successful. Just more evidence.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-51797700009260215762017-09-01T12:42:29.267-04:002017-09-01T12:42:29.267-04:00Anonymous is correct for wages. We have evidence ...Anonymous is correct for wages. We have evidence of (a) stagnant wages and (b) positions being left unfilled because corporations refuse to raise wages and refuse to spend money on training.<br /><br />These are both signs of monopsony power in hiring (or at least "monopsonistic competition), as we would expect from the Market Power hypothesis.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-70807783461834866712017-09-01T12:40:04.180-04:002017-09-01T12:40:04.180-04:00Tyler's wrong, and he's wrong because mono...Tyler's wrong, and he's wrong because monopoly and oligopoly is happening in *most* sectors of the economy. (Actually, off the top of my head, I can't think of a major sector which isn't an oligopoly; it's certainly a majority of the sectors and probably more than 2/3 of the sectors.) It's quite impossible to correct this in the short list of remaining sectors.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-69358808651795182462017-08-31T14:03:09.307-04:002017-08-31T14:03:09.307-04:00Not an economist, not even kinda, but I work in in...Not an economist, not even kinda, but I work in innovation research for the New Economy (tech and software). This involves detailed behavioral observation and subsequent design responses. <br />Increased markups may be the result of better market information...a systematic *underpricing* of lots of goods and experiences can be corrected with modern technology. Not only can you identify the platinum market more reliably--behavior is more reliable than older models such as demographics--it's much much easier to exploit that market using high-tech tools. So it wouldn't surprise me that companies might be irrationally exuberant when they price products, especially new products or disruptive products. TDWhttps://www.blogger.com/profile/14649920118018537733noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-64987856728742890242017-08-30T10:54:10.948-04:002017-08-30T10:54:10.948-04:00Hi, Noah, at least in plausibly calibrated medium/...Hi, Noah, at least in plausibly calibrated medium/large scale New Keynesian DSGE models you like to pick on sometimes, with the usual monopolistic competition+constant markup with flex prices an increase in markups due to lower competition among producers can significantly lower output: see p. 57 in the model docmentation below and reverse the reported dynamics.<br />https://www.imf.org/external/pubs/ft/wp/2013/wp1355.pdfdanielshttps://www.blogger.com/profile/01799942447501959179noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-40661325789710488942017-08-29T16:19:55.472-04:002017-08-29T16:19:55.472-04:00Would be interesting to see direct data on spendin...Would be interesting to see direct data on spending that increases monopolistic power, e.g. pattern and trade mark, legal enforcement, branding, versus product improvement and innovation, e.g. R&D.Serenity Seekerhttps://www.blogger.com/profile/17058420696887148148noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-78190536576580922992017-08-29T16:17:36.587-04:002017-08-29T16:17:36.587-04:00There is incentive to count all software developme...There is incentive to count all software development as expenses but that's not true. Some software development costs, including coders, are capitalized, i.e. investment.Serenity Seekerhttps://www.blogger.com/profile/17058420696887148148noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3577547096922523822017-08-29T16:01:04.115-04:002017-08-29T16:01:04.115-04:00No incentive to innovate. Managers get paid to eng...No incentive to innovate. Managers get paid to engage in financialization not innovation. Also I agree with Brad Towne as well.sdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-48168536858315894242017-08-29T10:21:50.283-04:002017-08-29T10:21:50.283-04:00If there has been a greater concentration of the U...If there has been a greater concentration of the US market that affects the aggregate level of GDP, why has not this also affected the aggregate level of prices characteristically low in the last three decades?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-62954056212770719172017-08-29T10:16:17.730-04:002017-08-29T10:16:17.730-04:00If there has been a greater concentration of the U...If there has been a greater concentration of the US market that affects the aggregate level of GDP. Why has not this also affected the aggregate level of prices, characteristically low in the last three decades?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-11830362919049415212017-08-28T15:58:02.630-04:002017-08-28T15:58:02.630-04:00Banking is more complicated than that and the regu...Banking is more complicated than that and the regulatory framework makes that sort of expansion difficult, but sure. But last I looked (it was several years ago, so grain of salt) there was something like 10,000 banks in the U.S. There are plenty of banks left to seek to expand into other markets.<br /><br />And, of course, there were hundreds of other banks in each of our hypothetical merging bank's home markets too.<br /><br />But there are absolutely incentive problems regarding corporate decision-making on mergers. That's a reason to be skeptical about the merging parties' claims about what great things will happen. It doesn't tell us anything about whether the merger will lead to market power, though.Adamhttps://www.blogger.com/profile/00848821084269314215noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21625113589461526652017-08-28T09:15:15.304-04:002017-08-28T09:15:15.304-04:00In my mind, the most important feature of this pos...In my mind, the most important feature of this post is that it showed me that Karl Smith is blogging again. After he left Modeled Behavior, I missed that he started with the Niskanen Center. Thanks!Steve D.https://www.blogger.com/profile/14621881283030606095noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-88238237622338737572017-08-27T12:50:55.639-04:002017-08-27T12:50:55.639-04:00Noah,
I am sympathetic to your argument, but I do...Noah,<br /><br />I am sympathetic to your argument, but I don't think this criticism of Tyler is correct:<br /><br /> This seems like a hand-waving argument that economic distortions in one sector are never bad, because they free up resources to be used elsewhere. That's obviously wrong, though. To see this, suppose the government levied a 10000% tax on food. Yes, the labor and capital freed up from the contraction of the food industry would get used elsewhere. NO, overall this outcome would not be good for the economy. Monopoly acts like a tax, so a similar principle applies. <br /><br />I think Tyler's point is that you can't simply add up individual distortions sector-by-sector to arrive at a grand total of the distortion. That's not hand-waving is the Lipsey-Lancaster theory of second-best.David Glasnerhttps://www.blogger.com/profile/12159754130499914976noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-55971181412938658292017-08-25T17:06:24.769-04:002017-08-25T17:06:24.769-04:00Deadweight Loss
I think Noah raises a question th...Deadweight Loss<br /><br />I think Noah raises a question that needs to be evaluated in regards to deadweight loss, and it is a concept I worry has some Econ-101ism. <br /><br /><br />Noah asks: how many more shampoo bottles would be purchased. I am going out on a ledge, but the amount of consumer of shampoo left out of the market from lack of money has to be too small to be a policy concern. I think what is the real dead weight loss is more about, what if there were lower prices in a more efficient economy, where would the surplus purchasing power of buyers go? Maybe if airline tickets were cheaper, more people would fly. Perhaps there is some deadweight loss here, but, unlike shampoo, there are actual alternatives (driving, buses, trains) that fill that need. In addition, most people's ability to take trips are limited by time and not money. <br /><br />We see stats all of the time about the need for consumers to go into more and more debt to maintain their lifestyle. So if anything, I think this concentration of firms and monopolistic competition does not necessarily create the deadweight loss, as much as it syphons off resources for consumers to save, or, requires consumers to go into debt (which is far worse). <br /><br /><br />I agree, especially in retail, that up until the late-1990's, for the most part, there was always a limited supply of retail options for any given good in your area. But as we are seeing now, as predicted in the monopolistic competitive economy, a lot of these national retail firms are slowly dying, and leaving only a few large players. In addition, even if local selection in 1975 was less than the national selection available now, the lack of local variability gives a sense of homogeneity that is more pernicious than in the past. Sure, New England had Ames and Rich's department stores in 1985 as the only two main competitors, but there was also Target in the upper Mid-West and Wal-Mart in the South. It felt less concentrated, even if options available at any given time in any given location were maybe a little bit less varied. Anonymoushttps://www.blogger.com/profile/03341282239844060037noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-17354410957897377542017-08-25T16:39:19.548-04:002017-08-25T16:39:19.548-04:00Tyler Cohen:
First of all, this guy's entire ...Tyler Cohen:<br /><br />First of all, this guy's entire world view I think comes down to having exotic cuisine near his home, and since that is happening, all must be good. <br /><br /><br />Secondly, I am not sure what IT investing his local Chinese restaurant is investing in, but guess what, I can almost guarantee they are not exactly building out an on-site server room or anything that would impact this discussion.Anonymoushttps://www.blogger.com/profile/03341282239844060037noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-59165397983311681422017-08-25T15:46:46.760-04:002017-08-25T15:46:46.760-04:00Do you really think that monopolistic competition ...Do you really think that monopolistic competition (which is what you get when entry is free, but where firms sell differentiated products -- in other words, the norm for most consumer goods) is a "problem" that demands a policy response?? Really?? Yes, in a Econ 101 textbook sense (BTW I thought I remembered reading posts by you that decry the use of Econ 101 arguments in policy debates ... but intellectual consistency is for little people, I guess)there is a "distortion" by comparison to perfectly competitive homogeneous goods markets, but no sensible person thinks that there is anything policymakers can or should try to do to eliminate this "distortion." This is a pretty lame argument.Unknownhttps://www.blogger.com/profile/03694117881871527518noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80858417610867857462017-08-25T15:40:22.984-04:002017-08-25T15:40:22.984-04:00Agreed - Rent is a fixed expense from the standpoi...Agreed - Rent is a fixed expense from the standpoint that most businesses have multi-year leases they cannot just get out of if a cheaper lease is available (especially retail where the cost to relocate is really expenses....see why when restaurants lose their lease they often just close down than relocate). Anonymoushttps://www.blogger.com/profile/03341282239844060037noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3460503080061894492017-08-25T15:37:46.631-04:002017-08-25T15:37:46.631-04:00Banks -
I think the issue is that, in theory, ove...Banks - <br />I think the issue is that, in theory, over time, Bank A and Bank B, if unable to merge, would then work to achieve growth and profits by expanding into the other bank's market. <br /><br />I think something to keep in mind with mergers. Executives and Board when considering mergers often are all acting in the self-interest of their own personal wealth. Bonuses, stock, and short-term labor efficiencies can often mean large payout to the executives in the first years after a merger. Most of the skeletons, inefficiencies and "oh sh*t" moments when things fail to arise come after the CEO/CFO who put the merger together have retired and left.<br /><br />So yes, there is no growth generated when Bank A & B merge, but for the executives putting the merger together, they get more short-term compensation than they would slogging through a competitive market reach expansion the old fashioned way.Anonymoushttps://www.blogger.com/profile/03341282239844060037noreply@blogger.com