Economists Say the Rise of Monopoly Power Explains Five Puzzling Trends

Economists have concocted a variety of explanations for five recent phenomena in the U.S. economy that don’t match the “facts” that economists supposedly agree on. Now a Brown University economist and two of his doctoral students claim to have killed all five birds with one stone—advancing a simple explanation that accounts for all the anomalies at once.

Two changes explain all the discrepancies, they say. First, there’s been an increase in monopoly power, likely caused by an increase of power in the hands of dominant companies. Second, productivity growth has slowed and the population has aged, driving down the natural rate of interest.

The economists’ “unified explanation” has policy implications, says Gauti Eggertsson, the Brown economist who shared the work with two students, Jacob Robbins and Ella Getz Wold. The growth in monopoly profits strengthens the case for raising taxes on capital such as dividends and capital gains, and also suggests that antitrust authorities “should do more to prevent monopolies and oligopolies from forming,” they write.

The paper was released on Feb. 12 by the Washington Center for Equitable Growth, where Eggertsson is a grantee and Robbins is a junior fellow. Here is a layman’s summary by Robbins.

The researchers tackle five so-called stylized facts—economists’ lingo for observations about the real world that are so consistent over time that they come to be accepted as true.  For example, one stylized fact asserted by the Hungarian-British economist Nicholas Kaldor in 1957 was that the way the national income is split between workers and capitalists tends to be roughly constant over time. In fact, labor’s share of national income, in the form of wages and salaries, has been on a steady downhill.

The paper also accounts for some new facts brought to light by the French economist Thomas Piketty, author of the surprise 2013 best-seller :Wealth has increased in relation to investment in the economy, and the market value of corporations is way above the replacement value of their assets. (As a stock market strategist would put it, the ratio of those two measures—known as “Tobin’s Q”—exceeds 1.) “These are not your father’s growth facts,” the researchers write.

In an interview, Eggertsson discussed how the paper came about. “We were very much focused on explaining the decline in the real interest rate. As we tried to confront the new model with data, we found that there was a big missing link to make sense of stuff. And that missing link was an increase in monopoly power,” he says.

Monopoly power isn’t always bad. Any time a company develops a unique product that it can charge more for than the commodity alternative, it’s earning monopoly profits—what the authors call “pure profits.” As they write, “one of the main purposes of the firm [is] to gain and secure this market power: the celebrated ‘sustainable competitive advantage.’ ” What’s true, though, is that the shareholders of companies that have strong pricing power do very nicely, capturing a bigger share of the national income.

The authors say they can’t be sure their theory is right. For one thing, they write, it “relies heavily on our estimates of the level of pure profits and markups in the U.S. economy.” They add, “Unfortunately, there is a great deal of uncertainty around these estimates.”

They’re pretty confident, though, that economic models assuming perfect competition and no pure profits are poor descriptions of reality. Says Eggertsson: “It’s a different world than people thought we were in.”

    Peter Coy
    Bloomberg Businessweek Columnist

    Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues. He also holds the position of senior writer. Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff. He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985.

    More From this publisher : HERE ; This post was curated using : TrendingTraffic

     


    RELATED PRODUCTS
  1. Improve your life and achieve your goals even if you have tried many times before.
  2. Secrets that will help bend your subconscious mind to your will.
  3. Discover your true abilities using this secret ancient code and enjoy a 2nd life.
  4. Know The Secret That Numerous Successful People Unknowingly Used For Over Decades.
  5. Teaches People How He Has Helped Countless Mentees To Achieve Their Goals And Success.
  6. Discover The Solar Air Lantern For Emergency Lighting Without Batteries Or Fuel
  7. No Exercise. No Yo-yo Dieting. No 'health' Foods. Get Results Within 60 Days, Or Your Money Back.
  8. (52) Mind power secrets help you grow into genius
  9. Clickbank Ads
     

    If you like our content help us with a share… or two …  

    Also -  I have some free stuff for you .......

    Nr 1. In This FREE Report you can Discover:

    Secrets to acquiring the freshest, hottest leads via YouTube In-Stream ads quickly and easily! Best secret tips for the most effective targeting for your ads! Totally legal, but little-known method for literally stealing traffic from your competitors! Get more traffic to your videos and landing pages without spending a fortune! And much more - all within this special FREE report!

     

    Nr 2. Did you know you can Absolutely EXPLODE YOUR EMAIL LIST FOR FREE with UNTOUCHED offline sources?

     

    Nr 3. The #1 secret to becoming an affiliate superstar - Earn your first $100 online – without a dime to invest.

    If you’re still looking to “make it online – I have just the thing for you. It’s a video series that shows how to make your first $100 online – even if you don’t have a dime to invest. Yes – nothing.  Free.  Nada. Is this possible? You bet. It’s the most powerful system used by those “in the know”. Good things don’t have to be difficult. And they don’t only come to those who wait. Have A Look

     

    Nr 4. Top 10 Email Marketing Mistakes. Which of these mistakes do you make?

     

    Nr 5.  You can learn about : The hottest social networking site that will send an unlimited stampede of traffic to your site - for FREE! How to quickly locate a swarm of hungry buyers using "information portals"! The fast and easy way to use simple images to siphon targeted traffic, on command! Learn how to get the most possible traffic from Instagram, and make sure that traffic converts! And much more ...

     

    Nr 6. It’s no secret… Facebook is an incredible place to get tons of free, viral traffic. But… most people are going about it all wrong.  How many of these mistakes are you making? Download the free report to find out.

       

    Nr 7.  Special free report .  It's called "Operation Midas Touch" and you can download it here...

    The report features a surefire method for generating at least $1000 per week online,without a website or product of your own!

    Nr 8.  Instagram is still one of the hottest ways to get a LOT of traffic fast. All by sharing images. Sounds easy enough, yeah? Well, yes and no. If you want to really start driving a lot of  traffic and making sales using Instagram then you should download this report.

    Nr 9.  When it comes to creating a product online there are so many ways to approach it. Wouldn’t it be great to just get the meat of it all so you can get started faster? Well, the good news is, today you can download a guide called the Product Creation Formula Quickstart Guide. It’s as the title suggests - a Quickstart guide. You’ll get a list of action steps to take right away. Download your copy today !

    Nr 10. Would you like to finally USE all of that dusty PLR you have sitting around on your harddrive? Or maybe find the resources for the best PLR available - at the best prices? What about how to use that PLR to make you money with just a few minutes of work. Well, you’re not going to want to miss this!

      Nr 11. Buzzfeed’s top post has more than 21 million views. Think about that for a sec… ONE of their articles has had over 21 million people who have read it! And they have thousands of articles... what would you do with that kind of traffic? A friend of mine hacked their method and was able to use it to get 11,592 targeted new subscribers in 2 weeks on their very first attempt!

    Nr 12. Push notifications are one of today's hottest trends in website traffic and conversions, and for good reason. Studies have shown that as many as 40% of people will opt-in for push notifications, which is about TEN TIMES the rate of people who opt-in for emails! That’s huge! Not only that, but they're also highly effective at pulling clicks, as well. Some studies have shown CTR at an average of around 40%, with highs of as much as 80%! Again, that’s huge!

    Nr 13. Would you like to know how to get more money from the exact same number of website visitors you’re currently getting? Even if you’re website is getting as few as 1-2 visitors a day, this report will show you how to increase your profits using these few handy hacks.

    Nr 14. People have now realised that it's not the size of the list which matters, it's the quality. ... and the only way to create a quality list is by launching your own products. Let it be $7 ebooks, $17 info products, $27 video training product or software's... all of these work. My good friend Kevin Fahey has is revealing how he's launched over 20 products in the past 4 years, many of them top sellers. Needless to say he's banked a handsome amount in this time.

    Nr 15. Do you ever feel that the man you like or even love, just doesn't see you or desire you in way you want him to? Or... maybe you're able to get a man's attention though not the right kind of attention? Or... maybe you're still single because you wait and wait for men to approach you first? What you may not know is that the way we flirt will either attract the "wrong" man for us or the "right" man.

    Nr 16. When it comes to getting sales and leads online, there is ONE thing that 95% of marketers use... it's called a LIST. My friend Jimmy just released a free book that explains WHY a list is important and how YOU can build your own list. It's available right here (and it won't cost you a penny)

    Nr 17. If you have tried everything, and still aren't able to get your Ex back, then you need to pay attention.

    Nr 18. What if I told you that you could make ANY woman WANT to do ANYTHING for you? Would you think I'm crazy? Well... what If I told you that you could also make her LOVE every minute of it and come back for more?

       

    Nr 19. I have a special free plugin for you today. It's called "Covert Hover Mini"

    This plugin will triple your blog traffic by compelling your visitors to share your images on social media. This is some really clever stuff and it works like a charm. After you grab your free plugin, don't  forget to read the free bonus report as it will show exactly how and why this strategy works like crazy.

    Nr 20. The days of being able to get away with a basic WP theme and a pic or two are gone, your site needs to look good. Even Google are looking for you to have engaging graphics on your site. But getting good quality graphics made for your site is a pain, AND it will cost you both time and money (if you outsource it). But I have a special free download for you today. A virtual treasure chest of over 21K profit pulling graphics you can start sing today to generate more traffic & sales!

    Nr 21. 20 professional full HD background videos. These background videos are perfect for giving your videos that extra kick they need to stand out from the crowd Oh yeah they are in full 1080p HD too, I hope you'll enjoy them.

    Nr 22. If you've ever failed to create a WordPress site of your own or typically waste hours & even weeks trying to figure it all out on your own....

    Nr 23. No doubt, you've seen all of the video launches lately! There is a reason for it... Video marketing is a GREAT way to make money, and with the recent creation tools making it super accessable for anyone to get started... It's no surprise that more people are making videos. However... there is a missing element to most video marketing products...

    Nr 24. For the first time ever... You can get the straight scoop on how someone is selling over $1,000,000/year of t-shirts on Facebook!

    Use them  .... and have fun !