In an era of technological progress and easy communication, it might seem reasonable to assume that the world’s working people have never had it so good. But wages are stagnant and prices are rising, so that everything from a bottle of beer to a prosthetic hip costs more. Economist Jan Eeckhout shows how this is due to a small number of companies exploiting an unbridled rise in market power—the ability to set prices higher than they could in a properly functioning competitive marketplace.
Drawing on his own groundbreaking research and telling the stories of common workers throughout, he demonstrates how market power has suffocated the world of work, and how, without better mechanisms to ensure competition, it could lead to disastrous market corrections and political turmoil. The Profit Paradox describes how, over the past forty years, a handful of companies have reaped most of the rewards of technological advancements—acquiring rivals, securing huge profits, and creating brutally unequal outcomes for workers. Instead of passing on the benefits of better technologies to consumers through lower prices, these “superstar” companies leverage new technologies to charge even higher prices.
The consequences are already immense, from unnecessarily high prices for virtually everything, to fewer startups that can compete, to rising inequality and stagnating wages for most workers and severely limited social mobility. A provocative investigation into how market power hurts average working people, The Profit Paradox also offers concrete solutions about how to fix the problem it and restore a healthy economy.
Jan Eeckhout (@jan_eeckhout) is ICREA Research Professor of Economics at UPF Barcelona. He studies the macroeconomic implications of market power, and the economics of labor markets and cities. He is the author of the book ‘The Profit Paradox’ and of numerous research articles in the top economics journals. His research has featured in the media, including The Economist, WSJ, FT, NYT and Bloomberg. He has been a tenured professor at UPenn and UCL as well as the Louis Simpson Visiting Professor at Princeton. He is a fellow of the Econometric Society, the EEA and Academia Europaea. He received his PhD from LSE.
Discussants:
Tommaso Valletti (@TomValletti) is Professor of Economics at Imperial College Business School, and also Professor of Economics at the University of Rome “Tor Vergata” (on leave). Tommaso is currently the Head of the Department of Economics & Public Policy at Imperial College Business School. He is a Non-Executive Director to the board of the Financial Conduct Authority.
Ioana Marinescu (@mioana) is an Associate Professor at the University of Pennsylvania School of Social Policy & Practice, and a Research Associate at the National Bureau of Economic Research. She studies the labor market to craft policies that can enhance employment, productivity, and economic security.
Chair:
Francisco Ferreira (@fhgferreira) is the Amartya Sen Professor of Inequality Studies and Director of the International Inequalities Institute at LSE.