miguelf's review against another edition
5.0
If you watch US business shows a common trope is to tout the dominance of US businesses over their other global competitors. However, as The Great Reversal shows conditions in the US from a competitive standpoint have actually gotten much worse and now lag behind their peers in spite of the dominance of highly touted behemoths that are part of the FAANGs. This doesn’t seem to be all that bad from the standpoint of Joe Sixpack, but the reality is that it has actually impacted prices and costs for the average consumer as Philippon convincingly shows and poor Joe in the US pays more for a basket of goods than his counterparts do in “old” weak Europe. Weak anti-competitive legislation in the US has exacerbated this issue mainly to the detriment of consumers. The simple premise of the book is started with why cell phone plans are so much cheaper in Europe as opposed to the US and it braches out from there.
From a personal standpoint there are a whole basket of goods and services which are less expensive here at Germany than at home in the US and yet where does this additional expense that the US consumer pay go to? It is these kinds of fundamental questions and explanation that make The Great Reversal such an interesting and vital book as he reveals why monopsony has exerted such a negative effect on the Economy as a whole.
From a personal standpoint there are a whole basket of goods and services which are less expensive here at Germany than at home in the US and yet where does this additional expense that the US consumer pay go to? It is these kinds of fundamental questions and explanation that make The Great Reversal such an interesting and vital book as he reveals why monopsony has exerted such a negative effect on the Economy as a whole.
jasonfurman's review against another edition
5.0
A great read on an important topic that advances a bold thesis about the United States economy, a counterintuitive re-thinking of the economic institutions of the European Union, and a synthesis of a lot of Thomas Philippon's research.
The bold thesis about the U.S. economy is that that concentration has risen across the economy with a smaller number of businesses dominating in each industry, an idea that a number of economists have advanced in recent years with Thomas Philippon among the leading ones in this group. In his telling the rise of concentration has resulted in a host of economic maladies, but the one Philippon makes most vivid is the higher prices and larger increase of prices for many goods and services relative to Europe, most notably airlines and cell phone bills. Philippon understands that increased concentration itself may be a consequence of more competition (that weeds out inefficient businesses) or a cause of less competition. He uses retail as an example of the more competition story where innovation has helped some companies, like Wal-Mart, grow and bring low prices. But he also shows the evidence that the less competition story predominates in much of the economy, including his previous papers finding that much of the investment gap--the reduction in investment below what one would predict from the economic fundamentals--is explained by the reduced competition. All told Philippon estimates that this is costing American consumers $1 trillion.
Philippon blames the rise in concentration on the fact that American institutions lend themselves to lobbying for a variety of reasons including our lack of restrictions on many forms of political contributions and the way a single set of national institutions matters. The lobbying chapters of the book were an excellent synthesis of the economic literature on the returns to lobbying and a subtle discussion of the empirical challenges that make forming precise conclusions difficult (e.g., how do you measure a lobbying campaign whose victory is defined by inaction when you don't see inaction in the data).
I do not think Philippon was fully convincing in establishing that this lobbying rose extremely rapidly, that it had a huge influence on the issue of antitrust in particular, and that this influence manifested itself in enough of a policy shift that it could yield the large changes he shows. This is especially true when ideas and ideology do matter in antitrust enforcement, but crass lobbying matters much less than it does with, say, your typical regulatory issues. Philippon does not really explore an alternative thesis for the decline in antitrust enforcement which is changing ideas, specifically the rise of the Chicago School and its increased influence in the judiciary which increasingly thought that outside of cartels there was nothing particularly to be worried about in mergers or conduct. Of course, the ideas themselves were related to set of powerful economic interests but the story is a different one than lobbying. Even with the Chicago School story, I think it is hard to see this as such a large abrupt change that it or any other policy changes could do more than explain part of the shift in recent decades.
The counterintuitive rethinking of the European Union's economic institutions is that they are not a large, cumbersome bureaucracy but instead have developed to reduce regulation and promote markets that would otherwise be restrained by the large, cumbersome bureaucracies that the individual member states would have. The origins of the European Coal and Steel Community were in attacking excessive concentration in that sector. Philippon discusses a theoretical model he developed with Germán Gutiérrez in which individual countries will tend to overregulate but when they give up their sovereignty to a higher level entity it will be rational for them to have less regulation than they would prefer because they will be reducing that higher level entity's ability to steer things in the direction of another country. Philippon goes through the ways that the EU's harmonization of rules, antitrust enforcement, anti-state aid efforts, and the like have helped create more of a market not less of one, with some particularly striking examples like airlines which were deregulated with the resulting spectacular rise in prices. All told, European institutions--especially DG Competition which enforces competition rules--were built in a more robust and resilient manner than the United States.
Philippon only briefly speculates on how European institutions might evolve when its most pro-market member (the United Kingdom) is exiting and two of its leading members (France and Germany) were recently highly critical of the blocking of the Siemens-Alstom merger. I personally think the former is a worry but the later is actually a testament to the strength of European institutions, but we will see.
Finally, the book concludes with a series of topic chapters, including the pay of bankers, the rise of digital giants, and monopsony in the labor markets. In some cases Philippon is describing his own research (e.g., his paper on the fall and rise of banker's pay over the last century) and in others he is thoughtfully synthesizing and summarizing the research of others.
Philippon clearly has a perspective on the direction policy should go but his book eschews making policy recommendations, and in his opening he cites that as an important virtue in a social scientist. I think this was probably the right choice since he sets up a great direction for others to go in. But I do wish we could understand how much of the $1 trillion loss to consumers he estimates could be regained by a shift in policy. Is this toothpaste back into a tube? Are these changes as much economic as policy so they cannot be reversed by policy? Or is the scope for policy impacts in this area quantitatively large? I think the promise is large enough I am for more of it but to start to understand the potential magnitude of impact we would need to get more tangible about the proposed changes.
Overall, a great and highly readable contribution to the debate from the first book that looks at the rise of concentration from more of a macroeconomic/finance perspective and develops insights by comparing U.S. and European institutions and outcomes.
The bold thesis about the U.S. economy is that that concentration has risen across the economy with a smaller number of businesses dominating in each industry, an idea that a number of economists have advanced in recent years with Thomas Philippon among the leading ones in this group. In his telling the rise of concentration has resulted in a host of economic maladies, but the one Philippon makes most vivid is the higher prices and larger increase of prices for many goods and services relative to Europe, most notably airlines and cell phone bills. Philippon understands that increased concentration itself may be a consequence of more competition (that weeds out inefficient businesses) or a cause of less competition. He uses retail as an example of the more competition story where innovation has helped some companies, like Wal-Mart, grow and bring low prices. But he also shows the evidence that the less competition story predominates in much of the economy, including his previous papers finding that much of the investment gap--the reduction in investment below what one would predict from the economic fundamentals--is explained by the reduced competition. All told Philippon estimates that this is costing American consumers $1 trillion.
Philippon blames the rise in concentration on the fact that American institutions lend themselves to lobbying for a variety of reasons including our lack of restrictions on many forms of political contributions and the way a single set of national institutions matters. The lobbying chapters of the book were an excellent synthesis of the economic literature on the returns to lobbying and a subtle discussion of the empirical challenges that make forming precise conclusions difficult (e.g., how do you measure a lobbying campaign whose victory is defined by inaction when you don't see inaction in the data).
I do not think Philippon was fully convincing in establishing that this lobbying rose extremely rapidly, that it had a huge influence on the issue of antitrust in particular, and that this influence manifested itself in enough of a policy shift that it could yield the large changes he shows. This is especially true when ideas and ideology do matter in antitrust enforcement, but crass lobbying matters much less than it does with, say, your typical regulatory issues. Philippon does not really explore an alternative thesis for the decline in antitrust enforcement which is changing ideas, specifically the rise of the Chicago School and its increased influence in the judiciary which increasingly thought that outside of cartels there was nothing particularly to be worried about in mergers or conduct. Of course, the ideas themselves were related to set of powerful economic interests but the story is a different one than lobbying. Even with the Chicago School story, I think it is hard to see this as such a large abrupt change that it or any other policy changes could do more than explain part of the shift in recent decades.
The counterintuitive rethinking of the European Union's economic institutions is that they are not a large, cumbersome bureaucracy but instead have developed to reduce regulation and promote markets that would otherwise be restrained by the large, cumbersome bureaucracies that the individual member states would have. The origins of the European Coal and Steel Community were in attacking excessive concentration in that sector. Philippon discusses a theoretical model he developed with Germán Gutiérrez in which individual countries will tend to overregulate but when they give up their sovereignty to a higher level entity it will be rational for them to have less regulation than they would prefer because they will be reducing that higher level entity's ability to steer things in the direction of another country. Philippon goes through the ways that the EU's harmonization of rules, antitrust enforcement, anti-state aid efforts, and the like have helped create more of a market not less of one, with some particularly striking examples like airlines which were deregulated with the resulting spectacular rise in prices. All told, European institutions--especially DG Competition which enforces competition rules--were built in a more robust and resilient manner than the United States.
Philippon only briefly speculates on how European institutions might evolve when its most pro-market member (the United Kingdom) is exiting and two of its leading members (France and Germany) were recently highly critical of the blocking of the Siemens-Alstom merger. I personally think the former is a worry but the later is actually a testament to the strength of European institutions, but we will see.
Finally, the book concludes with a series of topic chapters, including the pay of bankers, the rise of digital giants, and monopsony in the labor markets. In some cases Philippon is describing his own research (e.g., his paper on the fall and rise of banker's pay over the last century) and in others he is thoughtfully synthesizing and summarizing the research of others.
Philippon clearly has a perspective on the direction policy should go but his book eschews making policy recommendations, and in his opening he cites that as an important virtue in a social scientist. I think this was probably the right choice since he sets up a great direction for others to go in. But I do wish we could understand how much of the $1 trillion loss to consumers he estimates could be regained by a shift in policy. Is this toothpaste back into a tube? Are these changes as much economic as policy so they cannot be reversed by policy? Or is the scope for policy impacts in this area quantitatively large? I think the promise is large enough I am for more of it but to start to understand the potential magnitude of impact we would need to get more tangible about the proposed changes.
Overall, a great and highly readable contribution to the debate from the first book that looks at the rise of concentration from more of a macroeconomic/finance perspective and develops insights by comparing U.S. and European institutions and outcomes.
mclovin_from_hawaii's review against another edition
4.0
A good read on increasing market concentration and weak competition institutions in the US. If you’ve studied econ, however, there’ll be a lot of familiar stuff explained extensively and heavy-handedly.
alfonsofuggetta's review against another edition
5.0
Noi Europei (e specialmente noi Italiani) non ci rendiamo conto che, pur con tutti i suoi limiti e le tante cose da completare e modificare, l'Unione Europea è quanto di meglio lo sviluppo sociale ed economico è riuscito a produrre. Non saremo così competitivi come gli USA dal punto di vista tecnologico e militare, ma l'anima e il sogno Europeo sono straordinari elementi di speranza.
Lavoriamo per rafforzarla e completarla.
Lavoriamo per rafforzarla e completarla.
emmaallenmarshall's review against another edition
informative
slow-paced
4.0
okay! very informative.
alexisrt's review against another edition
4.0
The thesis is interesting--the US has become less competitive over the past 20 or so years while the EU has become more competitive. My anecdata suggests this is true.
The majority of the book is a theoretical analysis, with a lot of data. Philippon does as good a job as you can do with this; he explains economics clearly for the layperson. It makes a lot of the book a little dry, though; the more narrative sections, such as the discussion of EU politics and how the EU has developed a more independent competition regulator, have more verve. The last third looks at specific industries, which helps put the principle into practice.
I would have enjoyed more narrative and more details of specific examples, such as concentration in the airline industry, but I learned a lot.
The majority of the book is a theoretical analysis, with a lot of data. Philippon does as good a job as you can do with this; he explains economics clearly for the layperson. It makes a lot of the book a little dry, though; the more narrative sections, such as the discussion of EU politics and how the EU has developed a more independent competition regulator, have more verve. The last third looks at specific industries, which helps put the principle into practice.
I would have enjoyed more narrative and more details of specific examples, such as concentration in the airline industry, but I learned a lot.
miseamhain's review against another edition
5.0
Enjoyable book that lays out in extreme clarity what is wrong in America, the factors that incentivized the degradation, and what needs to be done to redress it
I think it is fantastic for both Americans and citizens of developed economies to read.
I do think it's suffers some limitations as an audiobook due to equations and attached PDFs
I think it is fantastic for both Americans and citizens of developed economies to read.
I do think it's suffers some limitations as an audiobook due to equations and attached PDFs
samanthad's review against another edition
I started listening to this as an audio book, but that's definitely not the right format for this book. Will come back to this one (as book/ebook).