Winner-Take-All Society [Hardcover]

Robert H. Frank (Author), Philip J. Cook (Author)

Book Description

Publication Date: September 15, 1995 | ISBN-10: 0028740343 | ISBN-13: 978-0028740348 | Edition: 1St Edition

In this pathbreaking book, the subject of considerable pre-publication, two distinguished economists draw attention to an important and disturbing new trend that has dramatically transformed our economy in the last two decades: the spread of "winner-take-all" markets, where marginal differences in performance translate into huge differences in reward.

Editorial Reviews

From Publishers Weekly

A examination of the ways in which "winner take all" markets allow top earners to corner an increasing proportion of total income growth.
Copyright 1996 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

From Booklist

If everyday avarice explained the astronomical remunerations garnered by stars and enter(info)tainers, this would be a one-page book, but economists Frank and Cook have broken down the market forces that push salaries into the stratosphere and produced some 200-odd pages on the subject. One major culprit is inherent in mass culture: when millions have a small interest in the winner's performance, however minutely superior to the runner-up's, a large reward goes to that winner (as in a golf tournament). The reward ratchets upward as the market in question becomes overcrowded with aspiring winners (as in acting), but at the end of the game, the inevitable multitude of losers are left with little reward for their efforts. Result: increasing inequality in income. If confined to arts and sports, the authors would just be telling interesting anecdotes, but the phenomenon has invaded law, business, and academia, where the pressure to win leads to sterile "positional arms races." Their solution won't appease free marketeers, who nonetheless will have nothing to object about in this economic analysis of the situation. Gilbert Taylor

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Product Details

• Hardcover: 288 pages
• Publisher: Free Press; 1St Edition edition (September 15, 1995)
• Language: English
• ISBN-10: 0028740343
• ISBN-13: 978-0028740348
• Product Dimensions: 9.4 x 6.1 x 1.1 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 3.9 out of 5 stars  See all reviews (14 customer reviews)
• Amazon Best Sellers Rank: #1,098,985 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

58 of 61 people found the following review helpful

5.0 out of 5 stars An Explanation for the Growing Economic Inequality October 2, 2002

By Dale Susan Brown

Format:Paperback

The basic premise of this book is that the U.S. has too many markets where the "star" or top performer gets a large percentage of the proceeds. Examples are the sports market, the movie star market and the publishing market; The reasons given are;

-Technology. National distribution channels such as network television make it easier for an individual to penetrate the market. For example, at one time villages and towns had their own musicians. Now a singer can make a CD and sell it nationally.

-Falling transportation and tariff costs. Goods have gotten lighter. It is easier to send computer discs all over the world than books. CD's are lighter than phonograph records

-- Mental shelf space constraints. We have a limit to the number of items we can keep in our head..."the amount of information we can actually use is thus a declining fraction of the total information available."

-Weakening of regulations and civil society. At one time, informal and formal rules limited the winner take all markets. Now, like free agents in baseball, the top performers have the leverage to demand high prices.

-Self-reinforcing processes. This is another way of saying "success begets success." For example, a sales person does well and gets bigger customers. A person does well and the word of mouth referral causes them to saturate the market. This virtuous cycle increases the income and power of top performers.

The author argues that winner take all markets are not good for society. People are unrealistically optimistic about their own chances of winning "a prize." Thus they are siphoned off from other productive endeavors.

This book was helpful to me in understanding today's economy and job market.... If anything, the winners are doing better than ever today, long after the book was published. Just take a look at the latest article on CEO salaries. Read more ›

39 of 46 people found the following review helpful

3.0 out of 5 stars A thought-provoking book that goes steadily downhill September 24, 2006

By Stan Vernooy

Format:Paperback|Amazon Verified Purchase

The first half to 2/3 of this book makes some very good points that have escaped most of the popular discussions of economic issues. The authors point out, persuasively in my opinion, that certain industries and professions have "winner-take-all" characteristics that pervert the usual reward/punishment consequences of free-market economic policies.

The markets for which the authors have the strongest evidence of "winner take all" characteristics are presented earliest. As the book goes on, however, it falls into the same pattern of thousands of books before it: the authors have made one important and interesting observation, and they proceed to claim that virtually everything in the world that they disapprove of can be accounted for by this one observation. They assume, without plausible evidence, that the declines in education and popular culture are the direct consequence of winner-take-all markets. In a couple of cases they even admit that the evidence for winner-take-all characteristics in a particular industry or occupation is scanty or even nonexistent. But that doesn't prevent them from offering further arguments and policy recommendations based on the assumption that every one of these markets is dominated by winner-take-all distortions.

By the end of this book, where the authors make policy recommendations, they come close to leaving reality behind. They make these recommendations based on the assumptions that the **entire economy** is dominated by winner-take-all characteristics - a proposition for which they offer no evidence whatever. It is hard to escape the impression that their goal in writing this book was to justify a more socialistic economic policy on the part of the government, rather than to evenhandedly examine and explain an important issue....

In short: read the first of half of this book, because it makes a lot of worthwhile points and observations. Read most of the rest if you're retired or have a lot of free time. Skip the last chapter, with their policy recommendations. Read more ›

24 of 28 people found the following review helpful

5.0 out of 5 stars Commentary from a Chicago school follower May 15, 2000

By Lewis Gainor

Format:Paperback

This book is very well written, presenting an argument questioning some of the assumptions that the neo-classical economists make regarding human behavior. While I formerly thought that the outcome of a free market is always socially optimal, I cannot resist the conclusion after reading Frank that some regulations are necessary to divert us from our tendency to engage in arms races for relative status into other more productive activities. The book presents a sound argument for why popular culture has degraded so, and why some people make grossly large incomes, explaining each not on sociological grounds, but rather in terms of the increasing scope and competitiveness of markets. It is not technical in style, so even an Econ B.A. like myself can understand it in its totality (or anyone else, for that matter). The book promises in the beginning to demonstrate who there is not necessary a trade off between equity and efficiency, and in the end, it delivers. More than anything, if you look at the salary of an NBA player and question, "Is his jumpshot really worth $50 million/year? Are we paying him for something that is socially valuable?" then this book is for you. Frank's answer to that question is NO, and that incomes like those induce people to make erroneous career choices (like students who opt for playing hoops over studying math). The result of the free market then, is wasted talent that could have been useful in another application. MIZZOU ECON RULES!

20 of 25 people found the following review helpful

4.0 out of 5 stars Some Amusing, Yet Very Scary and Disturbing Truths September 15, 2002

By Gregory McMahan VINE™ VOICE

Format:Paperback

Frank and Cook�s book, The Winner Take All Society, forces us to reconsider our position on the inherent good of the free market in light of newly emerging forms of destructive, albeit free, competition and growing income inequality. Written in the vein of a thinly veiled rebuke of the moral and social decline of the American economy and society, the book appears to focus too much on specific individuals, and merely states a few implications for society as a whole. In my mind, what the authors posit as the verities for individuals and corporations under a winner take all banner just as readily applies to the nation and ultimately, the world. Taking their arguments one step further, advances in high technology, such as the internet and telecommunications, have increased productivity, transformed labor markets all over the world, and created uniform standards for goods and services that can now be consumed anywhere in the world. In effect, technology has made the world a similar, smaller place. Thus, what is true economically in America now is most likely true elsewhere, though cultural differences still remain.

While winner take all markets can, with the aid of technology, make the goods and services of the few available to everyone in the world, they also have many negative consequences. Winner take all markets magnify the consequences of first mover advantages, making it difficult, if not impossible, for those late to the competition, be they corporations or countries, to establish themselves. Winner take all markets continue to increase the disparity between wealthy, industrialized countries of the North and the impoverished, besieged economies of the South.... Winner take all markets continuously lure our most talented individuals into socially unproductive and often individually and socially destructive tasks. Many of the world�s economies already invest too little for the future, be they nations struggling to develop (such as those on the African continent), or fully industrialized nations (such as the United States), and the growth of winner take all markets has encouraged wasteful patterns of investment and consumption. Finally, winner take all markets have the proven ability to undermine what is in the best interests of our culture and society, and given the terrifying ability of winner-take-all markets to rigidly engender and enforce conformity, standardization, and one-upmanship, this growing phenomenon can only be counter-productive and disruptive to the efforts of indigenous peoples to maintain and preserve their fragile and threatened cultures.

Quite literally, in winner-take-all competitions, the rules really are there are no rules. As such, these competitions lead people to do very crazy things. When large payoffs are at stake and there is a very real certainty of the loser(s) getting absolutely nothing for their effort, contestants have powerful incentives to spend money to enhance their chances of winning, and have little or no moral compunction to exercise restraint and sensibility in their behavior. This is especially the case where unfettered, free competition is the rule and covenants and/or regulations to ensure orderly, equitable markets are not the norm.

Thus, there seems to be an inverse, negative relationship between investment in these all or nothing competitions and their (social) value to the larger group. As the pace of investment, size of the investment and the risk associated with the investment in the winner take all competition increases, the social and economic value of the competition steadily decreases. While these investments look justifiable from the individual�s or nation�s standpoint, especially if there is a considerable chance that the individual stands to win, and win big, the concomitant dueling that these investments fuel almost always appears excessive from the standpoint of the society. As such, these all-or nothing competitions have led to a plethora of economic versions of military arms races between individuals, corporations and nations.

Although one could surmise much of the content from experience and simple common sense, I generally found the book to be a straightforward and thought-provoking read. Yet, many of the examples demonstrating the extent to which such competitions have infiltrated all aspects of our economic life, as well as the often ridiculous, comical and increasingly desperate attempts by individuals to thrive in these all-or-nothing environments, profoundly scared and disturbed me. The authors could have done away with the last chapter, a rehashing of the same old remedies to the problem, and written a much better ending which could have summarized the main points of the book and discussed their implications, going forward, for all participants in the new global economy.

In conclusion, these all-or-nothing competitions have steadily become �the only game in town�. Yet, I seriously doubt that these dangerous economic games are really worth playing. Read more ›