- Hardcover: 288 pages
- Publisher: Free Press; 1st edition (September 15, 1995)
- Language: English
- ISBN-10: 0028740343
- ISBN-13: 978-0028740348
- Product Dimensions: 6.5 x 1 x 9.8 inches
- Shipping Weight: 1.2 pounds (View shipping rates and policies)
- Average Customer Review: 20 customer reviews
- Amazon Best Sellers Rank: #1,302,025 in Books (See Top 100 in Books)
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Winner-Take-All Society 1st Edition
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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.
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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He makes the case that this is not socially beneficial for a number of reasons. One is that it leads to an over allocation of human resources to these fields. This happens as most persons are far too optimistic regarding their probability of being successful in such fields whereas, in reality, few would be. He provides considerable empirical evidence for the cast that such over optimism does exist. This leads to too many persons pursuing careers in such fields, a negative both for society and many of these same individuals as the overwhelming majority can never succeed in reaching the upper most pinnacles (or for that matter even being able to make a decent living in these fields).
In addition, these type of markets lead to great inequalities in wealth, too much conspicuous consumption and far too few resources allocated to public goods (i.e., schools, roads, etc.). With respect to the last item his argument is weak in that he does not make as strong a case for how increasingly inequality and conspicuous consumption lead to decreased spending on public goods.
The above arguments, in general, are novel and, more or less, logical. Where the book is weak, however, is in respect to the "solutions" proposed to remedy this problem. The author recommends implementing a more progressive income tax structure as a means of reducing the incentive to enter such markets. The main problem with this is that it would have to be raised significantly, from its current about one-third of top income earners income to, say, two-thirds (the author cites no specific numbers). This does not seem feasible, however, given the current political climate. In addition, raising the top rates does little to reduce the optimism most aspirants to these professions have in being able to make it to the pinnacles of these fields. Hence it does not tackle the true source of the misallocation problem.
Some of the markets where "winner took all" are very different today than 1995, when this book was written. The best example of that is in the music and entertainment industries. In 1995 what you got to hear was mostly decided by big name gate keepers pushing big name entertainers. You have many more choices today. Some of those choices are worse, as good, or better than what was available before. What's important is the gate keepers don't get between us and what we want to see and hear. Most "winners at the top" of the entertainment market aren't making nearly as much as they used to. Big entertainment companies like SONY have seen their music sales revenue hammered. More entertainers are making some money. More entertainers are touring, fewer are making huge money selling music with little touring. Basically the pyramid has gotten flatter and wider. The bias at the old gate keepers was to push the biggest names, to the biggest markets, all to maximize revenue. As a result many talented people worked in obscurity or just gave up. Today you can watch cute cat videos online all day if you want to. You can listen to music made at the beginning of the jazz age. You can watch a South Korea prancing around like a fool. You can watch obscure films or listen to obscure music and never listen to the Rolling Stones, Madonna, or Lady Gaga again in your life. Now that's progress!
There's been progress in other markets too. You can buy direct products made by people all over the world today, not just whatever happens to show up at your local retailer or Amazon (by the way, it was established 1994). The cost of manufacturing certain products has been coming down, so that helps increase the number of producers, and the variety of products available. This is progress too!
There still are markets where "winners take all", sports stars or corporate stars are great examples of that. Other examples are the usual assortment of local monopolies and highly regulated markets who pay off politicians; e.g., taxi-cab monopolies are a great example of that, another are barber and cosmetology schools that get laws passed to require hair braiders to spend thousands of dollars on useless course work.
In those markets where "winner takes all" still sometimes the best solution is to change laws to free up competition or reduce barriers to entry.