The Tyranny of the Market

This new book is by sometimes Slate.com columnist and U. Penn economist Joel Waldfogel, of "Deadweight Loss of Christmas" fame.  The subtitle is "Why You Can’t Always Get What You Want."

This well-written monograph is the best extant non-technical treatment of fixed costs and how they limit product diversity.  On a given night, you can’t see a live performance of Samuel Beckett in Topeka, Kansas but maybe you can in the larger New York City; fixed costs are why they won’t set up the stage and hire the cast for only five viewers.

But Waldfogel is more pessimistic about the market than I am.  The book’s opening example is about how hard it is to find radio stations in underpopulated areas; satellite radio is mentioned on p.120 but I would have started with its reach and also its limitations (and here).  There is internet radio as well.  The first example in the empirical chapter is that it takes $900 million on average to develop a new drug, but regulations and the FDA are not mentioned.

I can recommend this book but I do not agree with its central conclusion: "Markets do not avoid the tyranny of the majority."  There are very few areas of my life, if any, where markets force me to follow the wishes of the majority.

Oddly the biggest problem is not mentioned and that is style and marketing.  Retail outlets do not carry many items, not because they couldn’t hang some of the stuff from the ceiling, but rather because they wish to project a focused image.  In other words, the real problem, when there is one, is the very limited attention spans of the consumers and the ad watchers and the product line gossipers.

Comments

Radio strikes me as an ill-thought-out example of the "tyranny of the majority." Not only does satellite radio provide a fair amount of diversity everywhere, but one of the main functions of radio -- providing music to listen to -- is easily supplanted by a host of technological devices. Markets made that iPod my wife has; markets provided the hundreds of albums it is stuffed with, probably 75% of which have never been played on any radio station in the US; markets (namely eBay) even provided the dozens of 30-to-50-year-old traditional Newfoundland LPs I've ripped for her to put on it.

Markets, in other words, have ensured that when she is out driving, she can listen to our perfectly obscure music wherever she is. The only other people whose tastes she has to worry about is whoever is in the car with her.

I suppose you can argue that for the non-musical world, radio does limit you -- even with satellite radio you can't exactly listen to play-by-play of an Eastern Michigan University women's track meet while you're driving in Alaska. But given advances in broadcasting over the Internet and mobile wireless, I wouldn't be surprised if that limitation is gone in another decade.

Tyranny of the majority? Since when? Does Bobby Mugabe's tyranny
represent the majority in Zimbabwe?

Perhaps it is tyranny of markets, not majorities;

1. If I find something that fits, when I return later it will no longer be sold..it will be replaced by another style with different fitting
2. Markets force "gadgets" to have many unneeded features that no one uses, but make the item hard to use.
3. Instead of a wide variety of choices, typically there is a wide variety of very similar products. For example, try to buy a black resin mens watch that does not contain writing all over it explaining its features and pretending that it is used by atheletes or mercenaries.
4. Entertainment is inevitably pushed in the direction of the crassest lowest denominator and alternatives are marginalized. The classic example of this is the games in ancient Rome. This started out as athletic contests, but over time market forces led to the spectacle of virgins versus wild animals.

Seems like a particularly weak time to make this argument, when the Internet has opened up the market floodgates of minority preference.

You can actually get internet in remote and regional areas? You clearly don't live in australia, where lots of people are stuck on dialup speeds or out of coverage for anything at all (unless you install and commission your very own sat dish for transmit and receive at prohibitive expense - the PSTN speed is slower than GPRS.)

Oh and those dialup speeds are not going to be 56k either :P

I haven't read the book, but I do have a comment ... (does this sound like it is out of a faculty meeting or what?)

I think the "tyranny of the majority" is an interesting counterpoint to Chris Anderson's "long tail" phenomenon. Fixed costs do indeed have to be recovered else they are not incurred, and that can be done through increasing the number of payers, raising prices, or through relationships with complementary goods. In the long tail, Anderson shows us that there are some kinds of goods (in some kinds of markets) where distribution costs can get small enough so that minority preferences can be accommodated despite the up-front fixed costs. So I share Tyler's optimism that creative actors with appropriate incentives can find ways to meet minority preferences.

The problem with radio is that it is owned by the government (well managed by the government). Compare radio with cell phones. Radio grants an exclusive license to a single broadcaster in a region (with the set goal that they will not interfere with each other), resulting in a very small number of broadcasters. Early cell phones allocated spectrum in similar ways. Analog phones gave a call a specific portion of spectrum called a channel (radio has a single broadcaster on a channel).

However since you generally don't want a many to one relationship on your cell call, market based innovators began to work on channel sharing technologies. Nokia developed Time Divided Multiple Access which is a little like a token key network that each person using the same frequency is allocated the ability to broadcast for a portion of time. QUALCOMM devleoped Code Division Multiple Access which encodes each communication with a different encryption code and the different codes allow each end of the broadcast to correctly pull their portion of the broadcast from other users of the same frequency. Both technologies allow many multiples of the original single user per channel.
Because radio broadcasts have an incentive not to minimize their spectrum usage (within their licience) this technology is not used.

Framing the inquiry on the assumption that there is a "tyranny of the majority," in particular the colorful choice of "tyranny" rather than the more neutral "preference", suggests to me a bias with respect to the evaluation of "solutions". It reminds me of the classic ideological tactic of defining some aspect of the status quo as a big problem and then only endorsing solutions of a a different ideological stripe if a) they are backed up by irrefutable proof that it will unquestionably work, and b) it completely eliminates the problem, as opposed to merely mitigating it. However, if a solution consistent with the ideologue's pre-existing views is being debated, then the ideologue lowers the standard and says, "well, it may not work, but it is likely to make things better, and the situation is dire, so we should give it a try."

"There are very few areas of my life, if any, where markets force me to follow the wishes of the majority."

No doubt. But then again, you are very rich and very well-informed (and that is in many ways also a luxury you can afford as a tenured professor!).

There are _a lot_ of areas where the market has forced _me_ to follow the wishes of the majority. I only got a Linux job quite recently, for instance!

Despite all the supposed variety in radio that market provides me, I still usually listen to NPR, which the market does not provide me. What to make of that?

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