Product Description

Selected by Business Week as one of the 10 best business books of the year, this text is "a major contribution to the debate about the causes and consequences of inequality in America."--The New York Times Book Review.

Product Details

• Amazon Sales Rank: #227419 in Books
• Published on: 1996-09-01
• Original language: English
• Number of items: 1
• Binding: Paperback
• 288 pages

Features

• ISBN13: 9780140259957
• Condition: NEW
• Notes: Brand New from Publisher. No Remainder Mark.

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.

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

Customer Reviews

An Explanation for the Growing Economic Inequality
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.

A thought-provoking book that goes steadily downhill
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.

Commentary from a Chicago school follower
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!