The Market Power of Technology: Understanding the Second Gilded Age

Columbia University Press
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The Market Power of Technology

Since the 1980s, the United States has regressed to a level of economic inequality not seen since the Gilded Age in the late nineteenth century. At the same time, technological innovation has transformed society, and a core priority of public policy has been promoting innovation. What is the relationship between economic inequality and technological change?

Mordecai Kurz develops a comprehensive integrated theory of the dynamics of market power and income inequality. He shows that technological innovations are not simply sources of growth and progress: they sow the seeds of market power. In a free market economy with intellectual property rights, firms' control over technology enables them to expand, attain monopoly power, and earn exorbitant profits. Competition among innovators does not eliminate market power because technological competition is different from standard competition; it results in only one or two winners. Kurz provides a pioneering analysis grounded on quantifying technological market power and its effects on inequality, innovation, and economic growth. He outlines what causes market power to rise and fall and details its macroeconomic and distributional consequences.

Kurz demonstrates that technological market power tends to rise, increasing inequality of income and wealth. Unchecked inequality threatens the foundations of democracy: public policy is the only counterbalancing force that can restrain corporate power, attain more egalitarian distribution of wealth, and make democracy compatible with capitalism. Presenting a new paradigm for understanding today's vast inequalities, this book offers detailed proposals to redress them by restricting corporate mergers and acquisitions, reforming patent law, improving the balance of power in the labor market, increasing taxation, promoting upward mobility, and stabilizing the middle class.

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Professor Mordecai Kurz will be speaking in a Webinar with the Columbia University Alumni Association on February 22, 2023 at 6:00pm EST.
You can register for the event and learn more at this link: Mordecai Kurz with the Columbia University Alumni Association

Suggested Non-technical Reading of the Book

As I say in the preface, a rigorous examination of the problems related to inequality is difficult without advanced mathematical and statistical tools. Yet, most of the conclusions of those examinations and what they say about public policy are relatively simple and can be expressed in non-technical terms. With that in mind, I have written a special chapter enumerated Chapter 0, which offers a non-technical exposition of the content of the book. Virtually everything said in that chapter is repeated in more detail in later chapters. In addition to Chapter 0, there is a non-technical path through the various chapters that can be used by non-technical readers, particularly if their interest is focused on the policy implications of my study. This path is as follows:

Reviews and in the News

Advance Praise for The Market Power of Technology:

“Starting with the simple idea that established firms can use their technological innovations to deter entry, Kurz constructs an account of the rise in wealth inequality in modern societies. Beautifully blending analytical reasoning with empirical evidence, the book offers a picture of contemporary macroeconomic growth and development that is at once novel and convincing. This is economics at its best.” -- Sir Partha Dasgupta, Professor Emeritus of Economics at the University of Cambridge

“We live in a time of unparalleled technical innovation that ought to be bringing unparalleled and widespread prosperity. Mordecai Kurz gives us a clear, eloquent, and impassioned account of what has gone wrong and how we can fix it. This book is a key contribution to one of today's most important intellectual and policy debates.” -- Sir Angus Deaton, Noble Prize-Winning Professor of Economics and International Affairs Emeritus at the Princeton School of Public and International Affairs

“Economists tend to believe the market power enjoyed by innovators is a necessary evil. Mordecai Kurz shows that the resulting monopolies are neither temporary nor a minor hindrance. Kurz has written a book that is rigorous in its theoretical and empirical underpinnings, yet radical in its policy implications. This is a hugely important book that goes right to the core of the central contradictions of our current economic system.” -- Dani Rodrik, Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University

"In an era of dominance of IT firms, a sector which has been long known for its strong tendency for monopolization,The Market Power of Technologyprovides important reasoning and substantiation of how this increasing industrial concentration goes hand in hand with the income inequalities of our time.” -- Nicholas S. Vonortas, editor of Science and Public Policy

About the Author

Mordecai Kurz is Joan Kenney Professor of Economics Emeritus at Stanford University. His previous books include Public Investment, the Rate of Return, and Optimal Fiscal Policy (with Kenneth J. Arrow, 1970) and Endogenous Economic Fluctuations: Studies in the Theory of Rational Beliefs (1997), and he has published widely across many fields of economic theory.

Kurz has done work on Neoclassical Growth Theory, General Equilibrium Theory, Game Theory, Income Distribution, in addition to a substantial amount of empirical work. He served as the Director of Economics, The Institute for Mathematical Studies in the Social Sciences (IMSSS) at Stanford University, from 1969 to 1989 and directed for twenty years the most effective workshops of economic research in the history of the profession.