Jean Tirole

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pages: 383 words: 81,118

Matchmakers: The New Economics of Multisided Platforms by David S. Evans, Richard Schmalensee

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Airbnb, big-box store, business process, cashless society, Deng Xiaoping, if you build it, they will come, Internet Archive, invention of movable type, invention of the printing press, invention of the telegraph, invention of the telephone, Jean Tirole, Lyft, M-Pesa, market friction, market microstructure, mobile money, multi-sided market, Network effects, Productivity paradox, profit maximization, purchasing power parity, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, Steve Jobs, Tim Cook: Apple, transaction costs, two-sided market, Uber for X, Victor Gruen, winner-take-all economy

Slower and Faster Than You Think Glossary Notes Index Acknowledgments About the Authors Praise for Matchmakers “David Evans and Richard Schmalensee are masters at combining strategic analysis and economic theory. Matchmakers is a journey through the strategies of platform businesses, which are central to our economies. Full of stories, fun to read, stimulating, and rigorous, this terrific book is required reading, from the economics and MBA student to the entrepreneur looking at building a platform to any reader curious about how our economy evolves.” —JEAN TIROLE, Chairman, Toulouse School of Economics; Winner, 2014 Nobel Prize in Economic Sciences “Matchmakers will be mandatory for anyone building or investing in multisided platforms—in the cloud or on the ground. It’s not only full of great stories like the rise of M-PESA, it’s also a practical guide to getting your platform business off the ground. If the people behind Apple Pay had this book to read, maybe they would have started differently.”

More than a few of them also make some of their services available for free or pay “customers” to use them. Almost all had difficult childhoods. Many barely made it out of the crib. Now economists know why multisided platforms can create immense value, and how they do it, and also why most matchmaker start-ups sputter and die. The Discovery of Multisided Businesses In 2000, our colleagues Jean-Charles Rochet and Jean Tirole, working at the University of Toulouse in the southwest of France, made a discovery that is still reverberating through economics departments and business schools. Over the previous five years, they had conducted research on telecommunications networks, payment card businesses, and computer operating systems. Like all other economists, they thought these businesses had little in common. Then they had the insight that these businesses, and many others that look very different on the surface, have the same underlying business model.

And they must use nontraditional, counterintuitive strategies to make money and survive. After working out a pioneering economic model, they wrote a paper, “Platform Competition in Two-Sided Markets,” which began circulating among economists in 2000.18 Economists now call these businesses multisided platforms because some of them actually facilitate interactions between more than two types of customers, as we will soon see. Jean Tirole received the Nobel Memorial Prize in Economic Sciences in 2014 for a number of important accomplishments, including his pioneering contributions to the new economics of multisided platforms. In the intervening years, economists, including ourselves, have written hundreds of papers on multisided platforms that have deepened our understanding of how these businesses work and how they differ from traditional firms.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, clean water, conceptual framework, constrained optimization, continuous double auction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, helicopter parent, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, winner-take-all economy

As we’ll see below, companies’ fortunes have been wagered and lost based on misunderstandings of what makes a platform tick. Platform Builder as Internet Cop The economist who did the most to formalize our understanding of two-sided markets is Jean Tirole, a Frenchman who won the Nobel Prize in 2014.10 Within economics, Tirole is known for his superhuman productivity and, relatedly, his incredible clarity of thought. According to one of his former students, Tirole writes his papers out by hand, to be typed out by his assistant. The drafts never include scratch work or deletions—the full arc of an argument is clear in his mind as he writes out his ideas. At the Toulouse School of Economics, where he has worked since 1996, graduate students joked that there must be a dozen little Jean Tiroles hidden in his basement writing the manuscripts, given the rate at which they appeared. Tirole wrote the book, quite literally, on industrial organization, the field within economics that aims to understand why markets are organized as they actually appear—why some industries consist of two dominant players (like Coke and Pepsi), while others more closely resemble Kenneth Arrow’s perfectly competitive ideal.

This is distinct from charge cards, which had existed for a while, where you had to pay the full balance at the end of every month. 10. Tirole’s work on two-sided markets was done with Jean-Charles Rochet, an economist at the University of Zurich. 11. Paul Samuelson, Economics (Cambridge, MA: MIT Press, 1988; first published 1948). 12. Binyamin Appelbaum, “Q. and A. with Jean Tirole, Economics Nobel Winner,” The Upshot, New York Times, October 14, 2014, www.nytimes.com/2014/10/15/upshot/q-and-a-with-jean-tirole-nobel-prize-winner.html. 13. His precise definition goes somewhat further than this and is framed in terms of whether the level of exchange depends on the prices that participants on different sides of the platform are charged, or just the total price. For example, does it matter whether Visa charges retailers a 3 percent processing fee and offers a 1 percent rebate to cardholders, versus charging a 2 percent processing fee and no rebate?

Even this is an exaggeration. Every market has some two-sided aspects to it. We haven’t looked at the contracts that food producers have with grocery chains, but we’d bet that they lead both parties to care how many boxes of cereal or cans of beans get sold. Even if it’s not specified in the contract, you can be sure it’d come up the next time the grocer and its suppliers get together to do business. 6. Jean Tirole and Jean-Charles Rochet convey this point more precisely in a 2006 article where they show that two-sided markets are only necessary when the Coase Theorem fails. This theorem, more a conjecture provided by economist Ronald Coase, essentially argues that free markets maximize efficiency in the absence of externalities or transaction costs. Andrei Hagiu and Julian Wright explore the continuum of reseller and pure marketplace in “Do You Really Want to Be an eBay?”


pages: 421 words: 110,406

Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You by Sangeet Paul Choudary, Marshall W. van Alstyne, Geoffrey G. Parker

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3D printing, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, Apple's 1984 Super Bowl advert, autonomous vehicles, barriers to entry, big data - Walmart - Pop Tarts, bitcoin, blockchain, business process, buy low sell high, chief data officer, clean water, cloud computing, connected car, corporate governance, crowdsourcing, data acquisition, data is the new oil, discounted cash flows, disintermediation, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, financial innovation, Haber-Bosch Process, High speed trading, Internet of things, inventory management, invisible hand, Jean Tirole, Jeff Bezos, jimmy wales, Khan Academy, Kickstarter, Lean Startup, Lyft, market design, multi-sided market, Network effects, new economy, payday loans, peer-to-peer lending, Peter Thiel, pets.com, pre–internet, price mechanism, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Coase, Satoshi Nakamoto, self-driving car, shareholder value, sharing economy, side project, Silicon Valley, Skype, smart contracts, smart grid, Snapchat, software is eating the world, Steve Jobs, TaskRabbit, The Chicago School, the payments system, Tim Cook: Apple, transaction costs, two-sided market, Uber and Lyft, Uber for X, winner-take-all economy, Zipcar

Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2, no. 1 (Spring 1971): 3–21. 10. Jean-Jacques Laffont and Jean Tirole, “The Politics of Government Decision-Making: A Theory of Regulatory Capture,” Quarterly Journal of Economics 106, no. 4 (1991): 1089–1127. 11. Conor Friedersdorf, “Mayors of Atlanta and New Orleans: Uber Will Beat the Taxi Industry,” Atlantic, June 29, 2014, http://www.theatlantic .com/business/archive/2014/06/mayors-of-atlanta-and-new-orleans-uber-will-beat-the-taxi-cab-industry/373660/. 12. Don Boudreaux, “Uber vs. Piketty,” Cafe Hayek, August 1, 2015, http://cafehayek.com/2015/08/uber-vs-piketty.html. 13. Andrei Shleifer, “Understanding Regulation,” European Financial Management 11, no. 4 (2005): 439–51. 14. Jean-Jacques Laffont and Jean Tirole, Competition in Telecommunications (Cambridge, MA: MIT Press, 2000). 15.

This makes the design of monetization models more complex, since the platform must ensure that the value it gives away to one side can be used to capture value on the other side. Significant scholarly work has been done in this area. Two of this book’s authors (Geoff Parker and Marshall Van Alstyne) were among the first scholars to lay out the theory of two-sided market pricing.2 And the theory was mentioned as part of the 2014 Nobel Prize awarded to one of the other originators of two-sided market economics, Jean Tirole.3 Achieving the right balance among the complex factors involved in two-sided market pricing isn’t easy. Netscape, one of the pioneers of the Internet era, gave away browsers for free in hopes of selling web servers. Unfortunately, there was no proprietary connection between browsers and servers that Netscape could reliably control. Anyone could just as easily use Microsoft’s web server or the free Apache web server, which meant that Netscape was never able to monetize the other side of its free browser business.

In his 1971 article, Stigler illustrated the point with examples drawn from oil import quotas, the prevention of new firms entering the airline, trucking, and banking industries, and the control of access to labor markets through licensing requirements for workers such as barbers, embalmers, physicians, and pharmacists. Thanks to regulatory capture, government rules are often used to block competition and thwart innovation rather than to protect consumers and benefit society. Stigler and his followers argue that the economy and society as a whole will benefit when regulatory capture is eliminated—and that this requires the elimination of most government regulation of business. Jean-Jacques Laffont and Jean Tirole (the latter the 2014 winner of the Nobel Prize in Economics) extended Stigler’s analysis using an agency perspective, making the point that “principals,” like voters, have imperfect control over their “agents,” including elected and appointed officials. Laffont and Tirole show that it would be impossible for firms to benefit from regulatory capture if the principals involved had more complete information about and control over the behavior of their agents.10 There’s no doubt that regulatory capture does exist.


pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Edward Glaeser, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Washington Consensus, white flight

Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review 91, no. 5 (December 2001): 1369–1401. 17. A good overall synthesis of this work can be found in Daron Acemoglu and James Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (New York: Crown, 2012). 18. Binyamin Appelbaum, “Q. and A. with Jean Tirole, Economics Nobel Winner,” New York Times, October 14, 2014 (http://www.nytimes.com/2014/10/15/upshot/q-and-a-with-jean-tirole-nobel-prize-winner.html?_r=0&abt=0002&abg=0). 19. See, for example, the essays in Paul Rabinow and William M. Sullivan, eds., Interpretive Social Science: A Second Look (Berkeley: University of California Press, 1987). INDEX Page numbers in italics refer to illustrations. Page numbers listed correspond to the print edition of this book.

But simply switching to an alternative framework that itself lacks universality and captures only a particular slice of reality cannot be the solution. Insights of these alternative perspectives are, in fact, readily accommodated within standard modeling practices of economics, as I’ve argued. All these divides can be bridged by viewing economics as a collection of models, along with a system of navigation among models. The discipline’s most successful and celebrated practitioners exemplify this approach. The French economist Jean Tirole, who won the 2014 Nobel Prize in Economic Sciences for his work on regulation, is a good example. In typical fashion, he was deluged after his prize was announced by journalists seeking a quick take on the research that had brought him the recognition. But his interlocutors were in for some frustration. “There’s no easy line in summarizing my contribution,” he protested. “It is industry-specific.


pages: 678 words: 216,204

The Wealth of Networks: How Social Production Transforms Markets and Freedom by Yochai Benkler

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affirmative action, barriers to entry, bioinformatics, Brownian motion, call centre, Cass Sunstein, centre right, clean water, dark matter, desegregation, East Village, fear of failure, Firefox, game design, George Gilder, hiring and firing, Howard Rheingold, informal economy, invention of radio, Isaac Newton, iterative process, Jean Tirole, jimmy wales, market bubble, market clearing, Marshall McLuhan, New Journalism, optical character recognition, pattern recognition, pre–internet, price discrimination, profit maximization, profit motive, random walk, recommendation engine, regulatory arbitrage, rent-seeking, RFID, Richard Stallman, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, shareholder value, Silicon Valley, Skype, slashdot, social software, software patent, spectrum auction, technoutopianism, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs

For purposes of understanding the political implications that occupy most of this book, that is all that is necessary. [pg 91] * * * 18. For an excellent history of the free software movement and of open-source development, see Glyn Moody, Rebel Code: Inside Linux and the Open Source Revolution (New York: Perseus Publishing, 2001). 19. Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge: Cambridge University Press, 1990). 20. Josh Lerner and Jean Tirole, "The Scope of Open Source Licensing" (Harvard NOM working paper no. 02-42, table 1, Cambridge, MA, 2002). The figure is computed out of the data reported in this paper for the number of free software development projects that Lerner and Tirole identify as having "restrictive" or "very restrictive" licenses. 21. Netcraft, April 2004 Web Server Survey, ‹http://news.netcraft.com/archives/web_› server_survey.html. 22.

Being offered money to do something you know you "ought" to do, and that self-respecting members of society usually in fact do, implies that the person offering the money believes that you are not a well-adjusted human being or an equally respectable member of society. This causes the person offered the money either to believe the offerer, and thereby lose self-esteem and reduce effort, or to resent him and resist the offer. A similar causal explanation is formalized by Roland Benabou and Jean Tirole, who claim that the person receiving the monetary incentives infers that the person offering the compensation does not trust the offeree to do the right thing, or to do it well of their own accord. The offeree's self-confidence and intrinsic motivation to succeed are reduced to the extent that the offeree believes that the offerer--a manager or parent, for example--is better situated to judge the offeree's abilities. 34 188 More powerful than the theoretical literature is the substantial empirical literature--including field and laboratory experiments, econometrics, and surveys--that has developed since the mid-1990s to test the hypotheses of this model of human motivation.

These architectures and organizational models allow both independent creation that coexists and coheres into usable patterns, and interdependent cooperative enterprises in the form of peer-production processes. 207 Together, these three characteristics suggest that the patterns of social production of information that we are observing in the digitally networked environment are not a fad. They are, rather, a sustainable pattern of human production given the characteristics of the networked information economy. The diversity of human motivation is nothing new. We now have a substantial literature documenting its importance in free and open-source software development projects, from Josh Lerner and Jean Tirole, Rishab Ghosh, Eric Von Hippel and Karim Lakhani, and others. Neither is the public goods nature of information new. What is new are the technological conditions that allow these facts to provide the ingredients of a much larger role in the networked information economy for nonmarket, nonproprietary production to emerge. As long as capitalization and ownership of the physical capital base of this economy remain widely distributed and as long as regulatory policy does not make information inputs artificially expensive, individuals will be able to deploy their own creativity, wisdom, conversational capacities, and connected computers, both independently and in loose interdependent cooperation with others, to create a substantial portion of the information environment we occupy.


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

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airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K

O'Connor (1996), The Platinum Rule: Discover the Four Basic Business Personalities—And How They Can Lead You to Success, Warner Books. reputation scale Avinash Dixit and Barry Nalebuff (1991), Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life, Norton, 144–61. Criminals have signals Diego Gambetta (2009), Codes of the Underworld: How Criminals Communicate, Princeton University Press. Shared brand names Jean Tirole (1996), “A Theory of Collective Reputations (with Applications to the Persistence of Corruption and to Firm Quality),” Review of Economic Studies, 63:1–22. Saudi Binladin Group Holly Williams (20 Nov 2001), “Bin Laden Group Reputation Brief on Global Scale,” PR Week UK. pay a premium Stefano Castriota and Marco Delmastro (2009), “The Economics of Collective Reputation: Minimum Quality Standards, Vertical Differentiation, and Optimal Group Size,” American Association of Wine Economists Working Paper 50.

DC Circuit Court of Appeals, filed November 1, 2010. September 11 attacks Nate Silver (4 Jan 2010), “The Skies Are as Friendly as Ever: 9/11, Al Qaeda Obscure Statistics on Airline Safety,” FiveThirtyEight.com. scale is too large Bruce Schneier (2008), “Seven Habits of Highly Unsuccessful Terrorists,” Wired News. Max Abrams (2008), “What Terrorists Really Want,” International Security, 32:78–105. regulatory capture Jean J. Laffont and Jean Tirole (1991), “The Politics of Government Decision-Making: A Theory of Regulatory Capture,” The Quarterly Journal of Economics, 106:1089–127. Mark Jickling (2004), “Barriers to Corporate Fraud: How They Work, Why They Fail,” CRS Report for Congress RL32718, Congressional Research Service. Dieter Helm (2006), “Regulatory Reform, Capture, and the Regulatory Burden,” Oxford Review of Economic Policy, 22:169–86.

Joseph Henrich, Robert Boyd, Samuel Bowles, Colin Camerer, Ernst Fehr, Herbert Gintis, Richard McElreath, Michael Alvard, Abigail Barr, Jean Ensminger, Kim Hill, Francisco Gil-White, Michael Gurven, Frank Marlowe, John Q. Patton, Natalie Smith, and David Tracer (2005), “'Economic Man' in Cross-Cultural Perspective: Behavioral Experiments in 15 Small-Scale Societies,” Behavioral & Brain Sciences, 28:795–855. Some researchers claim Ernst Fehr and Urs Fischbacher (2005), “Human Altruism: Proximate Patterns and Evolutionary Origins,” Analyse & Kritik, 27:6–47. Others claim Roland Bénabou and Jean Tirole (2006), “Incentives and Prosocial Behavior,” American Economic Review, 96:1652–78. Amihai Glazer and Kai A. Konrad (1996) “A Signaling Explanation for Charity,” American Economic Review, 86:1019–28. Dan Ariely, Anat Bracha, and Stephan Meier (2008), “Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially,” Federal Reserve Bank of Boston Working Paper No. 07–9.


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

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accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bernie Madoff, British Empire, central bank independence, collective bargaining, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, Jean Tirole, job satisfaction, Joseph Schumpeter, knowledge worker, labour market flexibility, law of one price, Long Term Capital Management, low skilled workers, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, open economy, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, rolodex, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, ultimatum game, union organizing, working-age population, World Values Survey

Review of Financial Studies 22: 3093–3129. Becker, Gary S. 1957/1971. The Economics of Discrimination. 2nd ed. Chicago: University of Chicago Press. . 1976. The Economic Approach to Human Behavior. Chicago: University of Chicago Press. Bellante, Don. 2004. “Edward Chamberlin: Monopolisitic Competition and Pareto Optimality.” Journal of Business and Economics Research 2: 17–28. Benabou, Roland and Jean Tirole. 2006. “Belief in a Just World and Redistributive Politics.” Quarterly Journal of Economics 121: 699–746. Benmelech, Efraim, Eugene Kandel and Pietro Veronesi. 2010. “Stock-Based Compensation and CEO (Dis)Incentives.” Quarterly Journal of Economics 125: 1769–1820. Benmelech, Efraim and Toby Moskowitz. Forthcoming. “The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century.”

“Politically Connected Firms.” American Economic Review 96: 369–86. Faccio, Mara, Ronald W. Masulis and John J. McConnell. 2006. “Political Connections and Corporate Bailouts.” Journal of Finance 61: 2597–2635. Farber, Henry S. 2005. “What Do We Know About Job Loss in the United States: Evidence from the Displaced Workers Survey, 1984–2004.” Federal Reserve Bank of Chicago Regional Review: 13–28. Farhi, Emmanuel and Jean Tirole. 2009. “Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts.” NBER Working Paper 15138. Farhi, Emmanuel and Iván Werning. 2008. “The Political Economy of Nonlinear Capital Taxation.” Working paper. Feenstra, Robert, Benjamin Mandel, Marshall B. Reisdorf and Matthew J. Slaughter. 2009. “Effects of Terms of Trade and Tariff Changes on the Measurement of U.S. Productivity Growth.” NBER Working Paper 1592.


pages: 313 words: 84,312

We-Think: Mass Innovation, Not Mass Production by Charles Leadbeater

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1960s counterculture, Andrew Keen, barriers to entry, bioinformatics, c2.com, call centre, citizen journalism, clean water, cloud computing, complexity theory, congestion charging, death of newspapers, Debian, digital Maoism, double helix, Edward Lloyd's coffeehouse, frictionless, frictionless market, future of work, game design, Google Earth, Google X / Alphabet X, Hacker Ethic, Hernando de Soto, hive mind, Howard Rheingold, interchangeable parts, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jean Tirole, jimmy wales, John von Neumann, Kevin Kelly, knowledge economy, knowledge worker, lone genius, M-Pesa, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Silicon Valley, slashdot, social web, software patent, Steven Levy, Stewart Brand, supply-chain management, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Whole Earth Catalog, Zipcar

Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (Princeton University Press, 2007) 16 Bart Nooteboom, Learning and Innovation in Organizations and Economies (Oxford University Press, 2000) 17 Steven Weber, The Success of Open Source (Cambridge, MA/London: Harvard University Press, 2004) 18 Articles by Lakhani, Ghosh and Lerner in Joseph Feller, Brian Fitzgerald, Scott A. Hissam, Karim R. Lakhani (Eds), Perspectives on Free and Open Source Software (Cambridge, MA: MIT Press, 2005) 19 Josh Lerner and Jean Tirole, ‘The Simple Economics of Open Source’, NBER Working Paper W7600 (2000). Available from http://www.nber.org/papers/w7600 20 Robert Wright, Nonzero (Abacus, 2001) 21 Carliss Y. Baldwin and Kim B. Clark, Design Rules (Cambridge, MA/London: MIT Press, 2000) Chapter 4 1 Richard Sennett, The Culture of the New Capitalism (New Haven, CT/London: Yale University Press, 2006) 2 Mitch Kapor, blog.kapor.com 3 Henry Chesbrough, Wim Vanhaverbeke and Joel West (Eds), Open Innovation: Researching a New Paradigm (Oxford University Press, 2006) 4 John Hartley, ‘Culture Business and the Value Chain of Meaning’, The New Economy, Creativity and Consumption – A Symposium (Brisbane: Queensland University of Technology Publications, 2002), pp. 39–46 5 http://www.blizzard.com/inblizz/profile.shtml 6 Nicolas Ducheneaut, Nicholas Yee, Eric Nickell and Robert J.

, Guardian, 26 January 2006 Lane, Christel, and Reinhard Bachmann (Eds), Trust Within and Between Organizations (Oxford University Press, 1998) Larsson, Ulf (Ed), Cultures of Creativity (Canton, MA: Science History Publications, 2002) Leadbeater, Charles, ‘The DIY State’, Prospect 130, January 2007 Lencek, Lena, and Gideon Bosker, The Beach: The History of Paradise on Earth (New York: Penguin, 1999) Lerner, Josh, and Jean Tirole, ‘The Simple Economics of Open Source’, NBER Working Paper W7600 (2000). Available from http://www.nber.org/papers/w7600 Lessig, Lawrence, Code and Other Laws of Cyberspace (New York: Basic Books, 1999) Lessig, Lawrence, Free Culture (New York: Penguin Press, 2004) Lester, Richard K., and Michael Piore, Innovation: The Mission Dimension (Harvard University Press, 2004) Lethem, Jonathan, ‘The Ecstasy of Influence’, Harper’s Magazine, February 2007 Levine, Rick, Christopher Locke, Doc Searls and David Weinberger, The Cluetrain Manifesto (Perseus Books, 2000) Levy, Pierre and Robert Bonomo (trans), Collective Intelligence: Mankind’s Emerging World in Cyberspace (Perseus Books 1997) Levy, Steven, and Brad Stone, ‘The New Wisdom of the Web’, Newsweek, April 2006.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, invisible hand, Jean Tirole, joint-stock company, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, payday loans, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, War on Poverty, Washington Consensus, We are the 99%, working poor

“Scope and Impacts of Financial Conflicts of Interest in Biomedical Research,” Journal of the American Medical Association 284 (2003): 454–65. Bel, Germa. “The First Privatisation: Seeling SOEs and Privatizing Public Monopolies in Fascist Italy,” Cambridge Journal of Economics 35(5)(2011): 937-956. Benabou, Roland, and Jean Tirole. “Identity, Dignity and Taboos,” CEPR Discussion Paper 6123 (2007), available at www.vwl.tuwien.ac.at/hanappi/AgeSo/rp/Benabou_2007.pdf. Benabou, Roland, and Jean Tirole. “Self-Knowledge and Self-Regulation: An Economic Approach,” in I. Brocas and J. Carillo, eds., The Psychology of Economic Decisions, vol. 1 (Oxford: Oxford University Press, 2003), pp. 137–67. Benabou, Roland, and Jean Tirole. “Willpower and Personal Rules,” Journal of Political Economy 112 (2004): 848–86. Berg, Nathan, and Gerd Gigerenzer. “As-if Behavioral Economics: Neoclassical Economics in Disguise?” History of Economic Ideas 18 (2010): 133–65.


pages: 494 words: 142,285

The Future of Ideas: The Fate of the Commons in a Connected World by Lawrence Lessig

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AltaVista, Andy Kessler, barriers to entry, business process, Cass Sunstein, computer age, dark matter, disintermediation, Erik Brynjolfsson, George Gilder, Hacker Ethic, Hedy Lamarr / George Antheil, Howard Rheingold, Hush-A-Phone, HyperCard, hypertext link, Innovator's Dilemma, invention of hypertext, inventory management, invisible hand, Jean Tirole, Jeff Bezos, Joseph Schumpeter, linked data, Menlo Park, Network effects, new economy, packet switching, price mechanism, profit maximization, RAND corporation, rent control, rent-seeking, RFC: Request For Comment, Richard Stallman, Richard Thaler, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, smart grid, software patent, spectrum auction, Steve Crocker, Steven Levy, Stewart Brand, Ted Nelson, Telecommunications Act of 1996, The Chicago School, transaction costs

.: O'Reilly, 1999), 151. 54 Wayner, 289. 55 “IBM Extends Software Leadership on Linux,” IBM Press Release, December 8, 2000. 56 Economists have only begun to examine the incentives that might affect open code projects. Josh Lerner and Jean Tirole have summarized some of the benefits, relative to closed code projects, as follows: (1) lower costs due to (a) familiarity of the code from, e.g., university training, and (b) customization/bug-fixing advantages; and (2) higher benefits, especially due to signaling from (a) better performance measurement (easier to demonstrate skill), (b) “full initiative” (because no supervisory involvement), and (c) greater labor market fluidity. See Josh Lerner and Jean Tirole, “The Simple Economics of Open Source” (NBER Working Paper No. 7600, December 2000). James Bessen has offered a far more ambitious model of the benefits from open code projects.


pages: 500 words: 145,005

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

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Albert Einstein, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, More Guns, Less Crime, mortgage debt, Nash equilibrium, Nate Silver, New Journalism, nudge unit, payday loans, Ponzi scheme, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Walter Mischel

The first was empirical: finding and documenting anomalies, both in individual and firm behavior and in market prices. The second was developing theory. Economists were not going to take the field seriously until it had formal mathematical models that could incorporate the additional findings from psychology. With talented new behavioral economists entering the field, and even some well-established theorists such as Jean Tirole (the winner of the 2014 Nobel Prize) dabbling with behavioral models, there was continual progress on both fronts. But there was a third goal lurking in the background: could we use behavioral economics to make the world a better place? And could we do so without confirming the deeply held suspicions of our biggest critics: that we were closet socialists, if not communists, who wanted to replace markets with bureaucrats?

Murphy. 1988. “A Theory of Rational Addiction.” Journal of Political Economy 96, no. 4: 675–700. Behavioural Insights Team. 2013. “Removing the Hassle Factor Associated with Loft Insulation: Results of a Behavioural Trial.” UK Department of Energy & Climate Change, September. Available at: https://www.gov.uk/government/publications/loft-clearance-results-of-a-behavioural-trial. Bénabou, Roland, and Jean Tirole. 2003. “Intrinsic and Extrinsic Motivation.” Review of Economic Studies 70, no. 3: 489–520. Benartzi, Shlomo, and Richard H. Thaler. 1995. “Myopic Loss Aversion and the Equity Premium Puzzle.” Quarterly Journal of Economics 110, no. 1: 73–92. ———. 1999. “Risk Aversion or Myopia? Choices in Repeated Gambles and Retirement Investments.” Management Science 45, no. 3: 364–81. ———. 2013. “Behavioral Economics and the Retirement Savings Crisis.”


pages: 204 words: 54,395

Drive: The Surprising Truth About What Motivates Us by Daniel H. Pink

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affirmative action, call centre, Daniel Kahneman / Amos Tversky, Dean Kamen, deliberate practice, Firefox, Frederick Winslow Taylor, game design, George Akerlof, Isaac Newton, Jean Tirole, job satisfaction, knowledge worker, performance metric, profit maximization, profit motive, Results Only Work Environment, side project, the built environment, Tony Hsieh, transaction costs

Kuhnen and Brian Knutson, The Neural Basis of Financial Risk Taking, Neuron 47 (September 2005): 768. Mei Cheng, K. R. Subramanyam, and Yuan Zhang, Earnings Guidance and Managerial Myopia, SSRN Working Paper No. 854515 , November 2005. Lisa D. Ordonez, Maurice E. Schweitzer, Adam D. Galinsky, and Max H. Braverman, Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting, Harvard Business School Working Paper No. 09-083 , February 2009. Roland BŽnabou and Jean Tirole, Intrinsic and Extrinsic Motivation, Review of Economic Studies 70 (2003). CHAPTER 2A. . . . AND THE SPECIAL CIRCUMSTANCES WHEN THEY DO Edward L. Deci, Richard Koestner, and Richard M. Ryan, Extrinsic Rewards and Intrinsic Motivation in Education: Reconsidered Once Again, Review of Educational Research 71, no. 1 (Spring 2001): 14. Dan Ariely, What's the Value of a Big Bonus? New York Times , November 20, 2008.


pages: 282 words: 80,907

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

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Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, computer age, crowdsourcing, deferred acceptance, desegregation, experimental economics, first-price auction, Flash crash, High speed trading, income inequality, Internet of things, invention of agriculture, invisible hand, Jean Tirole, law of one price, Lyft, market clearing, market design, medical residency, obamacare, proxy bid, road to serfdom, school choice, sealed-bid auction, second-price auction, second-price sealed-bid, Silicon Valley, spectrum auction, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, The Wealth of Nations by Adam Smith, two-sided market

MARKETS FOR BREAKFAST AND THROUGH THE DAY [>] sold “by sample”: See Jonathan Levin and Paul Milgrom, “Online Advertising: Heterogeneity and Conflation in Market Design,” American Economic Review 100, no. 2 (May 2010): 603–7. [>] Credit cards offered merchants: Credit cards are sometimes referred to by economists as “two-sided markets” because of the way they form a marketplace that needs to attract two different kinds of participants: merchants and consumers. One important strand of work focuses on how the two sides of the service should be priced; see, for example, Jean-Charles Rochet and Jean Tirole, “Two-Sided Markets: A Progress Report,” RAND Journal of Economics 37, no. 3 (Autumn 2006): 645–67. [>] they seldom switch cards: See Lawrence M. Ausubel, “The Failure of Competition in the Credit Card Market,” American Economic Review 81, no. 1 (March 1991): 50–81. [>] middlemen: For competition among middlemen, see Benjamin Edelman and Julian Wright, “Price Coherence and Adverse Intermediation” (working paper, Harvard Business School, Cambridge, MA, December 2013). 3.

Infotopia: How Many Minds Produce Knowledge by Cass R. Sunstein

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affirmative action, Andrei Shleifer, availability heuristic, Build a better mousetrap, c2.com, Cass Sunstein, cognitive bias, cuban missile crisis, Daniel Kahneman / Amos Tversky, Edward Glaeser, en.wikipedia.org, feminist movement, framing effect, hindsight bias, Isaac Newton, Jean Tirole, jimmy wales, market bubble, market design, minimum wage unemployment, prediction markets, profit motive, rent control, Richard Stallman, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, slashdot, stem cell, The Wisdom of Crowds, winner-take-all economy

I draw here on the extremely illuminating discussion in Steven Weber, The Success of Open Source (Cambridge, MA: Harvard University Press, 2004), 171–78. 28. http://groups.google.com/group/comp.os.minix/msg/ 2194d253268b0a1b; quoted in ibid., 54–55. 29. Ibid., 55. 30. Interested readers may enjoy Torvalds’s homepage; see http:// www.cs.helsinki.fi/u/torvalds/. 31. See Richard Stallman, “The GNU Operating System and the Free Software Movement,” in Open Sources: Voices from the Open Source Revolution, ed. Chris Dibona et al. (Sebastopol, CA: O’Reilly, 1999), 55–56. 32. Ibid., 57. 33. See Josh Lerner and Jean Tirole, “The Economics of Technology Sharing: Open Source and Beyond,” Journal of Economic Perspectives 19 (2005): 100. 34. Ibid. 254 / Notes to Pages 167–71 35. See Raymond, The Cathedral and the Bazaar. 36. Ibid., 21–22. 37. Here, too, I am grateful to Ethan Zuckerman for clarifying comments. 38. Eric Raymond, “Homesteading the Noosphere,” in The Cathedral and the Bazaar, 67, 81, 110. 39. Ibid., 89. 40.


pages: 270 words: 79,180

The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit by Marina Krakovsky

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Affordable Care Act / Obamacare, Airbnb, Al Roth, Black Swan, buy low sell high, Credit Default Swap, cross-subsidies, crowdsourcing, disintermediation, diversified portfolio, experimental economics, George Akerlof, Goldman Sachs: Vampire Squid, income inequality, index fund, Jean Tirole, Lean Startup, Lyft, Mark Zuckerberg, market microstructure, Martin Wolf, McMansion, Menlo Park, moral hazard, multi-sided market, Network effects, patent troll, Paul Graham, Peter Thiel, pez dispenser, ride hailing / ride sharing, Sand Hill Road, sharing economy, Silicon Valley, social graph, supply-chain management, TaskRabbit, The Market for Lemons, too big to fail, trade route, transaction costs, two-sided market, Uber for X, ultimatum game, Y Combinator

Stein, “Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit Taking,” The Journal of Finance 57, no. 1 (February 2002): 33–73. 33.Interview with Genevieve Thiers, January 27, 2014. 34.Libby Kane, “Entrepreneurship 101: Interview with Genevieve Thiers,” LearnVest, September 12, 2012. 35.Interview with Marc Rysman, January 31, 2014. Rysman’s contribution to the literature is Marc Rysman, “The Economics of Two-Sided Markets,” Journal of Economic Perspectives 23, no. 3 (2009). Another survey paper is Jean-Charles Rochet and Jean Tirole, “Two-sided Markets: A Progress Report,” RAND Journal of Economics 37, no. 3 (September 2006): 646–67. The classic paper describing increasing returns to scale is W. Brian Arthur, “Competing Technologies, Increasing Returns, and Lock-In By Historical Events,” The Economic Journal 99, no. 394 (March 1989). A less academic account of these ideas by the same author is W. Brian Arthur, “Increasing Returns and the New World of Business,” Harvard Business Review 74, no. 4 (July/August 1996): 100–109. 36.These are called “indirect” because they refer to what is happening on the other side; direct network effects occur if users care how many other users are on the same side as they are.


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial innovation, financial intermediation, George Akerlof, Growth in a Time of Debt, income inequality, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, Nick Leeson, Northern Rock, open economy, peer-to-peer lending, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, sovereign wealth fund, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

“Tax Biases to Debt Finance: Assessing the Problem, Finding Solutions.” IMF staff discussion note. International Monetary Fund, Washington, DC. May 3. Demyanyk, Yuliya, and Otto Van Hemert. 2009. “Understanding the Subprime Mortgage Crisis.” Review of Financial Studies 24 (6): 1848–1880. Dermine, Jean. 1990. European Banking in the 1990s. Oxford, England: Blackwell. Dewatripont, Mathias, and Jean Tirole. 1994. The Prudential Regulation of Banks. Cambridge, MA: MIT Press. ———. “Macroeconomic Shocks and Banking Regulation.” Journal of Money, Credit, and Banking, forthcoming. Diamond, Douglas W. 1984. “Financial Intermediation and Delegated Monitoring.” Review of Economic Studies 51: 193–414. ———. 1991. “Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt.” Journal of Political Economy 99 (4): 689–721.

Accessed November 4, 2012. Fahlenbrach, Rüdiger, and René Stulz. 2011. “Bank CEO Incentives and the Credit Crisis.” Journal of Financial Economics 99: 11–26. Farber, David B., Marilyn F. Johnson, and Kathy R. Petroni. 2007. “Congressional Intervention in the Standard-Setting Process: An Analysis of the Stock Option Accounting Reform Act of 2004.” Accounting Horizons 21 (1): 1–22. Farhi, Emmanuel, and Jean Tirole. 2011. “Collective Moral Hazard, Maturity Mismatch, and Systemic Bailouts.” Working paper. Harvard University, Cambridge, MA, and Toulouse School of Economics, University of Toulouse, Toulouse, France. FCIC (Financial Crisis Inquiry Commission). 2011. The Financial Crisis Inquiry Report. Washington, DC: U.S. Government Printing Office. Federal Reserve Bank of Dallas. 2012. “Choosing the Road to Prosperity: Why We Must End Too Big to Fail Now.” 2011 annual report.


pages: 398 words: 107,788

Coding Freedom: The Ethics and Aesthetics of Hacking by E. Gabriella Coleman

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Benjamin Mako Hill, crowdsourcing, Debian, dumpster diving, en.wikipedia.org, financial independence, ghettoisation, Hacker Ethic, informal economy, Jacob Appelbaum, Jaron Lanier, Jason Scott: textfiles.com, Jean Tirole, knowledge economy, laissez-faire capitalism, Louis Pasteur, means of production, Paul Graham, pirate software, popular electronics, RFC: Request For Comment, Richard Stallman, rolodex, Ronald Reagan, Silicon Valley, Silicon Valley startup, slashdot, software patent, software studies, Steve Ballmer, Steven Levy, Ted Nelson, the scientific method, The Structural Transformation of the Public Sphere, web application, web of trust

US versus Microsoft: The Twelfth Week. http://news.bbc.co.uk/2/hi/special_report/1998/04/98/microsoft/262488.stm (accessed March 23, 2012). Leonard, Andrew. 1998. The Saint of Free Software. Salon.com. http://archive.salon.com/21st/feature/1998/08/cov_31feature.html (accessed July 17, 2011). Lerner, Josh, and Mark Schankerman. 2010. The Comingled Code: Open Source and Economic Development. Cambridge, MA: MIT Press. Lerner, Josh, and Jean Tirole. 2001. The Open Source Movement: Key Research Questions. European Economic Review 45 (4–6): 819–26. Lessig, Lawrence. 1999. Code and Other Laws of Cyberspace. New York: Basic Books. 2001a. The Future of Ideas: The Fate of the Commons in a Connected World. New York: Random House. 2001b. Jail Time in the Digital Age. New York Times, July 30. http://www.nytimes.com/2001/07/30/opinion/jail-time-in-the-digital-age.html (accessed July 17, 2011).


pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

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Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, new economy, New Urbanism, pension reform, Peter Singer: altruism, pets.com, placebo effect, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, women in the workforce, World Values Survey, Yom Kippur War, young professional

The analysis of the relationship between the price of labor and the availability of services is in Robert Lipsey and Birgitta Swedenborg, “High-Price and Low-Price Countries: Causes and Consequences of Product Price Differences Across Countries,” University of Pennsylvania Workshop Presentation, 2008; Robert Lipsey and Birgitta Swedenborg, “Explaining Product Price Differences Across Countries,” NBER Working Paper, July 2007; and Robert Lipsey and Birgitta Swedenborg, “Wage Dispersion and Country Price Levels,” NBER Working Paper, 1997. The commentary on the different views on fairness and luck in Europe and the United States draws from Roland Benabou and Jean Tirole, “Belief in a Just World and Redistributive Politics,” NBER Working Paper, March 2005; and World Values Survey, 2005-2008 wave (http://www.wvsevsdb.com/wvs/WVSAnalizeStudy.jsp, accessed 08/09/2010). The discussion on racial diversity and support for redistributive policies draws from William Julius Wilson, When Work Disappears: The World of the New Urban Poor (New York: Vintage Books, 1997), p. 202.


pages: 407 words: 109,653

Top Dog: The Science of Winning and Losing by Po Bronson, Ashley Merryman

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Asperger Syndrome, Berlin Wall, conceptual framework, crowdsourcing, delayed gratification, deliberate practice, Edward Glaeser, experimental economics, Fall of the Berlin Wall, fear of failure, game design, Jean Tirole, knowledge worker, loss aversion, Mark Zuckerberg, meta analysis, meta-analysis, Mikhail Gorbachev, phenotype, Richard Feynman, Richard Feynman, risk tolerance, school choice, shareholder value, Silicon Valley, six sigma, Steve Jobs

Magazine’s 500 Fastest-Growing Companies in America for Second Consecutive Year,” Press Release (8/27/2008) Moon, Jae Yun, & Lee Sproull, “Essence of Distributed Work: The Case of the Linux Kernel,” First Monday, vol. 5(11) (2000) Noyes, Kathleen, “Top Honor for Linus Torvalds Highlights Linux’s Importance,” Operating Systems Blog, PC World, http://bit.ly/HTceE4 (4/19/2012) Peyrache, Eloic, Jacques Cremer, & Jean Tirole, “Some Reflections on Open Source Software,” Communications & Strategies, vol. 40, pp. 139–159 (2000) Raymond, Eric, “The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary, Revised Edition,” Sebastopol, CA: O’Reilly & Assoc., Inc. (2001) Terwiesch, Christian, & Yi Xu, “Innovation Contests, Open Innovation, and Multiagent Problem Solving,” Management Science, vol. 54(9), pp. 1529–1543 (2008) Torvalds, Linus, “Re: [Announce] [patch] Modular Scheduler Core and Completely Fair Scheduler [CFS],” E-mail exchange, http://bit.ly/wxQVcQ (4/15/2007) Torvalds, Linus, & David Diamond, Just for Fun: The Story of an Accidental Revolutionary, New York: Harper Business (2002) Watson, Andrew, “Reputation in Open Source Software,” Working Paper (2005) “Who Uses TopCoder?”


pages: 324 words: 93,175

The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home by Dan Ariely

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Burning Man, business process, cognitive dissonance, corporate governance, Daniel Kahneman / Amos Tversky, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, George Akerlof, happiness index / gross national happiness, Jean Tirole, job satisfaction, knowledge economy, knowledge worker, loss aversion, Peter Singer: altruism, placebo effect, Richard Thaler, Saturday Night Live, second-price auction, software as a service, The Wealth of Nations by Adam Smith, ultimatum game, Upton Sinclair, young professional

Chapter 10: The Long-Term Effects of Short-Term Emotions: Why We Shouldn’t Act on Our Negative Feelings Based on Eduardo Andrade and Dan Ariely, “The Enduring Impact of Transient Emotions on Decision Making,” Organizational Behavior and Human Decision Processes 109, no. 1 (2009): 1–8. Additional readings Eduardo Andrade and Teck-Hua Ho, “Gaming Emotions in Social Interactions,” Journal of Consumer Research 36, no. 4 (2009): 539–552. Dan Ariely, Anat Bracha, and Stephan Meier, “Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially,” American Economic Review 99, no. 1 (2009): 544–545. Roland Bénabou and Jean Tirole, “Incentives and Prosocial Behavior,” American Economic Review 96, no. 5 (2006): 1652–1678. Ronit Bodner and Dražen Prelec, “Self-Signaling and Diagnostic Utility in Everyday Decision Making,” in Psychology of Economic Decisions, vol. 1, ed. Isabelle Brocas and Juan Carrillo (New York: Oxford University Press, 2003). Jennifer Lerner, Deborah Small, and George Loewenstein, “Heart Strings and Purse Strings: Carryover Effects of Emotions on Economic Decisions,” Psychological Science 15, no. 5 (2004): 337–341.


pages: 471 words: 97,152

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller

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affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, George Akerlof, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, new economy, New Urbanism, Plutocrats, plutocrats, price stability, profit maximization, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, working-age population, Y2K, Yom Kippur War

“Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from German Microdata.” Institute for the Study of Labor Discussion Paper 959. Becker, Gary S. 1968. “Crime and Punishment: An Economic Approach.” Journal of Political Economy 76:169–217. Benabou, Roland. 2008. “Groupthink: Collective Delusions in Organizations and Markets.” Unpublished paper, Princeton University. Benabou, Roland, and Jean Tirole. 2000. “Self-Confidence and Social Interactions.” National Bureau of Economic Research Working Paper 7585, March. Benoit, Bernard, Ben Hall, Krishna Guha, Francesco Guerrera, and Henry Sender. 2008. “US Prepares $250bn Banks Push; Global Rebound; S&P 500 Soars 11.6 % as Markets Cheer Europe’s $2,546bn Move.” Financial Times, October 14, p. 1. Berg, Lennart, and Reinhold Bergström. 1996.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

P1: KNP head margin: 1/2 gutter margin: 7/8 CUUS245-07 cuus245 978 0 521 87928 6 May 21, 2008 16:55 158 Against Intellectual Monopoly Economic Arguments for Intellectual Monopoly Economists – ourselves included – think that it is important that the creators of ideas be compensated for their effort in adding to our stock of knowledge.8 Although the economics literature generally acknowledges that intellectual property leads to undesirable intellectual monopoly, it also argues that this might be a good thing – because creators of new ideas may not be adequately compensated otherwise, and this is one way to provide additional compensation. As Joseph Schumpeter, in the words of Jean Tirole, puts it, “If one wants to induce firms to undertake R&D one must accept the creation of monopolies as a necessary evil.”9 This view is as commonly held among economists today as it was in the past. In their recent textbook, Robert Barro and Xavier Sala-i-Martin argue: In order to motivate research, successful innovators have to be compensated in some manner. The basic problem is that the creation of a new idea or design . . . is costly. . . .


pages: 606 words: 157,120

To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov

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3D printing, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, augmented reality, Automated Insights, Berlin Wall, big data - Walmart - Pop Tarts, Buckminster Fuller, call centre, carbon footprint, Cass Sunstein, choice architecture, citizen journalism, cloud computing, cognitive bias, crowdsourcing, data acquisition, Dava Sobel, disintermediation, East Village, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, Firefox, Francis Fukuyama: the end of history, frictionless, future of journalism, game design, Gary Taubes, Google Glasses, illegal immigration, income inequality, invention of the printing press, Jane Jacobs, Jean Tirole, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Kickstarter, license plate recognition, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Narrative Science, Nicholas Carr, packet switching, PageRank, Paul Graham, Peter Singer: altruism, Peter Thiel, pets.com, placebo effect, pre–internet, Ray Kurzweil, recommendation engine, Richard Thaler, Ronald Coase, Rosa Parks, self-driving car, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Slavoj Žižek, smart meter, social graph, social web, stakhanovite, Steve Jobs, Steven Levy, Stuxnet, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, the medium is the message, The Nature of the Firm, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, transaction costs, urban decay, urban planning, urban sprawl, Vannevar Bush, WikiLeaks

_r=0. 302 “anything can be fun”: quoted in Chorney, “Taking the Game out of Gamification,” 8. 302 “governments typically use two tools”: Thaler, “Making Good Citizenship Fun.” 302 “relating to the duties or activities”: “Civic,” Oxford Dictionaries, http://oxforddictionaries.com/definition/english/civic. 302 into two categories: for some reviews of the motivation literature in psychology and economics, see Roland Bénabou and Jean Tirole, “Intrinsic and Extrinsic Motivation,” Review of Economic Studies 70, no. 3 (July 1, 2003): 489–520, and Richard M. Ryan and Edward L. Deci, “Intrinsic and Extrinsic Motivations: Classic Definitions and New Directions,” Contemporary Educational Psychology 25, no. 1 (January 2000): 54–67. 302 Hence, some recent social experiments: discussed in Gabe Zichermann and Christopher Cunningham, Gamification by Design: Implementing Game Mechanics in Web and Mobile Apps, 1st ed.


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The Irrational Bundle by Dan Ariely

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accounting loophole / creative accounting, air freight, Albert Einstein, banking crisis, Bernie Madoff, Black Swan, Broken windows theory, Burning Man, business process, cashless society, Cass Sunstein, clean water, cognitive dissonance, computer vision, corporate governance, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, fudge factor, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, Jean Tirole, job satisfaction, knowledge economy, knowledge worker, lake wobegon effect, late fees, loss aversion, Murray Gell-Mann, new economy, Peter Singer: altruism, placebo effect, price anchoring, Richard Feynman, Richard Feynman, Richard Thaler, Saturday Night Live, Schrödinger's Cat, second-price auction, shareholder value, Silicon Valley, Skype, software as a service, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, ultimatum game, Upton Sinclair, Walter Mischel, young professional

Chapter 10: The Long-Term Effects of Short-Term Emotions: Why We Shouldn’t Act on Our Negative Feelings Based on Eduardo Andrade and Dan Ariely, “The Enduring Impact of Transient Emotions on Decision Making,” Organizational Behavior and Human Decision Processes 109, no. 1 (2009): 1–8. Additional readings Eduardo Andrade and Teck-Hua Ho, “Gaming Emotions in Social Interactions,” Journal of Consumer Research 36, no. 4 (2009): 539–552. Dan Ariely, Anat Bracha, and Stephan Meier, “Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially,” American Economic Review 99, no. 1 (2009): 544–545. Roland Bénabou and Jean Tirole, “Incentives and Prosocial Behavior,” American Economic Review 96, no. 5 (2006): 1652–1678. Ronit Bodner and Dražen Prelec, “Self-Signaling and Diagnostic Utility in Everyday Decision Making,” in Psychology of Economic Decisions, vol. 1, ed. Isabelle Brocas and Juan Carrillo (New York: Oxford University Press, 2003). Jennifer Lerner, Deborah Small, and George Loewenstein, “Heart Strings and Purse Strings: Carryover Effects of Emotions on Economic Decisions,” Psychological Science 15, no. 5 (2004): 337–341.