Jean Tirole

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pages: 383 words: 81,118

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

Airbnb, Alvin Roth, big-box store, business process, cashless society, Chuck Templeton: OpenTable:, creative destruction, Deng Xiaoping, disruptive innovation, if you build it, they will come, information asymmetry, Internet Archive, invention of movable type, invention of the printing press, invention of the telegraph, invention of the telephone, Jean Tirole, John Markoff, Lyft, M-Pesa, market friction, market microstructure, mobile money, multi-sided market, Network effects, Productivity paradox, profit maximization, purchasing power parity, QR code, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, Steve Jobs, Tim Cook: Apple, transaction costs, two-sided market, Uber for X, uber lyft, ubercab, 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: 414 words: 101,285

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It by Ian Goldin, Mike Mariathasan

"Robert Solow", air freight, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bretton Woods, BRICs, business cycle, butterfly effect, clean water, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, connected car, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, discovery of penicillin, diversification, diversified portfolio, Douglas Engelbart, Douglas Engelbart, Edward Lorenz: Chaos theory, energy security, eurozone crisis, failed state, Fellow of the Royal Society, financial deregulation, financial innovation, financial intermediation, fixed income, Gini coefficient, global pandemic, global supply chain, global value chain, global village, income inequality, information asymmetry, Jean Tirole, John Snow's cholera map, Kenneth Rogoff, light touch regulation, Long Term Capital Management, market bubble, mass immigration, megacity, moral hazard, Occupy movement, offshore financial centre, open economy, profit maximization, purchasing power parity, race to the bottom, RAND corporation, regulatory arbitrage, reshoring, Silicon Valley, six sigma, Stuxnet, supply-chain management, The Great Moderation, too big to fail, Toyota Production System, trade liberalization, transaction costs, uranium enrichment

Tarullo, 2008, Banking on Basel: The Future of International Financial Regulation (Washington, DC: Peterson Institute for International Economics); or Jean-Charles Rochet, 2010, “The Future of Banking Regulation,” in Balancing the Banks: Global Lessons from the Financial Crisis, ed. Mathias Dewatripont, Jean-Charles Rochet, and Jean Tirole (Princeton, NJ: Princeton University Press), 78–103. 80. The failure regarding Fortis Bank is discussed in Dewatripont and Rochet, 2010, 108. 81. Ibid. 82. Haldane, 2009. 83. White, 1997. 84. For a more extensive discussion of lessons from the crisis, see, for example, Viral V. Acharya et al., eds., 2010, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Hoboken, NJ: John Wiley and Sons); Financial Crisis Inquiry Commission, 2011, Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (Washington, DC: U.S. Public Affairs); or Jean Tirole, 2010, “Lessons from the Crisis,” in Balancing the Banks: Global Lessons from the Financial Crisis, ed.

Federal Reserve Bank of St. Louis, 2012, “Debt Outstanding Domestic Financial Sectors,” Board of Governors of the Federal Reserve System, accessed 7 December, http://research.stlouisfed.org/fred2/data/DODFS.txt. 46. Mathias Dewatripont and Jean-Charles Rochet, 2010, “The Treatment of Distressed Banks,” in Balancing the Banks: Global Lessons from the Financial Crisis, ed. Mathias Dewatripont, Jean-Charles Rochet, and Jean Tirole (Princeton, NJ: Princeton University Press), 107–130, esp. 113. 47. Andrew G. Haldane and Robert M. May, 2011, “Systemic Risk in Banking Ecosystems,” Nature 469: 351–355, quotes on 351. 48. Franklin Allen and Douglas Gale, 2000, “Financial Contagion,” Journal of Political Economy 108 (1): 1–33; and Prasanna Gai and Sujit Kapadia, 2010, “Contagion in Financial Networks,” Bank of England Working Paper 383, Bank of England, London. 49.

Public Affairs); or Jean Tirole, 2010, “Lessons from the Crisis,” in Balancing the Banks: Global Lessons from the Financial Crisis, ed. Mathias Dewatripont, Jean-Charles Rochet, and Jean Tirole (Princeton, NJ: Princeton University Press), 10–77. 85. Dieter Kerwer, 2005, “Rules That Many Use: Standards and Global Regulation,” Governance 18 (4): 611–632. 86. Robert M. May, Simon A. Levin, and George Sugihara, 2008, “Complex Systems: Ecology for Bankers,” Nature 451 (21 February): 893–895, quote on 893. 87. For example, the simple 1/N investment rule that Markowitz followed empirically outperforms the more complex models of portfolio theory he developed. See Harry M. Markowitz, 1952, “Portfolio Selection,” Journal of Finance 7: 77–91. 88. Gordon L. Clark, Adam D. Dixon, and Ashby H. B. Monk, eds., 2009, Managing Financial Risks: From Global to Local (Oxford, UK: Oxford University Press), 2. 89.


pages: 252 words: 73,131

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

"Robert Solow", Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, business cycle, buy and hold, centralized clearinghouse, Chuck Templeton: OpenTable:, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, 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, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, 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, uber lyft, uranium enrichment, Vickrey auction, Vilfredo Pareto, 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

3D printing, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, 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 cycle, business process, buy low sell high, chief data officer, Chuck Templeton: OpenTable:, clean water, cloud computing, connected car, corporate governance, crowdsourcing, data acquisition, data is the new oil, digital map, discounted cash flows, disintermediation, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, financial innovation, Haber-Bosch Process, High speed trading, information asymmetry, Internet of things, inventory management, invisible hand, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, Khan Academy, Kickstarter, Lean Startup, Lyft, Marc Andreessen, market design, Metcalfe’s law, 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, Robert Metcalfe, 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, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, winner-take-all economy, zero-sum game, 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

airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, business cycle, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, 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, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, 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, Vilfredo Pareto, 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: 463 words: 105,197

Radical Markets: Uprooting Capitalism and Democracy for a Just Society by Eric Posner, E. Weyl

3D printing, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, anti-communist, augmented reality, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, business process, buy and hold, carbon footprint, Cass Sunstein, Clayton Christensen, cloud computing, collective bargaining, commoditize, Corn Laws, corporate governance, crowdsourcing, cryptocurrency, Donald Trump, Elon Musk, endowment effect, Erik Brynjolfsson, Ethereum, feminist movement, financial deregulation, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, guest worker program, hydraulic fracturing, Hyperloop, illegal immigration, immigration reform, income inequality, income per capita, index fund, informal economy, information asymmetry, invisible hand, Jane Jacobs, Jaron Lanier, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, labor-force participation, laissez-faire capitalism, Landlord’s Game, liberal capitalism, low skilled workers, Lyft, market bubble, market design, market friction, market fundamentalism, mass immigration, negative equity, Network effects, obamacare, offshore financial centre, open borders, Pareto efficiency, passive investing, patent troll, Paul Samuelson, performance metric, plutocrats, Plutocrats, pre–internet, random walk, randomized controlled trial, Ray Kurzweil, recommendation engine, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Rory Sutherland, Second Machine Age, second-price auction, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, special economic zone, spectrum auction, speech recognition, statistical model, stem cell, telepresence, Thales and the olive presses, Thales of Miletus, The Death and Life of Great American Cities, The Future of Employment, The Market for Lemons, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, trickle-down economics, Uber and Lyft, uber lyft, universal basic income, urban planning, Vanguard fund, women in the workforce, Zipcar

While we identify many of our most important intellectual influences in the course of the book, each of us had personal intellectual mentors who go less noted there, but merit our thanks. Gary Becker and especially José Scheinkman played critical roles in encouraging Glen to pursue his boldest ideas, despite the costs to his professional standing and the difficulty publishing this work. Jerry Green, Amartya Sen, and especially Jean Tirole were central to shaping Glen’s view of mechanism design as a force for social transformation. Jennifer Chayes, Glen’s supervisor at Microsoft, gave him the professional space, interdisciplinary environment, and personal inspiration he needed to believe in and pursue this project. Eric is grateful for the support of his colleagues at the University of Chicago, and to the Russell Baker Scholars Fund for financial support.

These network effects can make it difficult for competitors to enter the market unless they have enough financial backing to subsidize users for years—and the social norms around money not changing hands makes even that strategy challenging to pull off. Many social scientists have also argued that siren servers use techniques similar to those employed by casinos to make their content addictive.35 Together these properties raise the power of siren servers to lock users into patterns that may not serve their long-term interests. Second, as highlighted by economist Roland Bénabou and Nobel Laureate Jean Tirole in their incisive 2003 and 2006 analyses of situations like the Tom Sawyer problem, paying for an activity often undermines intrinsic motivations (such as entertainment and social pressure).36 Paying for online data provision may signal to users that the activities they currently view as entertainment are actually labor benefiting the siren servers and for which they should demand payment, undermining the entertainment value.

Gray & Siddharth Suri, this project is currently untitled, but is under contract from Houghton Mifflin Harcourt. (Forthcoming). 28. Annalee Newitz, Raters of the World, Unite—The Secret Lives of Google Raters, Ars Technica (April 27, 2017), https://arstechnica.com/features/2017/04/the-secret-lives-of-google-raters/. 29. For example, a controversy raged in 2017 over Google’s role in the firing of a policy researcher critical of their business practices. 30. See Roland Bénabou & Jean Tirole, Intrinsic and Extrinsic Motivation, 70 Review of Economic Studies 489 (2003), for a survey of this literature. 31. Sara Constance Kingsley et al., Accounting for Market Frictions and Power Asymmetries in Online Labor Markets, 7 Policy & Internet 383 (2015). 32. Arindrajit Dube, Jeff Jacobs, Suresh Naidu, & Siddharth Suri, Monopsony in Crowdsourcing Labor Markets (Columbia University Working Paper, 2017). 33. https://www.nytimes.com/2016/05/06/business/facebook-bends-the-rules-of-audience-engagement-to-its-advantage.html?


pages: 116 words: 31,356

Platform Capitalism by Nick Srnicek

3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, collaborative economy, collective bargaining, deindustrialization, deskilling, disintermediation, future of work, gig economy, Infrastructure as a Service, Internet of things, Jean Tirole, Jeff Bezos, knowledge economy, knowledge worker, liquidity trap, low skilled workers, Lyft, Mark Zuckerberg, means of production, mittelstand, multi-sided market, natural language processing, Network effects, new economy, Oculus Rift, offshore financial centre, pattern recognition, platform as a service, quantitative easing, RFID, ride hailing / ride sharing, Robert Gordon, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, software as a service, TaskRabbit, the built environment, total factor productivity, two-sided market, Uber and Lyft, Uber for X, uber lyft, unconventional monetary instruments, unorthodox policies, Zipcar

London: Bank of England. https://bankunderground.co.uk/2015/07/27/drivers-of-long-term-global-interest-rates-canweaker-growth-explain-the-fall (accessed June 12, 2016). ‘Reinventing the Deal’. 2015. The Economist, 24 October. http://www.economist.com/news/briefing/21676760-americas-startups-are-changing-what-itmeans-own-company-reinventing-deal (accessed 4 June 2016). Rochet, Jean-Charles, and Jean Tirole. 2003. ‘Platform Competition in Two-Sided Markets’. Journal of the European Economic Association, 1 (4): 990–1029. Rochet, Jean-Charles, and Jean Tirole. 2006. ‘Two-Sided Markets: A Progress Report’. The RAND Journal of Economics, 37 (3): 645–67. Scheiber, Noam. 2015. ‘Growth in the “Gig Economy” Fuels Work Force Anxieties’. The New York Times, 12 July. http://www.nytimes.com/2015/07/13/business/rising-economic-insecurity-tied-to-decades-long-trend-in-employment-practices.html (accessed 4 June 2016).


pages: 470 words: 148,730

Good Economics for Hard Times: Better Answers to Our Biggest Problems by Abhijit V. Banerjee, Esther Duflo

"Robert Solow", 3D printing, affirmative action, Affordable Care Act / Obamacare, Airbnb, basic income, Bernie Sanders, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, charter city, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, endowment effect, energy transition, Erik Brynjolfsson, experimental economics, experimental subject, facts on the ground, fear of failure, financial innovation, George Akerlof, high net worth, immigration reform, income inequality, Indoor air pollution, industrial cluster, industrial robot, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Jean Tirole, Jeff Bezos, job automation, Joseph Schumpeter, labor-force participation, land reform, loss aversion, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, Network effects, new economy, New Urbanism, non-tariff barriers, obamacare, offshore financial centre, open economy, Paul Samuelson, place-making, price stability, profit maximization, purchasing power parity, race to the bottom, RAND corporation, randomized controlled trial, Richard Thaler, ride hailing / ride sharing, Robert Gordon, Ronald Reagan, school choice, Second Machine Age, secular stagnation, self-driving car, shareholder value, short selling, Silicon Valley, smart meter, social graph, spinning jenny, Steve Jobs, technology bubble, The Chicago School, The Future of Employment, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, trickle-down economics, universal basic income, urban sprawl, very high income, War on Poverty, women in the workforce, working-age population, Y2K

In the Swiss experiment, the context was whether or not the person saw himself as a banker, but in life it is often the people we are with, the schools we went to, what we do for work or for play, the clubs we belong to, and the clubs we would like to belong to that form us and shape our preferences. We economists, in our fealty to standard preferences, have tried very hard to keep all of that out, but it is increasingly obvious this is a hopeless quest. MOTIVATED BELIEFS Once we begin to acknowledge that our beliefs and even what we take to be our deep preferences are determined by context, many things fall into place. One important insight comes from the Nobel Prize–winner Jean Tirole’s work with Roland Bénabou on motivated beliefs.47 They argue that a big step toward understanding beliefs is not taking them too literally. Our beliefs about ourselves are shaped in part by our emotional needs; we feel terrible when we disappoint ourselves. The emotional value we put on beliefs about ourselves also leads us to distort our beliefs about others; for example, since we want to shield ourselves from our own prejudices, we couch them in the language of objective truth (“I have nothing against North African cashiers, but they would not respond to my encouragement anyway, so I don’t bother”).

Experimental Evidence from India,” Quarterly Journal of Economics 127, no. 2 (2012): 753–92. 62 Bryan, Chowdhury, and Mobarak, “Underinvestment in a Profitable Technology.” 63 Maheshwor Shrestha, “Get Rich or Die Tryin’: Perceived Earnings, Perceived Mortality Rate, and the Value of a Statistical Life of Potential Work-Migrants from Nepal,” World Bank Policy Research Working Paper 7945, 2017. 64 Maheshwor Shrestha, “Death Scares: How Potential Work-Migrants Infer Mortality Rates from Migrant Deaths,” World Bank Policy Research Working Paper 7946, 2017. 65 Donald Rumsfeld, Known and Unknown: A Memoir (New York: Sentinel, 2012). 66 Frank H. Knight, Risk, Uncertainty, and Profit (Boston: Hart, Schaffner, and Marx, 1921). 67 Justin Sydnor, “(Over)insuring Modest Risks,” American Economic Journal: Applied Economics 2, no. 4 (2010): 177–99. 68 We will return to the idea of these motivated beliefs in chapter 4. For a reference, see Roland Bénabou and Jean Tirole, “Mindful Economics: The Production, Consumption, and Value of Beliefs,” Journal of Economic Perspectives 30, no. 3 (2016): 141–64. 69 Alexis de Tocqueville, Democracy in America (London: Saunders and Otley, 1835). 70 Alberto Alesina, Stefanie Stantcheva, and Edoardo Teso, “Intergenerational Mobility and Preferences for Redistribution,” American Economic Review 108, no. 2 (2018): 521–54, DOI: 10.1257/aer.20162015. 71 Benjamin Austin, Edward Glaeser, and Lawrence H.

Khandelwal, and Adam Osman, “Exporting and Firm Performance: Evidence from a Randomized Experiment,” Quarterly Journal of Economics 132, no. 2 (2017): 551–615. 33 “Rankings by Country of Average Monthly Net Salary (After Tax) (Salaries and Financing),” Numbeo, accessed March 18, 2019, https://www.numbeo.com/cost-of-living/country_price_rankings?itemId=105. 34 Abhijit V. Banerjee and Esther Duflo, “Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry,” Quarterly Journal of Economics 115, no. 3 (2000): 989–1017. 35 Amos Tversky and Daniel Kahneman, “The Framing of Decisions and Psychology of Choice,” Science 211 (1981): 453–58. 36 Jean Tirole, “A Theory of Collective Reputations (with Applications to the Persistence of Corruption and to Firm Quality),” Review of Economic Studies 63, no. 1 (1996): 1–22. 37 Rocco Machiavello and Ameet Morjaria, “The Value of Relationships: Evidence from Supply Shock to Kenyan Rose Exports,” American Economic Review 105, no. 9 (2015): 2911–45. 38 Wang Xiaodong, “Govt Issues Guidance for Quality of Products,” China Daily, updated September 14, 2017, accessed March 29, 2019, http://www.chinadaily.com.cn/china/2017-09/14/content_31975019.htm. 39 Gujanita Kalita, “The Emergence of Tirupur as the Export Hub of Knitted Garments in India: A Case Study,” ICRIER, accessed April 21, 2019, https://www.econ-jobs.com/research/52329-The-Emergence-of-Tirupur-as-the-Export-Hub-of-Knitted-Garments-in-India-A-Case-Study.pdf. 40 L.


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Working in Public: The Making and Maintenance of Open Source Software by Nadia Eghbal

Amazon Web Services, barriers to entry, Benevolent Dictator For Life (BDFL), bitcoin, Clayton Christensen, cloud computing, commoditize, continuous integration, crowdsourcing, cryptocurrency, David Heinemeier Hansson, death of newspapers, Debian, disruptive innovation, en.wikipedia.org, Ethereum, Firefox, Guido van Rossum, Hacker Ethic, Induced demand, informal economy, Jane Jacobs, Jean Tirole, Kevin Kelly, Kickstarter, Kubernetes, Mark Zuckerberg, Menlo Park, Network effects, node package manager, Norbert Wiener, pirate software, pull request, RFC: Request For Comment, Richard Stallman, Ronald Coase, Ruby on Rails, side project, Silicon Valley, Snapchat, social graph, software as a service, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, two-sided market, urban planning, web application, wikimedia commons, Zimmermann PGP

Decentralized communities prioritize work based on abundance of attention: encouraging new contributors, developing governance processes, and improving engagement and retention. But a creator prioritizes work based on scarcity of attention: saying no to contributions, closing out issues, reducing user support. While the commons is tasked with resolving coordination issues, creators are defined by the need for curation. Josh Lerner and Jean Tirole’s “The Simple Economics of Open Source” was published in 2000, but it contains analysis and observations that are still trenchant today. The widely cited paper questions whether the commons was ever tractable in open source, or just a temporary phenomenon: Can the management of open source projects accommodate the increasing number of contributors? The frequency and quality of contributions to each of the open source projects studied appears to be highly skewed, with a few individuals (or at most a few dozen) accounting for a disproportionate amount of the contributions, with most programmers making just one or two submissions. . . .

Pinson, and B. A. Tague, “UNIX Time-Sharing System: Foreword,” The Bell System Technical Journal 57, no. 6 (1978): 1902, https://doi.org/10.1002/j.1538-7305.1978.tb02135.x. 118 Benkler, “Coase’s Penguin,” 379. 119 David Heinemeier Hansson, “The Perils of Mixing Open Source and Money,” November 12, 2013, https://dhh.dk/2013/the-perils-of-mixing-open-source-and-money.html. 120 Josh Lerner and Jean Tirole, “The Simple Economics of Open Source,” NBER Working Paper 7600, National Bureau of Economic Research, March 2000, 32, https://doi.org/10.3386/w7600. 121 Eugene Wei, “Status as a Service (StaaS),” Remains of the Day, February 19, 2019, https://www.eugenewei.com/blog/2019/2/19/status-as-a-service. 122 Michael Wesch, “YouTube and You: Experiences of Self-Awareness in the Context Collapse of the Recording Webcam,” Explorations in Media Ecology 8, no. 2 (2009): 19–34. 123 Robert E.

An OSS Project-by-Project Typology,” in Proceedings of the 11th Working Conference on Mining Software Repositories - MSR 2014, chair Premkumar Devanbu (Hyderabad, India: Association for Computing Machinery, May 2014): 344–46, https://doi.org/10.1145/2597073.2597116. 163 Gustavo Pinto, Igor Steinmacher, and Marco Aurélio Gerosa, “More Common Than You Think: An In-Depth Study of Casual Contributors,” in 2016 IEEE 23rd International Conference on Software Analysis, Evolution, and Reengineering (SANER) (Suita, Japan: IEEE, March 2016), 518–528, https://doi.org/10.1109/saner.2016.68. 164 Igor Steinmacher, Igor Wiese, Ana Paula Chaves, and Marco Aurélio Gerosa, “Why Do Newcomers Abandon Open Source Software Projects?,” in 2013 6th International Workshop on Cooperative and Human Aspects of Software Engineering (CHASE) (IEEE: San Francisco, May 2013): 31, https://doi.org/10.1109/chase.2013.6614728. 165 Josh Lerner and Jean Tirole, “Some Simple Economics of Open Source,” The Journal of Industrial Economics 50, no. 2 (June 2002): 197–234, https://doi.org/10.1111/1467-6451.00174. 166 Nadia Eghbal, “The Rise of Few-Maintainer Projects,” Increment 9 (May 2019), https://increment.com/open-source/the-rise-of-few-maintainer-projects/. 167 Kraut and Resnick, Building Successful Online Communities, 205. 168 Christoph Hannebauer, Matthias Book, and Volker Gruhn, “An Exploratory Study of Contribution Barriers Experienced by Newcomers to Open Source Software Projects,” in Proceedings of the 1st International Workshop on CrowdSourcing in Software Engineering - CSI-SE 2014, chairs Gordon Fraser et al.


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

affirmative action, barriers to entry, bioinformatics, Brownian motion, call centre, Cass Sunstein, centre right, clean water, commoditize, dark matter, desegregation, East Village, fear of failure, Firefox, game design, George Gilder, hiring and firing, Howard Rheingold, informal economy, information asymmetry, invention of radio, Isaac Newton, iterative process, Jean Tirole, jimmy wales, John Markoff, Kenneth Arrow, longitudinal study, market bubble, market clearing, Marshall McLuhan, Mitch Kapor, New Journalism, optical character recognition, pattern recognition, peer-to-peer, 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, Vilfredo Pareto

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.


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The Tyranny of Metrics by Jerry Z. Muller

Affordable Care Act / Obamacare, Atul Gawande, Cass Sunstein, Checklist Manifesto, Chelsea Manning, collapse of Lehman Brothers, corporate governance, Credit Default Swap, crowdsourcing, delayed gratification, deskilling, Edward Snowden, Erik Brynjolfsson, Frederick Winslow Taylor, George Akerlof, Hyman Minsky, intangible asset, Jean Tirole, job satisfaction, joint-stock company, joint-stock limited liability company, Moneyball by Michael Lewis explains big data, performance metric, price mechanism, RAND corporation, school choice, Second Machine Age, selection bias, Steven Levy, total factor productivity, transaction costs, WikiLeaks

For some are motivated less by extrinsic monetary rewards than by various sorts of intrinsic psychic rewards, including their commitment to the goals of the organizations for which they work, or a fascination with the complexity of the work they do, which makes it challenging, interesting, and entertaining. The existence of intrinsic as well as extrinsic motivations is obvious to anyone who has managed workers in complex tasks. It was articulated in the mid-1970s by psychologists, and has since been rediscovered and formalized by economists, including Jean Tirole, a recent recipient of the Nobel Prize for economics.8 It is simple-minded to assume that people are motivated only by the desire for more money, and naive to assume that they are motivated only by intrinsic rewards. The challenge is to figure out when each of these motivations is most effective, and in recent years social scientists have devoted attention to that issue. In general, extrinsic rewards—pay-for-performance, incentive pay, bonuses—are most effective in commercial organizations, where the primary goal is to make money.

Mintzberg, “Managing Government, Governing Management,” pp. 75–83; and Holmström and Milgrom, “Multitask Principal-Agent Analyses.” 7. Hal K. Rainey and Young Han Chun, “Public and Private Management Compared,” in Ewan Ferlie, Laurence E. Lynn, Jr., and Christopher Pollitt (eds.), The Oxford Handbook of Public Management (New York, 2005), pp. 72–102, 85; and James Q. Wilson, Bureaucracy: What Government Agencies Do and Why They Do It (New York, 2000), pp. 156–57. 8. Roland Bénabout and Jean Tirole, “Intrinsic and Extrinsic Motivation,” Review of Economic Studies no. 70 (2003), pp. 489–520. A pioneering work of intrinsic motivation theory was Edward L. Deci, Intrinsic Motivation (New York, 1975). Other studies by psychologists include Thane S. Pittman, Jolee Emery, and Ann K. Boggiano, “Intrinsic and Extrinsic Motivational Orientations: Reward-Induced Changes in Preference for Complexity,” Journal of Personality and Social Psychology 42, no. 5 (1982), pp. 789–97; and T.


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10% Less Democracy: Why You Should Trust Elites a Little More and the Masses a Little Less by Garett Jones

"Robert Solow", Andrei Shleifer, Asian financial crisis, business cycle, central bank independence, clean water, corporate governance, correlation does not imply causation, creative destruction, Edward Glaeser, financial independence, game design, German hyperinflation, hive mind, invisible hand, Jean Tirole, Kenneth Rogoff, Mark Zuckerberg, mass incarceration, minimum wage unemployment, Mohammed Bouazizi, open economy, Pareto efficiency, Paul Samuelson, price stability, rent control, The Wealth of Nations by Adam Smith, trade liberalization

I leave this question as food for thought, perhaps for another day.”²⁰ In the next chapter, that day arrives. 4 The 2% Solution Nonaccountability [e.g., restricting the power of voters to punish government officials] is most desirable when (a) the electorate is poorly informed about the optimal action, (b) acquiring decision-relevant information is costly, and (c) feedback about the quality of decisions is slow. Therefore, technical decisions, in particular, may be best allocated to judges or appointed bureaucrats. ERIC MASKIN AND JEAN TIROLE PRINCETON’S ALAN BLINDER HAD a whirlwind career in Washington: President Clinton asked him to serve on his Council of Economic Advisers, and then eighteen months later, Blinder took the second most powerful job at the Federal Reserve: vice chair. Nineteen months after that, he was back at Princeton. Three fast years near the pinnacles of power, and Blinder has been remarkably candid about what he learned over those three years.

., and Ted Robert Gurr. Polity IV Project: Political Regime Characteristics and Transitions, 1800–2016. Dataset Users’ Manual. Vienna, VA: Center for Systemic Peace. 2017. Marshall, Monty G., Ted Gurr, and Keith Jaggers. “Center for Systemic Peace: Polity IV Country Report 2010; Singapore.” Vienna, VA: Center for Systemic Peace, 2011. http://www.systemicpeace.org/polity/Singapore2010.pdf Maskin, Eric, and Jean Tirole. “The Politician and the Judge: Accountability in Government.” American Economic Review 94, no. 4 (2004): 1034–1054. Maurice, Eric. “EU Buries Migration Dispute for Now.” EU Observer, October 20, 2016. https://euobserver.com/migration/135576. Mayhew, David R. Congress: The Electoral Connection. New Haven: Yale University Press, 1974. Memoli, Vincenzo. “How Does Political Knowledge Shape Support for Democracy?


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

airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, 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, longitudinal study, mass incarceration, 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, zero-sum game

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.


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

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, disruptive innovation, double helix, Douglas Engelbart, 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, Johannes Kepler, John Markoff, John von Neumann, Joi Ito, Kevin Kelly, knowledge economy, knowledge worker, lateral thinking, lone genius, M-Pesa, Mark Shuttleworth, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, Mitch Kapor, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Shoshana Zuboff, 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.


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The Content Trap: A Strategist's Guide to Digital Change by Bharat Anand

Airbnb, Benjamin Mako Hill, Bernie Sanders, Clayton Christensen, cloud computing, commoditize, correlation does not imply causation, creative destruction, crowdsourcing, death of newspapers, disruptive innovation, Donald Trump, Google Glasses, Google X / Alphabet X, information asymmetry, Internet of things, inventory management, Jean Tirole, Jeff Bezos, John Markoff, Just-in-time delivery, Khan Academy, Kickstarter, late fees, Mark Zuckerberg, market design, Minecraft, multi-sided market, Network effects, post-work, price discrimination, publish or perish, QR code, recommendation engine, ride hailing / ride sharing, selection bias, self-driving car, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, social graph, social web, special economic zone, Stephen Hawking, Steve Jobs, Steven Levy, Thomas L Friedman, transaction costs, two-sided market, ubercab, WikiLeaks, winner-take-all economy, zero-sum game

iPhone users “iPhone App Store Downloads Top 10 Million in First Weekend,” Apple.com, July 14, 2008. when it restricted its service Judd Cramer and Alan Krueger, “Disruptive Change in the Taxi Business: The Case of Uber,” National Bureau of Economic Research, Working Paper No. 22083, March 2016. “product versus platform” See also Jean-Charles Rochet and Jean Tirole, “Platform Competition in Two-Sided Markets,” Journal of the European Economic Association 1, No. 4 (June 2003), 990–1039; Mark Armstrong, “Competition in Two-Sided Markets,” RAND Journal of Economics , 37, no. 3 (Autumn 2006), 668–91; Jean-Charles Rochet and Jean Tirole, “Two-Sided Markets: A Progress Report,” RAND Journal of Economics , 37, no. 3 (Autumn 2006), 645–67. in 1996 Nick Statt, “Rare Pokemon Card Attracts Record-Breaking $50k Offers on eBay,” CNET , September 5, 2013. indirect network effects Andrei Hagiu, “Strategic Decisions for Multisided Platforms,” MIT Sloan Management Review , Winter 2014; Andrei Hagiu and Simon Rothman, “Network Effects Aren’t Enough,” Harvard Business Review, April 2016; and Rita McGrath, “The Problem with Groupon’s Business Model,” Harvard Business Review , July 13, 2011.

Boston: Harvard Business Publishing, December 2001. ———. “Reproducing Knowledge: Replication Without Information at Moderate Complexity.” Organization Science 12, no. 3 (May–June 2001). Rob, Rafael, and Joel Waldfogel. “Piracy on the High C’s: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students.” Journal of Law and Economics, 49, no. 1 (2006): 29–62. Rochet, Jean-Charles, and Jean Tirole. “Platform Competition in Two-Sided Markets.” Journal of the European Economic Association 1, no. 4 (June 2003): 990–1029. ———. “Two-Sided Markets: A Progress Report.” RAND Journal of Economics 37, no. 3 (Autumn 2006): 645–67. Rogers, Jim. The Death and Life of the Music Industry in the Digital Age. London: Bloomsbury Academic, May 9, 2013. Rohlfs, Jeffrey. “A Theory of Interdependent Demand for a Communications Service.”


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

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bernie Madoff, British Empire, buy and hold, central bank independence, collective bargaining, commodity trading advisor, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, law of one price, light touch regulation, Long Term Capital Management, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, 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, Vilfredo Pareto, 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.


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The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, bitcoin, blockchain, business cycle, business process, buy and hold, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, gig economy, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, Vilfredo Pareto, zero-sum game

Without discrimination, there are cross-subsidies, and some people can be priced out. The concern, however, is that a monopoly with full information can extract all the surplus. This is the fear expressed by Omarova. The key point here is that free entry becomes more important when firms increase price discrimination. Platforms use a variety of tools to limit competition, and sometimes that involves preventing price discrimination. Nobel Prize–winning economist Jean Tirole (2017) emphasizes the role of price coherence, also called the “most favored nation” clause. That name is a metaphor that comes from international trade agreements. The idea is that a platform will prevent its merchants from offering lower prices outside the platform. Online booking services require that restaurants or hotels not offer cheaper prices on their own websites. Amazon imposes similar restrictions on its suppliers in many countries.

I have had the chance to learn from my wonderful co-authors Maryam Farboodi, Callum Jones, Virgiliu Midrigan, Roxana Mihet, and Laura Veldkamp. I have also benefited greatly from the insights of Ariel Burnstein, Luis Cabral, Gilbert Cette, Emmanuel Combe, Chiara Criscuolo, Jan De Loecker, Robin Döttling, Tomaso Duso, Rana Foroohar, Xavier Gabaix, Bob Hall, Erik Hurst, Seema Jayachandran, Sebnem Kalemli-Ozcan, Thomas Piketty, Howard Rosenthal, Tano Santos, Fiona Scott Morton, Dina Srinivasan, Johannes Stroebel, Jonathan Tepper, Jean Tirole, Nicolas Véron, David Wessel, Luigi Zingales, and Gabriel Zucman. I am grateful to Ian Malcolm and Mark Steinmeyer, who saw promise in my early ideas, to Rob Garver and Katherine Brick, who edited my dry and technical prose, to the team at Harvard University Press for their professionalism, and to the Smith Richardson Foundation for its support. Abhishek Bhardwaj and Matias Covarrubias provided invaluable assistance and feedback.


pages: 662 words: 180,546

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

"Robert Solow", Alvin Roth, 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, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, do-ocracy, 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, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, 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, Vilfredo Pareto, 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.


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

"Robert Solow", 3Com Palm IPO, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, business cycle, 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, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, Kickstarter, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, Paul Samuelson, 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, Stanford marshmallow experiment, statistical model, Steve Jobs, Supply of New York City Cabdrivers, 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, Vilfredo Pareto, Walter Mischel, zero-sum game

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: 462 words: 129,022

People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, battle of ideas, Berlin Wall, Bernie Madoff, Bernie Sanders, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, central bank independence, clean water, collective bargaining, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crony capitalism, deglobalization, deindustrialization, disintermediation, diversified portfolio, Donald Trump, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, Firefox, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, gig economy, global supply chain, greed is good, income inequality, information asymmetry, invisible hand, Isaac Newton, Jean Tirole, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, labor-force participation, late fees, low skilled workers, Mark Zuckerberg, market fundamentalism, mass incarceration, meta analysis, meta-analysis, minimum wage unemployment, moral hazard, new economy, New Urbanism, obamacare, patent troll, Paul Samuelson, pension reform, Peter Thiel, postindustrial economy, price discrimination, principal–agent problem, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Robert Bork, Robert Gordon, Robert Mercer, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, self-driving car, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, South China Sea, sovereign wealth fund, speech recognition, Steve Jobs, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, two-sided market, universal basic income, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, War on Poverty, working-age population

With other colleagues, we showed that the fight to be the monopolist didn’t necessarily have the positive effect on innovation that Schumpeter has assumed, but, on the contrary, could dampen it. See, for instance, Kenneth J. Arrow, “Economic Welfare and the Allocation of Resources to Invention,” and Drew Fudenberg, Richard Gilbert, Joseph E. Stiglitz, and Jean Tirole, “Preemption, Leapfrogging and Competition in Patent Races,” European Economic Review 22 (June 1983): 3–32 (Jean Tirole received the Nobel Memorial Prize in Economics in 2014). These conclusions have been reinforced by more recent results of Greenwald and Stiglitz, Creating a Learning Society, especially chapters 5 and 6. Arnold Harberger of the University of Chicago claimed that the loss in consumer welfare from monopoly power was of second-order importance (around 0.1 percent of GDP).


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

Nelson, ‘Poisoning the Well, or How Economic Theory Damages Moral Imagination’, in George DeMartino and Deirdre McCloskey (eds.), The Oxford Handbook on Professional Economic Ethics, Oxford University Press 2016. It is notable how far mainstream economists have started to draw on this wider cluster of ideas, as e.g. in two recent books by Nobel laureates: Edmund Phelps, Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change, Princeton University Press 2013; and Jean Tirole, Economics for the Common Good, Princeton University Press 2017 Inadequacy of genderless and raceless economics: Margherita Borella, Mariacristina De Nardi and Fang Yang, ‘The Aggregate Implications of Gender and Marriage’, Journal of the Economics of Ageing, 2017; Tomaz Cajner, Tyler Radler, David Ratner and Ivan Vidangos, ‘Racial Gaps in Labor Market Outcomes in the Last Four Decades and over the Business Cycle’, Washington DC, Federal Reserve System 2017 Husbandry: Julie A.

Kenneth Boulding, ‘Economics as a Moral Science’, American Economic Review, 59.1, 1969: ‘It was… Veblen’s principal, and still largely unrecognized, contribution to formal economic theory, to point out that we cannot assume that tastes are “given” in any dynamic theory’ (my added inverted commas). As Boulding notes, when he was a student at Cambridge University this understanding of economics was still reflected in its status as part of the (now defunct) Moral Sciences Tripos Beliefs as property: Roland Bénabou and Jean Tirole, ‘Identity, Morals, and Taboos: Beliefs as Assets’, Quarterly Journal of Economics, 126. 2, 2011 The economy of regard: see Avner Offer, The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950, Oxford University Press 2006, Ch. 6; and ‘Self-Interest, Sympathy and the Invisible Hand: From Adam Smith to Market Liberalism’, Economic Thought, 1.2, 2012 Parking tickets in New York: Raymond Fisman and Edward Miguel, ‘Cultures of Corruption: Evidence from Diplomatic Parking Tickets’, NBER Working Paper 12312, 2006.


pages: 494 words: 142,285

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

AltaVista, Andy Kessler, barriers to entry, business process, Cass Sunstein, commoditize, computer age, creative destruction, dark matter, disintermediation, disruptive innovation, Donald Davies, 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, Kenneth Arrow, Larry Wall, Leonard Kleinrock, linked data, Marc Andreessen, Menlo Park, Mitch Kapor, Network effects, new economy, packet switching, peer-to-peer, peer-to-peer model, price mechanism, profit maximization, RAND corporation, rent control, rent-seeking, RFC: Request For Comment, Richard Stallman, Richard Thaler, Robert Bork, 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, zero-sum game

.: 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.


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

Airbnb, Albert Einstein, algorithmic trading, barriers to entry, cloud computing, collaborative economy, commoditize, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, demand response, disintermediation, disruptive innovation, double helix, Downton Abbey, Erik Brynjolfsson, experimental economics, Firefox, framing effect, Google Chrome, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, offshore financial centre, pattern recognition, prediction markets, price discrimination, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

Judy Wajcman, Pressed for Time: The Acceleration of Life in Digital Capitalism (Chicago: University of Chicago Press, 2015); see also Hartmut Rosa, Social Acceleration—A New Theory of Modernity (New York: Columbia University Press, 2013). 7 • Tacit Collusion on Steroids: The Predictable Agent 1. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993); R. S. Khemani and D. M. Shapiro, Glossary of Industrial Organisation Economics and Competition Law (Paris: Organisation for Economic Cooperation and Development, 1993), http://www.oecd.org/dataoecd/8/61 /2376087.pdf. 2. Marc Ivaldi, Bruno Jullien, Patrick Rey, Paul Seabright, and Jean Tirole, “The Economics of Tacit Collusion,” Final Report for DG Competition (Toulouse: Eu ropean Commission, March 2003), 4, http://ec.europa .eu /competition/mergers/studies _ reports/the _ economics _of _tacit _ collusion _ en.pdf. 3. For a review of the economics of tacit collusion and the EU approach, see Nicolas Petit, “The ‘Oligopoly Problem’ in EU Competition Law” in Research Handbook in European Competition Law, Ioannis Liannos and Damien Geradin, eds.

(Oxford: Hart Publishing, 2014), 252. John Markoff, “Toyota Invests $1 Billion in Artificial Intelligence in U.S.,” New York Times, November 6, 2015, http://www.nytimes.com/2015/11/06 /technology/toyota-silicon-valley-artificial-intelligence-research-center.html ?_r = 0; Mui, “Google Is Millions of Miles Ahead of Apple in Driverless Cars.” See, e.g., Markoff, “Toyota Invests $1 Billion in Artificial Intelligence in U.S.” Jean Tirole, “Comments Made at FT-ETNO Summit 2015,” Financial Times (October 13, 2015), https://live.ft.com/Events/2015/FT-ETNO-Summit-2015. Stone, “Exclusive.” Matt Weinberger, “Microsoft Could See an Opportunity to Poke Google in the Eye with Uber Investment,” Business Insider UK (July 31, 2015), http://www.businessinsider.com/microsoft-and-google-are-uber-investors -2015-7. Nathaniel Mott, “Uber Should Fear the Company Formerly Known as Google,” Gigaom (August 11, 2015), https://gigaom.com/2015/08/11/uber-vs -alphabet-google/.


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Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State by Paul Tucker

Andrei Shleifer, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, conceptual framework, corporate governance, diversified portfolio, Fall of the Berlin Wall, financial innovation, financial intermediation, financial repression, first-past-the-post, floating exchange rates, forensic accounting, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, incomplete markets, inflation targeting, information asymmetry, invisible hand, iterative process, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, liberal capitalism, light touch regulation, Long Term Capital Management, means of production, money market fund, Mont Pelerin Society, moral hazard, Northern Rock, Pareto efficiency, Paul Samuelson, price mechanism, price stability, principal–agent problem, profit maximization, quantitative easing, regulatory arbitrage, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Robert Bork, Ronald Coase, seigniorage, short selling, Social Responsibility of Business Is to Increase Its Profits, stochastic process, The Chicago School, The Great Moderation, The Market for Lemons, the payments system, too big to fail, transaction costs, Vilfredo Pareto, Washington Consensus, yield curve, zero-coupon bond, zero-sum game

Bradford, and Lawrence H. Summers. “Fiscal Policy in a Depressed Economy.” Brookings Papers on Economic Activity (2012): 233–97. DeMuth, Christopher. “Can the Administrative State Be Tamed.” Journal of Legal Analysis 8, no. 1 (2016): 121–90. de Waal, James. “Depending on the Right People: British Political-Military Relations 2001–2010.” London: Chatham House, 2013. Dewatripont, Mathias, Ian Jewitt, and Jean Tirole. “The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies.” Review of Economic Studies 66, no. 1 (1999): 199–217. Dewey, John. The Public and Its Problems. Athens, OH: Swallow Press, 1954. Diamond, Douglas W., and P. H. Dybvig. “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy 91, no. 3 (1983): 401–19. Dicey, A.

Toqueville’s Nightmare: The Administrative State Emerges in America, 1900–1940. New York: Oxford University Press, 2014. Eskridge, William N., and John Ferejohn. “Super-Statutes.” Duke Law Journal 50 (2001): 1215–76. Estlund, David. Democratic Authority. Princeton, NJ: Princeton University Press, 2008. ________. “Jeremy Waldron on Law and Disagreement.” Philosophical Studies 99 (2000): 111–28. Farhi, Emmanuel, and Jean Tirole. “Collective Moral Hazard, Maturity Mismatch, and Systemic Bailouts.” American Economic Review 102, no. 1 (2012): 60–93. Fawcett, Edmund. Liberalism: The Life of an Idea. Princeton, NJ: Princeton University Press, 2014. Feaver, Peter D. “Crisis as Shirking: An Agency Theory Explanation of the Souring of American Civil-Military Relations.” Armed Forces & Society 24 (1998): 407–34. Ferguson, Niall.

“Forewarned and Four-Armed: Administrative Law Values and the Fourth Arm of Government.” Whitmore Lecture, 2013. ________. “Reflections on a Fourth Branch of Government.” Paper presented at Australasian Study of Parliament Group, 2013 Annual Conference. Mashaw, Jerry L. Creating the Administrative Constitution: The Lost One Hundred Years of American Administrative Law. New Haven, CT: Yale University Press, 2012. Maskin, Eric, and Jean Tirole. “The Politician and the Judge: Accountability in Government.” American Economic Review 94, no. 4 (2004): 1034–54. Mathews, Jud. “Proportionality Review in Administrative Law.” In Comparative Administrative Law, edited by Susan Rose-Ackerman and Peter Lindseth. 2nd ed. Cheltenham: Edward Elgar, 2017. Maxfield, Sylvia. Gatekeepers of Growth: The International Political Economy of Central Banking in Developing Countries.


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

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

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: 726 words: 172,988

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

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, break the buck, business cycle, 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, fixed income, George Akerlof, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, peer-to-peer lending, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Satyajit Das, 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: 586 words: 160,321

The Euro and the Battle of Ideas by Markus K. Brunnermeier, Harold James, Jean-Pierre Landau

Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, currency peg, debt deflation, Deng Xiaoping, different worldview, diversification, Donald Trump, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, financial deregulation, financial repression, fixed income, Flash crash, floating exchange rates, full employment, German hyperinflation, global reserve currency, income inequality, inflation targeting, information asymmetry, Irish property bubble, Jean Tirole, Kenneth Rogoff, Martin Wolf, mittelstand, money market fund, Mont Pelerin Society, moral hazard, negative equity, Neil Kinnock, new economy, Northern Rock, obamacare, offshore financial centre, open economy, paradox of thrift, pension reform, price stability, principal–agent problem, quantitative easing, race to the bottom, random walk, regulatory arbitrage, rent-seeking, reserve currency, road to serfdom, secular stagnation, short selling, Silicon Valley, South China Sea, special drawing rights, the payments system, too big to fail, union organizing, unorthodox policies, Washington Consensus, WikiLeaks, yield curve

Indeed, French academics have made a decisive contribution to the literature on time consistency and the consequent significance of the correct formulation of rules. In that sense, they have done more than the German Ordoliberals to present a version of a system of rules that is really applicable to the complexities of a modern economy, in which competition is not an obvious result of economic activity. Jean Tirole and Jean-Jacques Laffont in particular have been instrumental in developing a new approach to the provision of incentives by regulators, in which the dangers of creating moral hazard play a key role.44 The visions of the past influence the way that economics is seen. Most French economists complain—as did the recent best-selling author Thomas Piketty of Capital, a dramatic manifesto on how capitalism does not provide a self-sustaining and politically acceptable model of growth—that “economists are not highly respected in the academic and intellectual world or by political and financial elites.”45 In fact, a popular and intellectual culture exists that sees economists as narrow-minded and soulless technocrats who force a dehumanized concept of rationality on their fellow citizens.

Padioleau, Quand la France s’enferre, 33, 79. 42. Charles Maier, “The Politics of Productivity: Foundations of American International Economic Policy after World War II,” in In Search of Stability: Explorations in Historical Political Economy, edited by Charles Maier (New York: Cambridge University Press), 121–52. 43. Pierre Bauby, L'Etat-stratège, (Paris: Les éditions ouvrières, 1991), 195. 44. Jean-Jacques Laffont and Jean Tirole, A Theory of Incentives in Regulation and Procurement (Cambridge, MA: MIT Press, 1993). In Germany, Hans-Werner Sinn also made a significant contribution to the analysis of the provision of public goods and built this position up as the basis for a critique of many of the Euro rescue mechanisms. 45. Thomas Piketty, Capital in the Twenty-first Century (Cambridge, MA: Harvard University Press, 2014), 32. 46.


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

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, information asymmetry, 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: 288 words: 81,253

Thinking in Bets by Annie Duke

banking crisis, Bernie Madoff, Cass Sunstein, cognitive bias, cognitive dissonance, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, en.wikipedia.org, endowment effect, Estimating the Reproducibility of Psychological Science, Filter Bubble, hindsight bias, Jean Tirole, John Nash: game theory, John von Neumann, loss aversion, market design, mutually assured destruction, Nate Silver, p-value, phenotype, prediction markets, Richard Feynman, ride hailing / ride sharing, Stanford marshmallow experiment, Stephen Hawking, Steven Pinker, the scientific method, The Signal and the Noise by Nate Silver, urban planning, Walter Mischel, Yogi Berra, zero-sum game

Schelling (2005, game theory, “for having enhanced our understanding of conflict and cooperation through game theory analysis”); (6) Leonid Hurwicz, (7) Eric S. Maskin, and (8) Roger B. Myerson (2007, microeconomics, “for having laid the foundations of mechanism design theory”); (9) Alvin E. Roth and (10) Lloyd S. Shapley (2012, applied game theory, “for the theory of stable allocations and the practice of market design”); and (11) Jean Tirole (2014, industrial organization, microeconomics, “for his analysis of market power and regulation”). Poker vs. chess: My brother Howard came from a chess background, but the movement of players from chess into poker is relatively rare. In my opinion, the lack of uncertainty in chess compared with the great uncertainty in poker is a barrier to transitioning from one to the other. In contrast, during my time in poker there was a lot of crossover between backgammon and poker.


pages: 310 words: 85,995

The Future of Capitalism: Facing the New Anxieties by Paul Collier

"Robert Solow", accounting loophole / creative accounting, Airbnb, assortative mating, bank run, Berlin Wall, Bernie Sanders, bitcoin, Bob Geldof, bonus culture, business cycle, call centre, central bank independence, centre right, Commodity Super-Cycle, computerized trading, corporate governance, creative destruction, cuban missile crisis, David Brooks, delayed gratification, deskilling, Donald Trump, eurozone crisis, financial deregulation, full employment, George Akerlof, Goldman Sachs: Vampire Squid, greed is good, income inequality, industrial cluster, information asymmetry, intangible asset, Jean Tirole, job satisfaction, Joseph Schumpeter, knowledge economy, late capitalism, loss aversion, Mark Zuckerberg, minimum wage unemployment, moral hazard, negative equity, New Urbanism, Northern Rock, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, race to the bottom, rent control, rent-seeking, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, too big to fail, trade liberalization, urban planning, web of trust, zero-sum game

There has, however, to be a limit to such security; while firms should be able to cope with temporary fluctuations, they cannot adjust to a large, permanent drop in demand without shedding labour. At the limit, the firm goes bankrupt. Yet the fact that job loss is unavoidable in no way mitigates the cost to the worker. For this class of shock, we need an entity larger than the firm – the state. Nobel Laureate Jean Tirole has proposed a smart way for government to induce firms to retain workers through market troughs, while still enabling them to shed employees when faced by a permanent contraction. This is to impose a charge on labour-shedding to reflect the extra costs to the state of welfare payments and retraining. The governments that have reputedly best responded to such job shocks are those of Denmark and Sweden, which developed the concept of flexicurity.


pages: 270 words: 79,180

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

Affordable Care Act / Obamacare, Airbnb, Al Roth, Ben Horowitz, Black Swan, buy low sell high, Chuck Templeton: OpenTable:, Credit Default Swap, cross-subsidies, crowdsourcing, disintermediation, diversified portfolio, experimental economics, George Akerlof, Goldman Sachs: Vampire Squid, income inequality, index fund, information asymmetry, Jean Tirole, Joan Didion, Kenneth Arrow, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, market microstructure, Martin Wolf, McMansion, Menlo Park, Metcalfe’s law, moral hazard, multi-sided market, Network effects, patent troll, Paul Graham, Peter Thiel, pez dispenser, ride hailing / ride sharing, Robert Metcalfe, 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, uber lyft, 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: 282 words: 80,907

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

Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, Chuck Templeton: OpenTable:, commoditize, computer age, computerized markets, 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, uber lyft, undersea cable

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.


pages: 324 words: 93,175

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

Alvin Roth, assortative mating, Burning Man, business process, cognitive dissonance, corporate governance, Daniel Kahneman / Amos Tversky, end world poverty, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, George Akerlof, happiness index / gross national happiness, hedonic treadmill, IKEA effect, 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: 322 words: 87,181

Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta analysis, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, Pareto efficiency, postindustrial economy, price stability, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, special economic zone, spectrum auction, Steven Pinker, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

Daniel Drezner, The Ideas Industry, Oxford University Press, New York, 2017. CHAPTER 7: Economists, Politics, and Ideas 1. George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science, vol. 2(1), Spring 1971: 3–21; Sam Peltzman, “Toward a More General Theory of Regulation,” Journal of Law and Economics, vol. 19(2), 1976: 211–240; Jean-Jacques Laffont and Jean Tirole “The Politics of Government Decision Making: A Theory of Regulatory Capture,” Quarterly Journal of Economics, vol. 106, 1991: 1089–1127. 2. Anne O. Krueger, “The Political Economy of the Rent-Seeking Society,” American Economic Review, vol. 64(3), June 1974: 291–303; Gene Grossman and Elhanan Helpman, “Protection for Sale,” American Economic Review, vol. 84(4), 1994: 833; Dani Rodrik, “The Political Economy of Trade Policy,” in Handbook of International Economics, G.


pages: 353 words: 98,267

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

Alvin Roth, 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, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Joshua Gans and Andrew Leigh, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, longitudinal study, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Monkeys Reject Unequal Pay, new economy, New Urbanism, peer-to-peer, 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, ultimatum game, unpaid internship, urban planning, Veblen good, women in the workforce, World Values Survey, Yom Kippur War, young professional, zero-sum game

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: 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

"Robert Solow", affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, business cycle, buy and hold, 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, George Santayana, 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 market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Paul Samuelson, 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: 337 words: 101,440

Revolution Française: Emmanuel Macron and the Quest to Reinvent a Nation by Sophie Pedder

Airbnb, Berlin Wall, Bernie Sanders, bike sharing scheme, centre right, disruptive innovation, Donald Trump, Downton Abbey, Erik Brynjolfsson, eurozone crisis, failed state, Fall of the Berlin Wall, ghettoisation, haute couture, Jean Tirole, knowledge economy, liberal capitalism, mass immigration, mittelstand, new economy, post-industrial society, rent-seeking, ride hailing / ride sharing, Second Machine Age, sharing economy, Silicon Valley, Travis Kalanick, urban planning, éminence grise

This university had not found a solution to all the difficulties that Jean Jaurès faced. Yet, across all disciplines, 82 per cent of undergraduates got their degree in three years. During the student revolt, the Toulouse 1 campus was shut for just a brief period. In the Toulouse School of Economics (TSE), a faculty within the university, it has a world-class department of economics. One of the TSE pioneers, Jean Tirole, won the 2014 Nobel Prize in this field. Indeed, the history of the TSE, which arose from an institute originally set up in 1990 by Jean-Jacques Laffont, shows both how France has tied its hands with the existing system, and how to circumvent it. Instead of accepting its lot, the school’s founders decided to work around the rules. They sought private sponsorship for research, setting up research centres as associations, officially outside the university management structure and therefore not subject to civil-service rules.


pages: 398 words: 107,788

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

activist lawyer, Benjamin Mako Hill, commoditize, crowdsourcing, Debian, Donald Knuth, dumpster diving, en.wikipedia.org, financial independence, ghettoisation, GnuPG, Hacker Ethic, informal economy, Jacob Appelbaum, Jaron Lanier, Jason Scott: textfiles.com, Jean Tirole, knowledge economy, laissez-faire capitalism, Larry Wall, Louis Pasteur, means of production, Paul Graham, peer-to-peer, 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 Hackers Conference, 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: 407 words: 109,653

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

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

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: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"Robert Solow", 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, longitudinal study, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, Plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, ubercab, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

Erik benefited immensely from the help of his students and research team, who not only provided solutions to many of the puzzles that emerged as we worked on this book, but more important, asked the questions that occur only to people who look at problems with fresh eyes, including especially: Sagit Bar-Gill, Andrey Fradkin, Avi Gannamaneni, Shan Huang, Meng Lui, JooHee Oh, Daniel Rock, Guillaume Saint-Jacques, George Westerman, and Erina Ytsma. A few hundred students in Erik’s MBA classes served as lively test subjects for many of the nascent ideas that made it into the book, and many more that didn’t. Professors Marshall Van Alstyne, Geoff Parker, and Jean Tirole were particularly helpful in thinking through some of the issues relating to platform economics, while Naomi Stephen provided superb administrative support. Erik drew inspiration from ShaoLan Hsueh’s encouragement as the project neared completion. He is especially grateful to his family’s support throughout this project, even as it kept him away from them too often. When the manuscript was finished(-ish) we turned it over to Norton.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

"Robert Solow", accounting loophole / creative accounting, agricultural Revolution, barriers to entry, business cycle, cognitive bias, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, 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, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, peer-to-peer, 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: 611 words: 130,419

Narrative Economics: How Stories Go Viral and Drive Major Economic Events by Robert J. Shiller

agricultural Revolution, Albert Einstein, algorithmic trading, Andrei Shleifer, autonomous vehicles, bank run, banking crisis, basic income, bitcoin, blockchain, business cycle, butterfly effect, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, central bank independence, collective bargaining, computerized trading, corporate raider, correlation does not imply causation, cryptocurrency, Daniel Kahneman / Amos Tversky, debt deflation, disintermediation, Donald Trump, Edmond Halley, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, full employment, George Akerlof, germ theory of disease, German hyperinflation, Gunnar Myrdal, Gödel, Escher, Bach, Hacker Ethic, implied volatility, income inequality, inflation targeting, invention of radio, invention of the telegraph, Jean Tirole, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, litecoin, market bubble, money market fund, moral hazard, Northern Rock, nudge unit, Own Your Own Home, Paul Samuelson, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, publish or perish, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, Rubik’s Cube, Satoshi Nakamoto, secular stagnation, shareholder value, Silicon Valley, speech recognition, Steve Jobs, Steven Pinker, stochastic process, stocks for the long run, superstar cities, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, traveling salesman, trickle-down economics, tulip mania, universal basic income, Watson beat the top human players on Jeopardy!, We are the 99%, yellow journalism, yield curve, Yom Kippur War

“Self-Referencing and Persuasion: Narrative Transportation versus Analytical Elaboration.” Journal of Consumer Research 16:421–29. Fair, Ray C. 1987. “Sources of Output and Price Variability in a Macroeconomic Model.” Yale University: Cowles Foundation Discussion Paper 815. Fair, Ray C., and Robert J. Shiller. 1989. “The Informational Content of Ex Ante Forecasts.” Review of Economics and Statistics 71(2):325–31. Falk, Armin, and Jean Tirole. 2016. “Narratives, Imperatives, and Moral Reasoning.” Unpublished paper, University of Bonn. Falter, Jürgen W. 1986. “Unemployment and the Radicalisation of the German Electorate 1928–1933: An Aggregate Data Analysis with Special Emphasis on the Rise of National Socialism.” In Peter Stachura, ed., Unemployment and the Great Depression in Weimar Germany, 187–208. London: Palgrave Macmillan. Fama, Eugene F., and Kenneth R.


pages: 482 words: 161,169

Corporate Warriors: The Rise of the Privatized Military Industry by Peter Warren Singer

barriers to entry, Berlin Wall, blood diamonds, borderless world, British Empire, colonial rule, conceptual framework, failed state, Fall of the Berlin Wall, financial independence, full employment, Jean Tirole, joint-stock company, Machinery of Freedom by David Friedman, market friction, moral hazard, Nelson Mandela, new economy, offshore financial centre, Peace of Westphalia, principal–agent problem, prisoner's dilemma, private military company, profit maximization, profit motive, RAND corporation, risk/return, rolodex, Ronald Coase, Ronald Reagan, Scramble for Africa, South China Sea, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith

Milton, "The New Mercenaries—Corporate Armies for Hire," Foreign Area Officers Association Journal, 1997. 20. The fact that industry employees do not have any union protection only underscores their dependence on the goodwill of firm management and the impetus to turn a profit. Shichor, Punishment for Profit. 56. 21. Donahue, Privatization Decision, 54. 22. Ash ton Carter and John White, Keeping the Edge (Cambridge: MIT Press, 2001), 187. 23. Donahue, Privatization Decision, 105. 24. Jean Tirole. The Theory of Industrial Organization (Cambridge, Mass.: MIT Press, 1988), 29-49- 25. General Accounting Office. "Contingency Operations: Army Should Do More to Control Contract Cost in the Balkans." NSDIAD-00-225. October (i, 2000. http://www .gao.gov/ 2(3. Interviews with a PMF employee and a L\S. government official, Sarajevo, July 1999. 27. Ibid.; Kiltie Merx, "Cop Fired From Kosovo Job," Detroit Nnvs, Februaiy 25. 2000. 28.


pages: 606 words: 157,120

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

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, creative destruction, 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, lifelogging, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, moral panic, Narrative Science, Nelson Mandela, Nicholas Carr, packet switching, PageRank, Parag Khanna, Paul Graham, peer-to-peer, 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.


pages: 614 words: 174,226

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum

"Robert Solow", airline deregulation, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, ending welfare as we know it, financial deregulation, financial innovation, fixed income, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Growth in a Time of Debt, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Long Term Capital Management, low cost airline, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, oil shock, Paul Samuelson, Philip Mirowski, plutocrats, Plutocrats, price stability, profit motive, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Peltzman, Silicon Valley, Simon Kuznets, starchitect, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus

The Bush administration said competition would come from the cable industry instead. The result was deregulation without competition. Three quarters of American households have, at best, a choice of two potential providers of high-speed internet service.98 In that same year, 2005, the United Kingdom tried again, adopting a new formula for leasing phone lines based on the work of the French economist Jean Tirole. The basic balancing act is to set rates high enough to reward investment by the company that owns the lines, but low enough to encourage competitors to lease the lines. Tirole’s answer proved successful, and it has been adopted by a growing number of nations. When Tirole was honored with the Nobel Prize in 2014, a member of the prize committee told reporters, “Politicians would be stupid not to take his policy advice.”99 The United States has not, and so Americans pay more for internet access.100 It is easy to forget that markets are human creations, precisely because we have created so many markets.


Economic Origins of Dictatorship and Democracy by Daron Acemoğlu, James A. Robinson

Andrei Shleifer, British Empire, business cycle, colonial rule, conceptual framework, constrained optimization, Corn Laws, declining real wages, Edward Glaeser, European colonialism, Gunnar Myrdal, income inequality, income per capita, invisible hand, Jean Tirole, John Markoff, Kenneth Rogoff, land reform, minimum wage unemployment, Nash equilibrium, Nelson Mandela, oil shock, open economy, Pareto efficiency, rent-seeking, strikebreaker, total factor productivity, transaction costs, Washington Consensus, William of Occam, women in the workforce

Samuel (1998) The Armed Forces and Democracy in Latin America; Baltimore: Johns Hopkins University Press. Flora, Peter (1983) State, Economy, and Society, 1815–1975; Frankfurt: Campus-Verlag. Fogel, Robert W. (1989) Without Consent or Contract: The Rise and Fall of American Slavery; New York: Norton. Fogel, Robert W., and Stanley L. Engerman (1974) Time on the Cross: The Economics of American Negro Slavery; Boston: Little, Brown. Fudenberg, Drew, and Jean Tirole (1991) Game Theory; Cambridge, MA: MIT Press. Fukuyama, Francis (1992) The End of History and the Last Man; New York: Free Press. Galor, Oded, and Omer Moav (2003) “Das Human Kapital: A Theory of the Demise of the Class Structure,” Unpublished. http://www.econ.brown.edu/fac/Oded Galor/. Galor, Oded, and Joseph Zeira (1993) “Income Distribution and Macroeconomics,” Review of Economic Studies, 40, 35–52.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

KPMG International, 2012, KPMG’s Individual Income Tax and Social Security Rate Survey, October, Publication Number 120916. Krueger, Anne O., 2000, Economic Policy Reform: The Second Stage (Chicago, IL: The University of Chicago Press). La Porta, Rafael, Florencio Lopez-Silanes, Andrei Shleifer, and Robert Vishny, 1998, “The Quality of Government.” Unpublished mimeo Lacey, A. R., 2001, Robert Nozick (Princeton, NJ: Princeton University Press). Laffont, Jean-Jacques and Jean Tirole, 1993, A Theory of Incentives in Procurement and Regulations (Cambridge, MA: MIT Press). Landes, David, 1983, Revolution in Time: Clocks and the Making of the Modern World (Cambridge, MA: Harvard University Press). 1998, The Wealth and Poverty of Nations: Why Some Are So Rich and Some so Poor (New York and London: W. W. Norton & Company). Lange, Oskar and Fred M. Taylor, 1938, On the Economic Theory of Socialism (New York: McGraw-Hill Book Company).


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The Irrational Bundle by Dan Ariely

accounting loophole / creative accounting, air freight, Albert Einstein, Alvin Roth, assortative mating, 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, end world poverty, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, fudge factor, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, IKEA effect, Jean Tirole, job satisfaction, Kenneth Arrow, 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 Thaler, Saturday Night Live, Schrödinger's Cat, second-price auction, Shai Danziger, 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.


pages: 918 words: 257,605

The Age of Surveillance Capitalism by Shoshana Zuboff

Amazon Web Services, Andrew Keen, augmented reality, autonomous vehicles, barriers to entry, Bartolomé de las Casas, Berlin Wall, bitcoin, blockchain, blue-collar work, book scanning, Broken windows theory, California gold rush, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, citizen journalism, cloud computing, collective bargaining, Computer Numeric Control, computer vision, connected car, corporate governance, corporate personhood, creative destruction, cryptocurrency, dogs of the Dow, don't be evil, Donald Trump, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, facts on the ground, Ford paid five dollars a day, future of work, game design, Google Earth, Google Glasses, Google X / Alphabet X, hive mind, impulse control, income inequality, Internet of things, invention of the printing press, invisible hand, Jean Tirole, job automation, Johann Wolfgang von Goethe, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, knowledge economy, linked data, longitudinal study, low skilled workers, Mark Zuckerberg, market bubble, means of production, multi-sided market, Naomi Klein, natural language processing, Network effects, new economy, Occupy movement, off grid, PageRank, Panopticon Jeremy Bentham, pattern recognition, Paul Buchheit, performance metric, Philip Mirowski, precision agriculture, price mechanism, profit maximization, profit motive, recommendation engine, refrigerator car, RFID, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Mercer, Second Machine Age, self-driving car, sentiment analysis, shareholder value, Shoshana Zuboff, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, slashdot, smart cities, Snapchat, social graph, social web, software as a service, speech recognition, statistical model, Steve Jobs, Steven Levy, structural adjustment programs, The Future of Employment, The Wealth of Nations by Adam Smith, Tim Cook: Apple, two-sided market, union organizing, Watson beat the top human players on Jeopardy!, winner-take-all economy, Wolfgang Streeck

Roben Farzad, “Google at $400 Billion: A New No. 2 in Market Cap,” BusinessWeek, February 12, 2014, http://www.businessweek.com/articles/2014-02-12/google-at-400-billion-a-new-no-dot-2-in-market-cap. 92. “Largest Companies by Market Cap Today,” Dogs of the Dow, 2017, https://web.archive.org/web/20180701094340/http://dogsofthedow.com/largest-companies-by-market-cap.htm. 93. Jean-Charles Rochet and Jean Tirole, “Two-Sided Markets: A Progress Report,” RAND Journal of Economics 37, no. 3 (2006): 645–67. 94. For a discussion on this point and its relation to online target advertising, see Katherine J. Strandburg, “Free Fall: The Online Market’s Consumer Preference Disconnect” (working paper, New York University Law and Economics, October 1, 2013). 95. Kevin Kelly, “The Three Breakthroughs That Have Finally Unleashed AI on the World,” Wired, October 27, 2014, https://www.wired.com/2014/10/future-of-artificial-intelligence. 96.