WILLIAM H. JANEWAY
Given the need to reward those who risk time and money on unproven ventures and ideas, there is often a tension between encouraging innovation and preventing monopolization in capitalist economies. The question is how to strike a proper balance in the face of immensely powerful technological and market dynamics.
CAMBRIDGE – The detective in a typical British crime procedural would say that Mordecai Kurz “has got form.” An emeritus professor at Stanford University, Kurz received his doctorate in economics from Yale University more than 60 years ago. In 1970, he co-authored a book with Kenneth J. Arrow, a soon-to-be Nobel laureate in economics and among the greatest cross-over mathematician-social scientists ever.
Kurz would go on to establish a distinctive platform for criticizing John Muth and Robert Lucas’s rational expectations hypothesis, demonstrating with rigor that any number of models could be mapped to the historical statistical record to reveal a spectrum of alternative “rational beliefs.” And now, in his book The Market Power of Technology: Understanding the Second Gilded Age, he brings the same rigor to bear on the question of what shapes income growth and the distribution of wealth in an economy driven by privately owned technological innovations.
Kurz’s theory of “technological market power” distinguishes legally sanctioned monopolies based on innovation from illegal conspiracies that restrain trade. He offers the example of General Electric, which exemplified the persistence of technological market power for a century, starting in the 1890s. An initial innovation that improves the innovator’s competitive position creates market power which, in turn, generates monopoly profits that are invested in entrenching and extending the scope of market power. Moreover, those monopoly profits can and observably have been applied to influence the extent to which the political process can counter the accumulated market power.
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