We’ve Been Measuring the Economy All Wrong
https://www.theatlantic.com/ideas/archive/2023/04/economic-models-trump-tax-cut/673749/
Annie Lowrey:
That said, several forecasters agreed that conventional models rely on questionable, even laughable, assumptions. Some models, for instance, assume that the country has perfectly competitive labor markets in which workers have total freedom to switch jobs and are paid precisely what they’re worth to a company’s bottom line. And the models generally don’t account for the ways in which having markets dominated by so few competitors—Google with web search, Amazon with online shopping—might skew profits, investments, and wages. “The assumption that there’s no market power is just wrong,” Stiglitz told me. “It’s so obvious. In many sectors of our economy, we don’t have anything that approaches that level of competition.” He cited the tech sector, drug stores, even dog food.
https://www.theatlantic.com/ideas/archive/2023/04/economic-models-trump-tax-cut/673749/
Annie Lowrey:
That said, several forecasters agreed that conventional models rely on questionable, even laughable, assumptions. Some models, for instance, assume that the country has perfectly competitive labor markets in which workers have total freedom to switch jobs and are paid precisely what they’re worth to a company’s bottom line. And the models generally don’t account for the ways in which having markets dominated by so few competitors—Google with web search, Amazon with online shopping—might skew profits, investments, and wages. “The assumption that there’s no market power is just wrong,” Stiglitz told me. “It’s so obvious. In many sectors of our economy, we don’t have anything that approaches that level of competition.” He cited the tech sector, drug stores, even dog food.