A New Economy? Created: 2000-01-01 Last Modified: 2000-01-01 Go to Brad DeLong's Home Page http://www.j-bradford-delong.net/

What Kind of an Historical Turning Point?

J. Bradford DeLong
http://www.j-bradford-delong.net/
delong@econ.berkeley.edu

 

Industry Structure

• This is not the first time we have seen massive economies of scale and network externalities.
  
  • The Gilded Age--Shapiro and Varian's Information Rules.
    
  • Attempted political blocking of continent-spanning enterprise: Swift, Armour, and the FDA.
    
  • How to reap the benefits of both competition and efficient scale?
    
    
• The solution to the Gilded Age dilemma: the Progressive-Era equilibrium.
  
  • Tolerate oligopoly but dissolve monopoly.
    
    • Thus achieve most of the benefits of competition and most of the benefits of scale economies.
      
  • Regulate natural monopolies with a very heavy hand.
    
    
• But we no longer have confidence in regulatory authorities.
  
  
• And oligopolies may be becoming less and less sustainable.
  
  • Network externalities do make it easier and easier for the dominant firm to push its market share toward 100%.

 

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