Information Technology Reference
In-Depth Information
can lead a publisher to give a big advance to a well-known author to produce a second-
rate work, rather than invest the same resources in developing an unknown, but more
talented, author. The same effect happens with movie producers. Hoping for the largest
possible sales on the first weekend, they bankroll second-rate sequels to big hits rather
than original stories filmed by lesser-known directors.
If winner-take-all markets have harmful consequences on our economy and society,
what can be done? Frank and Cook suggest four ways to reduce winner-take-all effects.
First, societies can enact laws limiting the number of hours that stores remain open for
business. These laws ensure parity among competing businesses and prevent them from
engaging in positional arms races. Without these laws, one business may extend its hours
in order to gain an advantage over its competitors. Soon all of its competitors follow suit.
Parity is restored, but now all the employees must bear the burden of the longer hours.
Regulations on business hours are often called “blue laws.”
Second, in the absence of laws, businesses can form cooperative agreements to
reduce positional arms races. An example is when a group of professional sports team
owners agree to establish a cap on team salaries.
Third, more progressive tax structures reduce excess competition for the few hand-
somely rewarded positions. Back in 1961, the marginal tax rate on income in the highest
tax bracket was 91 percent. By 1989, the highest marginal income tax rate had been low-
ered to 28 percent. Consumption taxes and luxury taxes are other ways of targeting the
wealthiest people. Heavily taxing those with the highest incomes makes a higher income
less attractive and dissuades some people from competing for the highest-paying jobs.
Society benefits when these people engage in more productive work.
Finally, campaign finance reform can reduce the political power of the wealthiest
1 percent of the population, who control more than one-third of the wealth. Reducing
the political power of the very wealthy is another way to reduce the attraction of com-
peting for the highest-paying positions.
This chapter has explored a variety of ways in which information technology and au-
tomation have affected the workplace. We began by asking the question, Does automa-
tion increase unemployment? On the surface, the answer to this question seems obvi-
ous: of course automation increases unemployment. That is what automation means—
replacing human labor with machine labor. Industrial robots, voice mail systems, and
a myriad of other devices have displaced millions of workers over the past 50 years.
However, a deeper look reveals how automation can create jobs, too. When products
are less expensive, more people want to buy them, increasing the number that must be
made. If products are less expensive, consumers have more money left to spend, which
increases demand for other products. Finally, some people are involved in creating and
maintaining the machines themselves. For these reasons, the rapid introduction of auto-
