Friday, 7 August 2015

The Winner-Take-All Economy

The Second Machine Age
I've just read "The Second Machine Age", by Brynjolfsson and McAfee, and I thought I would share some thoughts relevant to our project with you.

The authors explain the concept of a winner-take-all economy. This is an economy where the company or individual that produces the best product or the best performance gets huge rewards and all the competitors get relatively little, even when the quality of their product or performance is only slightly lower than the quality of the product or performance of the top company or individual. The authors also explain how technology (and digitisation in particular) and globalisation are pushing contemporary society more and more towards a winner-take-all economy.

Digitisation means that many goods (those that can be digitised) can be reproduced at a very low cost and can thereby invade global markets very easily. The same applies to goods that have a low marginal cost of reproduction. So, within any particular niche of the market, the best version of one product can generate huge profits for its producer leaving only crumbs to the producers of second-best versions. As the Nike ad put it "you don't win silver, you lose gold".

Winner-take-all systems for the distribution of rewards can be useful for some purposes: they can spur excellence and innovation (in some circumstances, when they don't give rise to monopolies, etc.) But they obviously result in huge inequalities. If there is no mechanism to redistribute the rewards of the winner so that the whole of society can benefit, the inequalities accumulate and become entrenched. 

This is bad in all sorts of ways and for all sorts of things, including health. The epidemiological literature on the social determinants of health has shown how significant the impact of inequalities on health are. In the decades to come, the shift towards a winner-take-all economy generated by digitisation and globalisation will make those impacts even more significant and problematic than they already are. 

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