Waldfogel the tyranny of the market; why you cant always get what you want (2007)

The Tyranny of the Market The Tyranny of the Market WHY YOU CAN’T ALWAYS GET WHAT YOU WANT Joel Waldfogel Harvard University Press Cambridge, Massachusetts London, England 2007 Copyright © 2007 by the President and Fellows of Harvard College All rights reserved Printed in the United States of America Library of Congress Cataloging-in-Publication Data Waldfogel, Joel, 1962– The tyranny of the market : Why you can’t always get what you want / Joel Waldfogel p cm Includes bibliographical references and index ISBN-13: 978-0-674-02581-3 ISBN-10: 0-674-02581-4 Consumers’ preferences Majorities Supply and demand Social choice Free enterprise I Title HF5415.32.W35 2007 381—dc22 2007000531 Contents Preface Introduction vii PART ONE THEORY Markets and the Tyranny of the Majority 13 Are “Lumpy” Markets a Problem? 21 PART TWO EMPIRICAL EVIDENCE Who Benefits Whom in Practice 39 Who Benefits Whom in the Neighborhood 59 Preference Minorities as Citizens and Consumers 74 PART THREE MARKET SOLUTIONS AND THEIR LIMITS Market Enlargement and Consumer Liberation 89 Fixed Costs, Product Quality, and Market Size 100 Trade and the Tyranny of Alien Majorities 108 Salvation through New Technologies 119 vi • Contents PART FOUR POLICY SOLUTIONS AND THEIR LIMITS 10 Government Subsidies and Insufficient Demand 131 11 Books and Liquor: Two Case Studies 147 Conclusion 163 Notes 173 References 189 Credits 195 Index 197 Preface In this book, I respond to—and extend in new ways—ideas laid out most famously in two very important works in economics and political economy, Milton Friedman’s Capitalism and Freedom and John Stuart Mill’s On Liberty Mill points out a fundamental feature of decision-making through government, that majority rule imposes constraints on individuals who disagree with the collective choice My liberty is abridged in the sense that the choices available to me as a citizen depend on the preferences of others If the majority wants liquor stores closed on Sunday while I would prefer to have them open, then my freedom is abridged by the fact that we make this choice collectively If I want green shirts but the state shirt-making collective, bowing to majority views, makes only red, then my freedom to choose among shirt colors is abridged Friedman agrees that allocation through collective choice promotes a tyranny of the majority, and he argues that when allocation takes place through markets, rather than collective choice, individuals get what they want rather than, say, what the majority wants Friedman argues for a stark dichotomy between market and collective choice Markets offer “freedom” in the sense of allowing people access to whatever products might suit their tastes, regardless of what others prefer On this basis he argues that societies should let the market decide as many questions as possible to avoid effects akin to tyranny of the majority viii • Preface As a student I read both Capitalism and Freedom and On Liberty with great interest Capitalism and Freedom inspired me with the message that allocation through markets is not just expedient; it also promotes freedom, something far nobler than base material needs I often claimed to incredulous acquaintances that Capitalism and Freedom would still be read centuries from now I still view Friedman’s book as an enduring contribution, but for more than a decade I have been an empirical economist studying the functioning of actual markets In the course of my research I have discovered a (growing) number of contexts in which people’s consumption options—and indeed their ensuing satisfaction as consumers—depend on the preferences of others In particular, in markets where fixed costs are substantial and preferences differ across groups of consumers, individuals find more options—and more satisfaction—when more people share their preferences That is, I have documented phenomena analogous to the tyranny of the majority in markets These findings stand in stark contrast to the notion that markets avoid objectionable features of collective choice My goal in this work is not so much to argue that Friedman is wrong To the extent that Friedman is arguing that capitalism allows better tailoring of consumption opportunities to heterogeneous preferences than, say, a communist system of state-run industry, he is surely correct Rather, my goal is to demonstrate that Friedman’s dichotomy between markets and collective choice is not right Under some simple circumstances that prevail in many markets, what I get depends on how many others also want it Market allocation shares many of the features of allocation through collective choice This finding—which is the chief message of the book— undermines some of the rationale to let the market decide such a wide array of questions When I first began talking about these ideas in seminars in the late 1990s, one prominent economist told me, “That’s interesting But aren’t you worried about what the Right would with those Preface • ix results?” This economist was presumably concerned that conservatives would see in the results an argument for promoting residential segregation For example, clusters of blacks would bring forth products more appealing to blacks, relieving pressure for policies promoting residential mobility by minorities A week later, another prominent economist had a similar but opposite reaction, finding it “interesting” but expressing concern about “what the Left would with the results.” This economist was presumably concerned that activists would see an argument for subsidizing products targeted at minorities and other small groups of consumers Annoying people across the ideological spectrum confirmed my sense that I was on to something This book is the result This book is the distilled product of ten years of work, much of it undertaken with students and colleagues, to whom I am enormously grateful Collaborators who helped educate me include Steve Berry, Lisa George, Felix Oberholzer-Gee, Peter Siegelman, and Todd Sinai I have benefited from comments on the book draft from my editor at Harvard University Press, Mike Aronson, as well as Mary Benner, Steve Berry, Matt Kahn, Jeff Milyo, Fiona ScottMorton, Asher Waldfogel, and two anonymous referees I am grateful for the intellectual atmosphere of the Wharton School, where I have been free to pursue empirical applied economics informed by heavy doses of reality I am also grateful for the hospitality of the Wharton Marketing Department during a leave in the fall of 2005, when I completed a draft of the manuscript This book is dedicated to three sets of people who have been instrumental in my life and work: my wife, Mary Benner, an accomplished scholar who has supported this project from before its beginning; my father, Melvin, and late mother, Gertrude, whose rearing made me sensitive to the concerns of preference minorities; and my children, Hannah and Sarah, who inspire me every day 190 • References Breyer, Stephen 1982 Regulation and Its Reform Cambridge: Harvard University Press Burrelle’s Information Services 2000 Burrelle’s Media Directory Livingston, N.J.: Burrelle’s Information Services Coase, Ronald A 1960 “The Problem of Social Cost.” Journal of Law and Economics 3: 1–44 Consumer Reports 2003 “Best Meals, Best Deals.” Consumer Reports (July): 18–23 Coyne, Philip E 2001 “The Eflornithine Story.” Journal of American Academic Dermatology 45: 784–786 Cutler, David M., and Edward L Glaeser 1997 “Are Ghettos Good or Bad?” Quarterly Journal of Economics 112: 827–872 Cutler, David M., Edward L Glaeser, and Jacob L Vigdor 1999 “The Rise and Decline of the American Ghetto.” Journal of Political Economy 107: 455506 dAspremont, Claude, Jean Jaskold-Gabszewicz, and Jacques-Franỗois Thisse 1979 “On Hotelling’s ‘Stability in Competition.’” Econometrica 47: 1145–1150 Dixit, Avinash K., and Joseph E Stiglitz 1997 “Monopolistic Competition and Optimum Product Diversity.” American Economic Review 67: 297–308 Donahue, John D 1989 The Privatization Decision: Public Ends, Private Means New York: Basic Books Duncan, James H 1993 Duncan’s American Radio, Spring 1993 Indianapolis: Duncan’s American Radio ——— 1994 Duncan’s Radio Market Guide Indianapolis: Duncan’s American Radio ——— 1997 Duncan’s American Radio, Spring 1997 Indianapolis: Duncan’s American Radio Economides, Nicholas 1989 “Quality Variations and Maximal Variety Differentiation.” Regional Science and Urban Economics 19: 21–29 ——— 1993 “Hotelling’s ‘Main Street’ with More than Two Competitors.” Journal of Regional Science 33: 303–319 Fehr, Ernst, and Klaus M Schmidt 1999 “A Theory of Fairness, Competition, and Cooperation.” Quarterly Journal of Economics 114: 817– 868 Friedman, Milton 1962 Capitalism and Freedom Chicago: University of Chicago Press References • 191 Gentzkow, Matthew 2006 “Television and Voter Turnout.” Quarterly Journal of Economics 121: 931–972 George, Lisa 2001 “What’s Fit to Print: The Effect of Ownership Concentration on Product Variety in Daily Newspaper Markets.” Unpublished paper, Hunter College George, Lisa, and Joel Waldfogel 2003 “Who Affects Whom in Daily Newspaper Markets?” Journal of Political Economy 111: 765–784 ——— 2006 “The New York Times and the Market for Local Newspapers.” American Economic Review 96: 435–447 Glaeser, Edward L., Jed Kolko, and Albert Saiz 2001 “Consumer City,” Journal of Economic Geography 1: 27–50 Guth, Werner, Rolf Schmittberger, and Bernd Schwarze 1982 “An Experimental Analysis of Ultimatum Bargaining.” Journal of Economic Behavior and Organization 3: 367–388 Heal, Geoffrey 1980 “Spatial Structure in Retail Trade: A Study in Product Differentiation.” Bell Journal of Economics 11: 565–583 Hotelling, Harold 1929 “Stability in Competition.” Economic Journal 39: 41–57 Kemp, Roger L., ed 1991 Privatization: The Provision of Public Services by the Private Sector Jefferson, N.C.: McFarland & Co Mankiw, N Gregory, and Michael D Whinston 1986 “Free Entry and Social Inefficiency.” RAND Journal of Economics 17: 48–58 Massey, Douglas, and Nancy Denton 1993 American Apartheid: Segregation and the Making of the Underclass Cambridge: Harvard University Press Mazzeo, Michael J 2002 “Product Choice and Oligopoly Market Structure.” RAND Journal of Economics 33: 1–22 Mill, John Stuart 1978 On Liberty Indianapolis: Hacket Oberholzer-Gee, Felix, and Joel Waldfogel 2005 “Strength in Numbers: Group Size and Political Mobilization.” Journal of Law and Economics 48: 75–91 ——— 2006 “Does Local News en Español Raise Hispanic Voter Turnout?” Working paper 12317, National Bureau of Economic Research (NBER), Cambridge Oberholzer-Gee, Felix, Joel Waldfogel, and Matthew White 2003 “Social Learning and Coordination in High-Stakes Games: Evidence from Friend or Foe,” Working paper 9805, National Bureau of Economic Research (NBER), Cambridge 192 • References Pindyck, Robert S., and Daniel L Rubinfeld 2001 Microeconomics, 5th ed Upper Saddle River, N.J.: Prentice Hall Rabin, M 1993 “Incorporating Fairness into Game Theory and Economics.” American Economic Review 83: 1281–1302 Riker, William H., and Peter C Ordeshook 1968 “A Theory of the Calculus of Voting.” American Political Science Review 62: 25–42 Savas, E S 1982 Privatizing the Public Sector: How to Shrink Government Chatham, N.J.: Chatham House ——— 1987 Privatization: The Key to Better Government Chatham, N.J.: Chatham House Shleifer, Andre, and Robert Vishny 1998 The Grabbing Hand Cambridge: Harvard University Press Siegelman, Peter, and Joel Waldfogel 2001 “Race and Radio: Preference Externalities, Minority Ownership, and the Provision of Programming to Minorities.” In Advances in Applied Microeconomics, vol 10, ed Michael R Baye and Jon P Nelson, pp 73–108 Greenwich, Conn.: JAI Press Sinai, Todd M., and Joel Waldfogel 2004 “Geography and the Internet: Is the Internet a Substitute or a Complement for Cities?” Journal of Urban Economics 56: 1–24 Solow, Robert M 1957 “Technical Change and the Aggregate Production Function.” Review of Economics and Statistics 39: 312–320 Spence, Michael 1976a “Product Selection, Fixed Costs, and Monopolistic Competition.” Review of Economic Studies 43: 217–235 ——— 1976b “Product Differentiation and Welfare.” American Economic Review 66: 407–414 Stigler, George J 1971 “The Theory of Economic Regulation.” Bell Journal of Economics 2: 3–21 Stiglitz, Joseph E 1996 Whither Socialism? Cambridge: MIT Press ——— 2002 Globalization and Its Discontents New York: W W Norton Sutton, John 1991 Sunk Costs and Market Structure Cambridge: MIT Press Tiebout, Charles 1958 “A Pure Theory of Local Expenditures.” Journal of Political Economy 114: 416–424 Waldfogel, Joel 1999 “Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets.” Working paper 7391, National Bureau of Economic Research (NBER), Cambridge References • 193 ——— 2003 “Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets.” RAND Journal of Economics 34: 557–568 ——— 2004 “Who Benefits Whom in Local Television Markets?” Brookings-Wharton Papers on Urban Affairs 5: 257–284 ——— 2006 “The Median Voter and the Median Consumer.” Working paper 11972, National Bureau of Economic Research (NBER), Cambridge Waterman, David 2005 Hollywood’s Road to Riches Cambridge: Harvard University Press Wolf, Charles, Jr 1988 Markets or Governments: Choosing between Imperfect Alternatives Cambridge: MIT Press World Bank 1997 World Development Report: The State in a Changing World New York: Oxford University Press Credits In writing this book, I drew on a number of my previously published technical papers, some of them coauthored In every case the papers were completely rewritten and augmented with additional ideas, so they bear little resemblance to the chapters here I list them below, however, for readers who may be interested in a technical presentation of some of the content of this book Joel Waldfogel, “Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets,” Working Paper 7391, National Bureau of Economic Research, 1999 © 1999 by Joel Waldfogel Peter Siegelman and Joel Waldfogel, “Race and Radio: Preference Externalities, Minority Ownership, and the Provision of Programming to Minorities,” Advances in Applied Microeconomics 10 (2001): 73–107 © 2001 by Elsevier Science Ltd All rights of reproduction in any form reserved Joel Waldfogel, “Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets,” RAND Journal of Economics 34, no (Autumn 2003): 557–568 © 2003, RAND Steven Berry and Joel Waldfogel “Product Quality and Market Size” Working Paper 9675, National Bureau of Economic Research © 2003 by Steven Berry and Joel Waldfogel Lisa George and Joel Waldfogel, “Who Affects Whom in Daily Newspaper Markets?” Journal of Political Economy 111, no 41 (2003) © 2003 by The University of Chicago All rights reserved Frank R Lichtenberg and Joel Waldfogel, “Does Misery Love Company? Evidence from Pharmaceutical Markets before and after the Orphan 195 196 • Credits Drug Act,” Working Paper 9750, National Bureau of Economic Research © 2003 by Frank R Lichtenberg and Joel Waldfogel Joel Waldfogel, “Who Benefits Whom in Local Television Markets?” Brookings-Wharton Papers on Urban Affairs (2004), pp 257–284 © The Brookings Institution Todd Sinai and Joel Waldfogel, “Geography and the Internet: Is the Internet a Substitute or a Complement for Cities?” Journal of Urban Economics 56 (2004): 1–24 © 2004 Elsevier, Inc All rights reserved Felix Oberholzer-Gee and Joel Waldfogel, “Strength in Numbers: Group Size and Political Mobilization,” Journal of Law and Economics 48, no (2005), pp 73–91 © The University of Chicago All rights reserved Joel Waldfogel “The Median Voter and the Median Consumer: Local Private Goods and Residential Sorting.” Working Paper 11972, National Bureau of Economic Research © 2006 by Joel Waldfogel Lisa George and Joel Waldfogel, “The New York Times and the Market for Local Newspapers.” American Economic Review 96, no 1, (2006), pp 435–447 © 2006 by the American Economic Association Felix Oberholzer-Gee and Joel Waldfogel “Media Markets and Localism: Does Local News en Español Boost Hispanic Voter Turnout?” Working Paper 12317, National Bureau of Economic Research © 2006 by Felix Oberholzer-Gee and Joel Waldfogel Index Advertisers, 43, 77, 103 Africa, 40, 41, 58 Age, of consumers, 45, 49, 180n11 Agriculture, U.S Department of, 144 Airport Improvement Program (AIP), 135, 137 Air transport, 9, 163, 164; government policy and, 131, 132–138, 145; technological change and, 121–122 Alien majorities, 108, 110, 111–118 Altruism, 30 Amsterdam, 93–94 Antitrust, 166–170 Arbitron ratings, 46 Automobiles, 13, 58, 164; trade and, 91–92, 98; used cars, 30–31 Aventis drug company, 40 Barrett, Rep Bill, 138 Best Buy, 123–124 Black Entertainment Television (BET), 94 Blacks, 22, 60; availability of bookstores and libraries and, 158–161; food preferences, 65–66, 68–71, 179n7; freedom of consumer choice, 22–23; Internet use by, 8, 97–98; media markets and, 7, 75; newspapers and, 54–58; as percentage of U.S population, 5, 21; radio broadcasting and, 44, 46–51, 79, 139, 142, 177n14; television (cable and satellite) and, 93, 95; voting and, 77, 83–86; voting rights and, 74 Blogs, 126 Bolton, Louise, 132 Books and bookstores, 9, 13, 148, 149; libraries compared with, 151– 153; race and availability of, 158– 161 Boston, 54, 75 Brandt, Randolph, 53 Broadcasting media, 138–142 Buruma, Ian, 93–94 Bush, George W., 77, 169–170 Buyers, 4, 14, 28, 33, 41, 58; asymmetric information and, 30–31; book distribution and, 159–160; demand threshold and, 150; fixed (setup) costs, 25; preference minorities and, 5; “who benefits whom” phenomenon and, 165 See also Consumers BYU-TV, 94 197 198 • Index Cable television, 8, 93, 94–95, 98, 99 Canada, 109 Capital costs, 43 Capitalism and Freedom (Friedman), 2, 158–159 Census, U.S., 93, 160, 178n3 Chicago, 147, 148 China, 118 Choices, collective, 1, 3, 7, 8, 164 Civic affairs, Clothing market, 58 CNN (Cable News Network), 97, 126 Competition: cost of production and, 28; perfectly competitive model, 28, 29, 32–33, 57, 149, 169; product differentiation and, 27 Congress, U.S., 80, 137, 142 Consumer Expenditure Survey, 160 Consumer Reports, 13, 65, 67 Consumers, 2, 3; aggregate value and, 24; “alien majorities,” 108; competition and, 28; education level, 64, 66, 67, 68, 69; freedom of choice, 26, 160; local versus nonlocal sources and, 99; market versus government allocation and, 9; prevalence of preferences and, 6, 16, 17; quality and, 102; regulatory authorities and, 35; residential clustering and, 60; restaurant market and, 62; satisfaction of, 74, 86, 143; tastes and preferences of, 4–5; trade and, 90, 164–165 See also Buyers Consumer theory, 28–29 Corporation for Public Broadcasting (CPB), 139, 141–142 Culture, Current Population Survey (CPS), 79, 80, 83, 98 Custom-pricing ideal, 24–25 DayJet, 122 Defense, national, 29–30, 174n6 Demand, 42, 120; efficiency and, 27; geographic area and, 63; Law of Demand, 29, 30; product availability and, 150–151; restaurant industry and, 100–101 Deno, Dave, 125 Deregulation, 135 Differentiation, 13–14, 27–28, 106, 119, 167 Digital divide, 97 DirectTV, 94 Discrimination, 21, 22, 159 Dish cities, 94, 97 Dish Network, 93 Distribution, 23, 120, 131; liquor, 156–158; market versus government, 164 Drugs, prescription, 39–41, 123, 164; global markets for, 62; orphan drugs, 142–143 See also Pharmaceuticals Economics, urban, 165–166 Economists, 36, 125; on efficiency, 23–24; embrace of free trade, 164; fairness of markets and, 33; on government allocation, 149; perfectly competitive model and, 28; trade barriers viewed by, 109 Editor and Publisher magazine, 52 Efficiency, 131, 145, 163, 168; fairness and, 35, 146; government corruption and, 169 Eflornithine, 40, 41 Elections, 77, 80–82, 86, 99 Index Electricity, subsidies for, 9, 144 Eli Lilly Company, 123 English language, 3, 52, 53, 54, 76– 77; consumer preference and, 104– 105, 106, 107; election coverage in, 80; globalized film industry and, 114; television broadcasts in, 78, 83 Entertainment, 54, 74, 94, 96 Essential Air Service (EAS), 135–138, 184n10 Ethnicity, 5, 68 Europe, 103, 109–111 Exports, 63, 64, 108–109 Externalities, 30 Fairness, 33–35, 146 Fargo, N.D., 100, 102, 134 Fast food chains, 65, 66, 100, 125 Federal Communications Commission (FCC), 93, 95, 142, 143, 144 Fergus Falls, Minn., 100–101, 103, 104 Fixed (setup) costs, 86, 126, 163, 168; air travel and, 122; bookstores and, 155, 161; demand threshold and, 108; differentiated products and, 14–16, 119; efficiency and, 23, 25, 26; fairness and, 34; film industry and, 114; freedom of choice and, 160; globalized trade and, 111, 118; government subsidies and, 133, 145; market size and, 21, 73, 89, 102, 149, 164; monopoly and, 166; newspaper industry and, 57, 104; number of producers and, 31–32; perfectly competitive model and, 32–33; pharmaceutical industry and, 39, 40–41; preference minorities and, • 199 22; producer theory and, 29; product differentiation and, 59; radio stations and, 43, 51; residential concentrations and, 72, 165; restaurant industry and, 61, 71; rise of, 15–16; technology and, 121; tyranny of majority and, 19–20; “who benefits whom” phenomenon and, 106 Food needs and preferences, 4, 6; clusters of like-minded customers, 61; food allergies, 4, 22; group differences and, 64–68 Ford, Henry, 119–120 Ford Motor Company, 119 France, 109–110, 112, 133 Franklin, Benjamin, 151 Friedman, Milton, 2, 19, 32, 57; Bush (George W.) and, 169–170; on ethnic minorities, 158–159 Friend or Foe (game show), 34 Galavision, 94 Game shows, 33–34 Gender, 45, 49, 179n7 General Accounting Office, 134 General Motors, 120 Geography, markets and, 60, 62–64, 164; air transportation, 134; restaurant industry, 105, 106; trade and, 89 Globalization, 108, 111 Godin, Meg, 75–76 Goodwill, 29 Government, 2, 9; air transportation and, 131, 132–138, 145, 164, 184n10; antitrust regulation, 166– 168; critics of, 168–170; intervention in markets, 35–36; liquor distribution and, 156–158, 164; market allocation and, 9; market 200 • Index Government (continued) failure and, 30; perfectly competitive model and, 28; pharmaceutical industry and, 125, 164; Postal Service, 133, 137, 147–148; public libraries, 151–155, 164; radio broadcasting and, 138–142, 164; residential sorting and, 72–83; telecommunications and, 143–145, 164 Hagel, Sen Chuck, 133, 137–138 Hard news, 55, 101 Hirschberg, Lynn, 113, 114 Hispanics, 60, 180n11; group-targeted media and, 78–79; media markets and, 7, 75; newspapers and, 52–54; as percentage of U.S population, 5, 52, 53; radio broadcasting and, 45–51, 139, 142; restaurant preferences, 64, 66, 67; Spanish-language media and, 3, 6, 75–77; television (cable and satellite) and, 95; urban economics and, 165; voting and, 80–83 Hollywood movies, 109–114 Housing market, 31 Iacocca, Lee, 119 Imports, 63, 64, 108, 114–118 Industrial Revolution, 119 Information, 7, 13, 30–31, 96, 126 Inquirer (Philadelphia newspaper), 103 Internet, 8, 96–99, 123, 126, 143 Jacobsen, Nina, 113–114 Japan, 103, 111, 113 Jews, 6, 53, 59–60, 159, 165–166 Journal-Times (Racine, Wisc.), 52–53 Kennedy, John F., 93 Kerry, John, 77 Labor, costs of, 24, 155 Lansing, Sherry, 112, 114 Law of Demand, 29, 30 “Lemons,” 30–31 Libraries, public, 133, 148, 149, 186n11; bookstores compared with, 151–153; population and book availability, 153–155; race and availability of, 158–161; social benefits of, 186n15 Liquor, Liquor stores, 149, 156–158, 161, 162, 164 “Lumpy” markets, 15, 23–28, 163, 165–166 Majority, tyranny of the, 2, 6, 16, 163–164; fixed costs and, 19; government regulation and, 35, 131; Hollywood movies and, 110; media markets and, 43; newspaper industry and, 54; prevalence of preferences and, 18; trade and alien majorities, 111–114; voting and, 1, 4, 35, 176n14 Managerial practice, 119, 121, 164 Marginal costs, 24, 26 Markets: efficiency of, 23; fairness and, 146; fixed costs and, 7, 8, 14– 15; global, 41, 58, 62; government allocation and, 9, 131, 150–151, 156–158; local (neighborhood), 8, 41–43, 60; “perfectly competitive,” 28, 29, 32–33, 57, 149, 169; politics and, 2, 6, 7, 33–35, 73, 86; postal services and, 148; product availability and, 150–151; seen as liberating force, 2, 8; size of, 3, 21, 27, 89, 102–107; success and failure of, 28–33; trade and expansion of, 89, 102; tyranny of majority and, 2, 6–7, 164 Index Materials, cost of, 24 Media markets, 41–43, 73; black-targeted, 83–86; globalization and, 118; group targeting and, 77, 78– 79; Hispanic-targeted, 80–83; information and entertainment, 74; local, 62 Miami, 53, 78 Miami Herald, 53, 105 Mill, John Stuart, Miller, Don, 143 Minneapolis–St Paul, 100–101, 102, 104, 134, 156 Minorities, ethnic or racial, 21–22, 92–93, 159 Minow, Newton, 93 Monopoly, 31–32, 166 Movies, 13, 103, 105, 163; technological fixed costs and, 126–127; tyranny of alien majorities and, 109–114, 118 MSNBC, 97 Music, 13, 120, 125, 138–139, 140 Muslims, Native Americans, 142 New Haven, Conn., 114–115 New Haven Register (newspaper), 115 Newspapers, 7, 13, 60, 174n6; group targeting and, 79; market size and, 8; quality of, 101, 102–103, 106; targeting of readers by race, 55– 58; tyranny of alien majorities and, 114–117; voting and, 77; “who benefits whom” phenomenon and, 42, 43, 51–58 New York City, 104 New York Times, 42, 112, 114–117, 122, 126 Nielsen ratings, 92 Non-Hispanics, as group, 7, 180n11; • 201 food preferences, 67, 68; Spanishlanguage media and, 78, 80, 81, 82 Northwest Telephone Cooperative Association, 143 Nuevo Herald (newspaper), 78, 105 Orphan Drug Act (1983), 142 “Orphan” medical conditions, 40 Overprovision, 151, 155, 161 Pharmaceuticals, 9, 13, 39–41, 51, 163; globalization and, 118; rare medical conditions and, 142; technological change and, 123, 125; “who benefits whom” phenomenon and, 58 See also Drugs, prescription Philadelphia, 44, 54, 59, 96; libraries in, 148, 151; newspapers, 103; postal rates to, 147; satellite television in, 93 Policymakers See Government Politics, 1, 73; allocation through, 5, 7; conformity and, 2; egalitarian ideal and, 86; film industry and, 114 Postal services, 35, 133, 137, 147– 148 Poverty, 21, 22 Preference minorities, 5–6, 16, 149; air transportation and, 137; automobile market and, 91–92; ethnic minorities as, 21–22; government policy and, 131; Internet and, 96, 97, 98; local markets and, 126; market size and, 119; prescription drugs and, 142; radio broadcasting and, 44; trade and, 90–91, 108; voting and, 75, 79 Pricing, 27–28, 35, 173n4 Privatization, 36, 149 Producer theory, 29 202 • Index Production costs, 35, 59, 175n7 Products: availability under markets and government, 150–151; differentiated, 13, 106; distribution of, 131; fixed-cost, 8, 9; Internet and variety of, 96; “lumpy” product space, 15; market size and, 3–4; multiple groups and single product, 52–53; overprovision of, 151, 155, 161; positioning of, 4, 8, 18, 19, 20, 167–168, 173n4; preference minorities and, 5–6; quality of, 31, 102–103, 105–106, 115; residential concentrations and, 72; size of markets and variety of, 3; “smooth” product space, 16; targeting and group size, 7, 18; trade and variety of, 90, 118; underprovision of, 26, 27 Provision, costs of, 23, 24, 27 Public goods, 29 Public sphere, 133, 154 Race: availability of books and, 158– 161; diversity in TV programming and, 92–93; persistence of segregation, 72, 165; restaurant preferences and, 64, 65, 67; “who benefits whom” phenomenon and, 16– 18, 17, 45; zip codes and, 68 Radio, 2–3, 7, 9; black voter turnout and, 84–85; group targeting and, 77; on Internet, 97; listeners by ethnic and racial group, 45–51; market size and, 102; number of similar products (stations), 27; public (government-subsidized), 138–142; technological advance and, 120; “who benefits whom” phenomenon and, 42, 43–51 Radio & Records magazine, 48 Raw materials, 29 Regional jets, 122 Religion, 72 Rent control, 28 Representation, proportional, Research and development (R&D), 103 Restaurant industry, 7, 8, 60, 100, 163; differentiated products and, 13; fast food chains, 65; fixed (setup) costs in, 61, 71, 161; geographic markets and, 62–64, 68– 73; group food preferences and, 64–68; quality and, 105–106; sitdown restaurants, 65; technological change and, 124–125 Retail stores, 123–124, 163 Rural Utilities Service (RUS), 144 Satellite television, 93–95, 98, 99, 120–121 SATSAir, 122 Scarborough Research, 64, 67 Sears catalog, 90, 123 Segregation, 165 Sellers, 14, 28, 71, 159, 174n6; asymmetric information and, 30– 31; government regulation and, 133; product location (positioning) and, 16; underprovision of products and, 27, 154–155; variable costs and, 15; “who benefits whom” phenomenon and, 41 Sit-down restaurants, 65 Sleeping sickness, 40, 58 Small Community Air Service Development Pilot Program (SCASDPP), 135, 136 “Smooth” markets, 16, 26 Social scientists, 60–61 Soft news, 55, 101 Solow, Robert, 119 Index Spanish language, 3; consumer preference and, 104–105, 106, 107; newspapers in, 52–53, 54; radio broadcasts in, 45–46, 47, 50; satellite TV in, 94; television broadcasts in, 75–76, 78–79, 80–83 Star Tribune (Minneapolis), 101 Subsidies, agricultural, 28 “Sunk” cost, 121 Technology, 8, 13, 26, 119, 125–127, 163; air travel and, 121–122; broadcast entertainment and, 120– 121; pharmaceutical products and, 123; restaurants and, 124–127; retail stores and, 123–124; telecommunications, 144 Teenagers, radio broadcasting and, 49 Telecommunications, 9, 120, 132, 133, 143–145, 164 Telecommunications Act (1996), 144, 167 Telemundo, 78, 79, 180n10 Telephones, cellular and satellite, 121 Television, 42–43, 46, 164; newspaper circulation and, 52; political advertising on, 77; Spanish-language, 75–76, 78–79, 80–83; technological advance and, 120–121; variety of programming, 92–96 See also Cable television; Satellite television Textile industry, 118 Trade, 89, 164–165; alien majorities and, 111–114; liberating effects of, 90–91, 102; regulations and restrictions of, 28, 109, 118 Transportation, U.S Department of, 135, 136 Tuition, college, 24–25 • 203 Ultimatum game, 33 Underprovision, 26, 27 United Parcel Service (UPS), 147 United States, 21, 32, 78, 124, 169; automobile market, 92; clothing market, 58; diverse population of, 5; government intervention in markets, 131, 132, 133; Hispanic population, 67; Hollywood film industry, 109–114; international trade and, 103; media markets, 42; newspapers in, 52; nonprofit broadcasting in, 139; pharmaceutical industry, 39; postal pricing in, 35; race and per capita income, 160; restaurant density, 61; satellite television in, 121; textile industry, 118; voting in, 74 Universal Service Administration, 143 Univision, 75, 78–79 Value, aggregate, 24 Variable costs, 14, 15, 23, 104 Video programming, 13, 42, 120 Voting, 3, 73, 164; black-targeted media and, 83–86; efficient results and, 175n14; Hispanic-targeted media and, 80–83; information and, 74, 75; news as information and, 74; Spanish-language TV and, 80–83; tyranny of majority and, 1, 4, 35, 176n14 Wal-Mart, 90, 124 Warranties, 31 Whites, 5, 60; availability of bookstores and libraries and, 158–161; food preferences, 65–66, 179n7; Internet use by, 97–98; media markets and, 7; newspapers and, 54– 57; purchasing power, 22; radio 204 • Index Whites (continued) broadcasting and, 46, 48–51, 142; voting and, 84, 85 “Who benefits whom” phenomenon, 16, 71–72, 89, 102, 163; air transportation and, 134–135; fixed costs and, 106; government policy and, 131; local markets and, 60; “lumpy markets” and, 26; media markets and, 41–43; newspapers and, 51–58; pharmaceutical industry and, 41; radio broadcasting and, 3, 4, 7, 43–51; restaurant industry and, 4, 71; voting and, 75 World Trade Organization, 108 Yum Brands, 125 Zip codes: bookstores and, 148, 152–155; newspaper circulation and, 116, 178n28; race and per capita income, 160; restaurants and, 63–64, 68–71, 178n3, 179n12 .. .The Tyranny of the Market The Tyranny of the Market WHY YOU CAN’T ALWAYS GET WHAT YOU WANT Joel Waldfogel Harvard University Press Cambridge, Massachusetts... a tyranny of the majority, and he argues that when allocation takes place through markets, rather than collective choice, individuals get what they want rather than, say, what the majority wants... Hispanics and non-Hispanics In the standard view of the economy, people of diverse preferences would find what they want regardless of the popularity of their choices But if the view I am advancing