Tyler Cowen tries to argue in his latest book Big Business that big businesses are in reality not the villains they’re often made out to be and, in fact, deserve our praise. While the book presents strong counter-intuitive arguments about the good that big business does in America, I suspect readers skeptical of large private enterprise will walk away unconvinced. In the big picture, critics of big business are still likely to assume that some combination of more regulation, smaller businesses, and public ownership would be a superior alternative to the status quo.

In a huge ecosystem of large corporations, Cowen emphasizes that a fair assessment needs to look at the “net net” of the total impact of big business and not just the worst offenses. Cowen acknowledges the salesmen swindling low-information customers, dentists recommending more appointments than necessary, and pharmaceuticals striking shady deals with doctors to dish out addictive drugs. But his underlying thesis is that we need to look at the net effect.

The Good

While admitting these egregious offenses, Cowen claims “the propensity to commit fraud is essentially just an extension of the propensity of people to commit fraud.” He points to a survey showing that 53% of people admitted to lying in their online dating profile. One study estimated that we tell an average of nearly two lies per day and most often those are to people we are the closest to and not total strangers. Another showed 31% of people having completely fabricated information on their resumes and 76% “embellished the truth.” Indeed, when we look at big business in the modern economy we often evaluate things as they are and think of alternatives as we wish to be. It’s worth considering the possibility that big business is no more dishonest than we are as individuals.

In fact, Cowen argues that big business is incentivized to be even more honest than individuals or small companies. Because they have an (inter)national brand to uphold, big businesses are more incentivized to avoid the PR disasters that come from customer negligence in a world of viral social media. Further, there is evidence big businesses are more likely to treat their workers better than their mom-and-pop counterparts.

The NFL can shamefully exclude Colin Kaepernick because of his politics, but often overlooked is the idea that the profit motive can be a positive force for social justice. Cowen points to our national reckoning with sexual assault to argue that private business can be a better force for good in these regards than the public alternative. Allegations against men in the entertainment industry were met with swift action – think of Kevin Spacey, Jeffrey Tambor, etc. – while a man with a long history of unambiguously immoral treatment of women sits in the Oval Office. Roy Moore only barely lost in the Alabama Senate race. Market forces can be seen as a villainous determinant to cut corners and exploit people unfairly, but it can also be a force for social justice under some circumstances. As Sam Hammond argued in Liberal Currents, corporate capitalism and social justice are not always opposing forces.

Too many arguments in favor of scrapping the entire system assume that a radically redefined economic system and culture will mold to their ideal reality. But what happens when we put government in control of every industry and Donald Trump is the one running that government? Fox News is an easy target for the ills of profit-driven media, but would an entirely publicly-owned media landscape just mean Trump hires Roger Ailes to run PBS?

Cowen spends the majority of the book tackling the common criticisms of big business: CEO pay, the financial industry, big tech companies, and corporate influence over government. The gravity of these statements need to be analyzed through his “net net” framework and does add counter-intuitive arguments to the conversation, even if not always entirely convincing.

CEOs today work in a more demanding environment, he argues, needing to steer through a globalized economy full of public relations issues, foreign investment, and regulatory know-how. How important is leadership to a company’s performance? The top 4 percent of corporate performers are responsible for the entire increase in the U.S. stock market since 1926. Cowen offers evidence that these higher demands are borne out by higher performance. For example, Chinese firms could improve their productivity by 30 to 50 percent by bringing management quality up to the standard of Americans, Indian firms 40 to 60 percent. One study says a company’s leader accounts for 5 to 6 percent of the value of a company. Under this backdrop, Cowen believes higher pay is warranted under the greater demands.

An important stylized fact is that the main driver of inequality is not from changing pay scales within firms, but changing pay scales between firms. In other words, superstar firms that are torching the competition with higher productivity are paying all of their workers better, and Cowen believes this rise of superstar firms is thanks in large part to good CEOs.

The benefits of the financial industry are not always obvious for the typical citizen but Cowen tries to paint a brighter picture. He points to the role of credit in supporting the country’s biggest projects and the strong correlation between prosperous countries and the health of their financial sectors. American venture capital, he believes, is the envy of the world and funds some of our greatest success stories – without ever expecting a bailout. The American banking system is more fragmented than any other high-income country in the world, and the proliferation of smaller banks during the Great Depression shows “breaking up the banks” is no guarantee in preventing catastrophe.

Contemporary tech companies give us unparalleled power at our fingertips, often for free. The cost of privacy has become the common public rallying cry but Cowen still believes their value to each and every one of us far exceeds the cost. We’ve become so accustomed to free email, free mapping, one-day shipping, and reliable spreadsheets that it’s easy to only focus on what appears to be corrupting market power. But only recently did companies like Kodak, Myspace, General Motors, IBM, AOL, and Blackberry seem to be too dominant. The image of too-powerful tech titans complicates our appreciation for the value of these companies, in Cowen’s mind. The common criticism of brain-rot through the internet and smartphones is strikingly familiar to the doomsday predictions of yesteryear about the opera, rock and roll, and the novel.

The election of Donald Trump shows the hold of big business on government is not nearly as strong as portrayed, Cowen believes. Business leaders most often state their priorities to be predictability, more open immigration, and free trade – a clear opposite to Trump’s policies. The $3 billion companies spend annually on lobbying is pennies compared to the $200 billion they spend on advertising. Farm subsidies – one of the most offensive instances of crony capitalism in the Federal budget – only accounts for $20 billion a year out of a $4.4 trillion budget.

In Search of a Better Alternative

But to all of the good of businesses, a skeptical outsider would rightly point out that these realities exist within the current system. What if we lie on our resumes because it’s a brutal rat race economy? Or we lie on our dating profiles because the market economy conditions us to be self-interested and cut corners to get ahead? It’s true that Monsanto supplies the food that keeps me alive, tech giants allow me to communicate with my family, and big pharmaceutical companies produce drugs that fight infections. Every prosperous society has indeed depended on a well-oiled financial system. And the dignity of work that employers give us through jobs is indeed important. But why are these actions necessarily being done in the most optimal way?

Feudal lords could be given credit for the food given to peasants or the dignity their work provides, tyrannical leaders for military protection, and the DMV for making sure our roads are safe. Skeptics of the market economy believe that we could have a world that is more prosperous, more egalitarian, and more ethical under a different regime. Just as an anarcho-capitalist would refute gratitude towards roads or a public school education with “well, the private sector could do it better,” any critique of the status quo asserts a superior alternative outside big business.

Incrementalists who criticize big business may just want more regulation or more support for small business, while radicals prefer more public ownership. I sense that many of Cowen’s observations on the goods that big business provides will fall on deaf ears to skeptics whose prior beliefs are that we could have an even better regime.

Of course, Cowen is up against an insurmountable foe in many of those skeptical arguments. Critics of the status quo can struggle to find strong counterfactuals in order to prove there is a better system out there. Saying that “culture and economy would shift under a different system to one where we’d all be moral, not run the rat race, cut corners, or tolerate pollution” is a tough argument to prove or disprove when it is so hypothetical.

In Cowen’s (wonderful) podcast, he always asks the guest about their “production function” – what habits/routines the guests do to ensure their highest productivity. In a recent Ezra Klein Show podcast episode about workism, Ezra brings up how an inevitable part of capitalism is the encouragement to always maximize productivity…even doing something like meditation or wellness as a means to counteract the toxins of modern life. But it’s still under a framework of “optimizing” time. Can this cultural reliance on “productivity” actually make us miss the point, even when we appear to be cognizant of mindfulness? For an infovore like Cowen, the current culture and system gives him every opportunity he can to learn and explore new things. But for the vast majority of us, are smart phones instead just giving us a bigger portfolio of addictive distractions from more important matters?

As a response to skeptics, Cowen points to data he believes reveals that – despite our self-reported disdain for tech and working – we love our smart phones and love working. He says that the fact Americans work longer hours now than they did in 1950 shows we necessarily like our jobs better. But what if we are just being motivated to “keep up with the Joneses” and none of the extra work is actually making us better? Similarly, he argues few people actually leaving Facebook despite all the public criticism shows that people like it a lot more than they let on. But the powerful network effects and addictive qualities of social media are not always the easiest thing to shake off. It seems a far jump to assume these facts necessarily reveal strong-willed rational decision-making. It’s not encouraging that the people who designed the notification mechanisms for phone apps don’t let their own children use them.

So Why the Hate?

The last chapter of Big Business addresses a lingering question: If big business is so good, why does everyone seem to hate it? While the vast majority of the population loathe the post-Citizens United saying that “corporations are people,” Cowen believes we indeed do anthromorphosize corporations. In fact, projecting human qualities onto our outside world is how we have long attempted to understand and relate to it. In all of recorded history, civilizations have told stories of the weather and natural forces as gods with faces, arms, and legs. “When it comes to our cars, our ships, and our pets, we give them names, talk about their loyalty, and feel abandoned or let down if they disappoint us.”

It is this humanizing fact that makes us inevitably disappointed by corporations’ performance. We want them to be our fuzzy friends that take care of us but in the end they are actually just … “faceless” corporations. It presents a case that we will never be grateful enough for what big businesses do for us. Cowen says hating corporations is like hating your parents – the people who give you everything but also enforce rules. This might be true…but again, couldn’t oppressive feudal landlords fit the same description?

 

It’s important to view any analysis of big business in “net net” terms by focusing not only on the most outrageous failures, but the tremendous good big business brings to our lives. To these points, Cowen does a service by providing under-appreciated defenses of the most common shortcomings of big business. I agree with Cowen’s point of view and think big business needs more appreciation. In the end, skeptics may be impossible to sway as they rely on non-falsifiable hypotheticals. But a better appeal to their stronger arguments would likely leave a stronger impression on the critics of big business.

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A few months ago, I made a conscious decision to overhaul my Twitter feed. The vast majority of accounts I followed were not only economists, but they were white, male, and in an ideological range from libertarian to Technocratic Left. I eliminated a lot of those accounts, replacing them with accounts representing a diverse range of views/demographics. Even in this simple experiment, the A/B test gives me conscious conclusions about how one’s media bubble affects one’s line of thinking, and suggests there are even more implicit outcomes that I don’t recognize. It also made me realize how reasonable it is that nearly everyone is under-exposed to an optimally diverse set of views in their media diet.

B.O. (Before Overhaul), I was pretty sure there weren’t any smart socialist thinkers out there. And this extends past purist socialism and even into what you might now call the “Bernie Left.” Most arguments I read were caricature defenses of socialism that frankly could easily be refuted. Naomi Klein would make outrageous ad hominem attacks on Milton Friedman and claim it delegitimized the market economy, Jeremy Corbyn would defend the wonderful work Hugo Chavez did in Venezuela for the poor, college-aged kids would spew half-baked defenses of what they thought Marx meant, and a plethora of writers would accuse anyone against rent control as selfish idiots. If the best arguments I came across were entirely unconvincing, it only made sense that I became more confident in my views.

But that’s where the problem is. I assumed the views I was being exposed to were the best ones out there. By default, my media diet as a self-identifying liberal/cosmopolitan/technocratic/educated guy included MainstreamMedia sources like the New York Times, Washington Post, The Economist, The Atlantic, Vox.com, etc. Those sources don’t often include a prominent voice on the socialist left. Just as David Brooks and Thomas Friedman are unconvincing voices for a centrist conservatism, the voices I was being exposed to were making weak arguments for socialist and left-populist economic policy. The reasonable voices were in a narrow range of centrism somewhere between Paul Krugman, Matt Yglesias, and Greg Mankiw. In hindsight, this group of people has way more in common than I or they ever realized. What I mean to highlight is that these sources, the ones I was reading as an Enlightened Educated Gentleman, were not amply exposing me to economic arguments for strong pro-labor, pro-nationalization, massive taxation, or significant adjustment to labor laws aiming to equalize gender/racial disparities. The people I was reading were all pretty in favor of markets as a basis for economic policy, where technocratic solutions through NBER papers and incremental adjustments were the road to ideal policy. The debates, in retrospect, were over the magnitude of redistribution and balancing economic liberty with regulation. Joseph Stiglitz would enter into the picture every now and then, but not enough to really shake my worldview.

It turns out there are a lot of smart people that have very far left economic views. Matt Bruenig, Elizabeth Bruenig, Marshall Steinbaum, to name a few, consistently are writing things that not only give a drastically different point of view – they are writing things that I find very difficult to argue against given my current toolkit of existing knowledge. This is when you know you’re actually exposing yourself to new ideas. Before, it was as if I was unconsciously exposing myself only to straw men arguments and red herrings in order to simultaneously reenforce my priors and give me a false sense of being open-minded. These people were always out there, but they don’t have a prominent (enough) voice in where I assumed a good media diet was found. [Elizabeth writes for the Washington Post now, and many of these people have some exposure, but you get my point]

The same can be said for the level of female economists out there. I used to rationalize not reading many female economists by saying that the field just didn’t have many women. While the discipline does seem to be hostile to women and it’s not at total parity, I was dead wrong. Some of the best work in academia is being done by people like Alice Evans, Claudia Goldin, Dina Pomeranz, and many many more. But except for Janet Yellen, Joan Robinson, Anna Schwartz, and a handful of others, female economists don’t have too much exposure in the mass media. Only one woman has ever won the Nobel Prize in economics (and she could be considered more of a political scientist). Paul Krugman, Greg Mankiw, Mark Thoma, Brad Delong all seem to get much more exposure than their female counterparts. Without making a conscious effort to include more female voices in my media diet, I was left reading a much more homogenized set of views.

The same can be said for non-economists. I have made more of an effort to include historians, sociologists, and anthropologists in my twitter feed and blog roll. Robert Solow once quipped, “Everything reminds Milton of the money supply. Well, everything reminds me of sex, but I keep it out of the paper.” Economists are prone to see everything as an economic problem; it’s all about incentives. All other disciplines fall prey to their own unique narrow-mindedness. But forcing yourself to look through that lens can be quite revealing. Looking through a lens of “everything is gendered” or “everything is explained by our irrational cognitive biases” at least exposes you to the possibility of these ideas.

So far in my experiment, I’m happy to report I’m much less sure of any of my beliefs. When Matt Bruenig gives an analysis with thorough empirics and theory showing the greatness of socialism, I can scoff all I want but if I can’t convincingly refute his points, how sure am I of the greatness of markets? I think I have a good idea of how economic history shows that markets and liberalism set the stage for the industrial revolution, but when Pseudoerasmus talks about the oh-so-ridiculous conventional wisdom that I of course had wrong, how sure am I about any of those beliefs?

Twitter is pretty much the worst, but also can be used for good. The freewheeling platform made it pretty easy to find these new alternative voices once I made the conscious effort. My worry is not that people don’t have access to a diverse set of views, it’s that their habits and circumstances will inevitably lead to equilibria that perpetuates echo chambers.

There’s still one thing everyone in my twitter feed agrees on: Trump is the worst. I’m not yet ready to start following alt-right accounts, Holocaust deniers, or MAGA fanboys. Yet it does beg the question: if I did, what would the mere exposure to these accounts do to my confidence in my own beliefs?

With newspapers having dramatic drops in circulation and the internet quickly becoming the source where almost everyone gets their news, traditional media outlets are scrambling to make a business model that turns a profit. By “profit”, I mean they’re trying to run organizations where their revenues exceed their costs. The problem for a lot of newspapers that are trying to find their way on the internet is their difficulty with making enough advertising revenue to support their operations. Having “free” news online apparently just isn’t working. So the New York Times is following the Wall Street Journal and other Murdoch-run papers by charging a fee to online readers for their material.

Charging online readers is little more than an inconvenience. Compared to many other news outlets, buying a monthly subscription to the online WSJ is pretty cheap. But with internet users used to everything being free, the WSJ and New York Times are predicted by some to lose some valuable customers. This might be true but I support the organizations for the time being in their quest to find a sustainable business model. If the papers aren’t making enough money by having their news be free, what are we to expect them to do?

Now, I’ll segue to the next logical issue: online media accountability. If big news outlets like the New York Times and Wall Street Journal start charging money, intuition would lead me to believe that readers will switch their viewing to free sites. Often times, these free sites are blogs that need not send someone to Baghdad to get the scoop on the current events in Iraq or go to the Detroit airport to interview government officials about somebody’s underwear catching on fire. These blogs, while providing meaningful commentary, do nothing to get news and can be famously unreliable. But Glenn Greenwald recently had a great post discussing the unreliability of America’s media. We may be rightly hesitant to trust blogs but how reliable is the Associated Press or the New York Times anyways? Often times one report, made by an anonymous source, is repeated by every major news source assuming that the facts have already been checked.

Consider the record of the American media over the last two weeks alone.  Justin Elliott of TPM documents how an absolute falsehood about the attempted Christmas Day airline bombing — that Abdulmutallab purchased a “one-way ticket” to the U.S., when it was actually a round-trip ticket — has been repeated far and wide by U.S. media outlets as fact.  Two weeks ago, Elliott similarly documented how an equally false claim from ABC News — that two of the Al Qaeda leaders behind that airliner attack had been released from Guantanamo — became entrenched as fact in media reports (at most, it was one, not two).

I’d agree that the above misconceptions are indeed engrained right now into most news-followers’ minds as being fact. The media can also be selective in what they print – perhaps not inaccurate but not telling the whole story:

…in 1996, then-Secretary-of-State Madeleine Albright was asked by 60 Minutes about the fact that American sanctions on Iraq resulted in the deaths of “a half million children” — more than the number killed at Hiroshima — and Albright dismissively replied:  “We think the price is worth it.”  At the time, FAIR documented that while the number of dead Iraqi children — as well as Albright’s quote — was known far and wide in predominantly Muslim countries, it was almost completely blacked-out in the American press.  How many Americans know that our sanctions resulted in the deaths of hundreds of thousands of Iraqi children?

Greenwald explains the lazy journalism:

None of the falsehoods documented here will ever lead to any accountability, because the identity of the falsehood-producers will be shielded by their loyal journalist-servants, and the journalists themselves will simply claim that they wrote what they did because their hidden sources told them to.

He makes a good point. Blogs and small-time online news sources are often criticized as using links as citations for their information – links that are often broken, phony, or completely contradict what their personal report says. But what makes newspapers necessarily any better? “Anonymous” sources, like during the Killian documents scandal, can be an easy way for journalists to hide behind false stories that are “too good to check”. On the other hand, like in any other news industry, big companies use their reputation – along with economies of scale – as the main source of their business. The New York Times has much more of an incentive to avoid a scandal than some small-town blogger whose audience is small.

So what’s the solution then? Are we best to be left with blogs? Bailout the newspapers like some people are arguing for? There’s no silver bullet solution to make the media reliable, accountable, and profitable. I agree with many arguments that blogs are particularly more unreliable and unaccountable than newspapers. I think the presence of big media outlets like the Associated Press and New York Times is better than having tens of thousands of blog sites to rely on for the news. But how to solve it? I don’t know. If the Wall Street Journal and New York Times can attract enough people to their sites to warrant their fee-based service, then they should do it. If they can’t, they’ll have to find a way to make money.

Will informed me the other day that John Stossel is leaving his long time home at ABC to join FOX. The NY times reports:

Mr. Stossel will start work in October, and his weekly program, named “Stossel,” will begin someti me in the fourth quarter. Fox said “Stossel” would include news segments and conversations about “libertarian issues in the United States and abroad,” including free-market economics and civil liberties.

In a post on his ABC blog, Mr. Stossel said he wanted to “dig into the meaning of the words ‘liberty’ and ‘limited government’ ” on the program.

“ABC enabled me to do some of that, but Fox offers me more air time and a new challenge,” he added.

…Mr. Stossel publicly fumed after ABC chose to run a report in late June about Michael Jackson’s death instead of a segment he had prepared about the dangers of government-run health care systems. “I am sick of the coverage of Michael Jackson,” he wrote in a blog post. The segment was eventually shown four weeks later.

Stossel has been the most articulate free market advocate on TV for a long time (here’s the first part of one of my favorite old Stossel classics on greed). I’m afraid, though, that the move to FOX is going to seriously undermine his credibility. On ABC, he was a libertarian voice questioning the conventional wisdom of the mainstream television pundits. On FOX, he becomes part of the tea-bagger echo chamber. I don’t agree with Stossel on everything, but I think he’s far better than any part of the supposedly free-market oriented Hannity-Cavuto-Beck-O’Reilly team of right wing stooges. I cringe every time I hear Glenn Beck call himself a libertarian (this is actually a big part of my reluctance to apply the term to myself), and I think it’ll be hard for Stossel to distinguish himself in the minds of most viewers from the nationalist, collectivist, flag-fetishizing anti-intellectualism espoused by most of his new colleagues.