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.


I have another piece in the LA Review of Books, this time a review of Tyler Cowen’s book Stubborn Attachments.

The end blurb:

Stubborn Attachments is short and intentionally vague on many dimensions. Respecting human rights is an admirable pursuit, but what is the definition of human rights? At what point do income transfers become so excessive that they make immigration untenable? How exactly can we be sure to establish institutions that lead to higher sustainable economic growth? Cowen knows these are important questions but instead chooses to emphasize the need to rethink our big-picture goals. How we get there is still up for debate, but Stubborn Attachmentspresents a compelling case for redefining our long-term priorities in favor of more sustained economic growth and a greater respect for human rights.

Tyler Cowen has tried to explain the recent trend in wage stagnation by claiming we have reached a “Great Stagnation” – we have exhausted the low-hanging fruits of cheap labor from immigration, trade liberalization, increased education, and previously unused land and natural resources. Basically, we have reached diminishing returns in many of the areas from which we expected to keep getting high growth. A worker’s productivity is easy and cheap to improve when they are illiterate, for example; but increasing productivity when they’re already college-educated is a little harder, more expensive, and at some points not even possible.

I’d like to posit that we have also reached a great stagnation in music. Remember that the Great Stagnation does not claim growth has stopped or we will regress; it merely states that our rate of growth has slowed down. Much like the American economy, popular music extracted what it could in low-hanging fruits during a golden age and getting those incredible returns again is harder to come by.

By some metrics technological innovation peaked in the 1870s and we only realized all the benefits of these innovations decades later. By the same token, popular music had technical and creative innovations in the first half of the twentieth century that we did not fully exploit until the golden age of popular music, which I’d like to theorize was between 1964 and 1973. These progressions include many things, but chiefly the introduction of the electric guitar, increased access of music to influence wider audiences, and better access to recording studios and production equipment.

The Beatles recorded Rubber Soul, Revolver, and Sgt. Pepper’s in an incredible 18-month span. Bob Dylan released Bringing it All Back Home, Highway 61 Revisited, and Blonde on Blonde in about 14 months. Today, regardless of your musical taste and what you consider the most relevant music, artists will usually take years upon completing albums. Releasing two landmark albums within a year is essentially unheard of. Radiohead took 4 years between Hail to the Thief and In Rainbows, 4 years between In Rainbows and King of Limbs. When I think of any of my favorite rock/indie/pop bands in my lifetime, their careers span twice as long as my Theorized Golden Age and often produce half a many albums as the Beatles, Rolling Stones, Neil Young, Bob Dylan, the Beach Boys, Jimi Hendrix, or the Kinks did in the same time period.

I want to emphasize again that the presence of a great stagnation in music does not mean we are no longer creating really awesome music, it just means you have to push that much harder to squeeze out valuable creative juices that turn something incredible. In the beginning to mid 60s there were so many low hanging fruits that the aforementioned could churn out excellent albums, often while touring.

Thomas Edison filed thousands of patents centuries ago, all without much formal education. In a sense, he had so much to work with because there was so much potential that was yet to be realized. Now such a renaissance man is impossible to come by. Even the greatest innovators are only known for one or two great inventions, spending their whole lives devoted to coming up with and perfecting one great idea. Edison managed to make hundreds or thousands, depending on how you look at it.

The artists of 64-73 encountered a similar atmosphere. Many production techniques, the electric guitar, a recovered post-WWII global economy – these were all things that made it very easy to release lots of high quality music very quickly. There is simply no other reason why John Lennon, Bob Dylan, and Brian Wilson could poop out the music they did so quickly. Never before had the rate of fusion of so many genres of music – blues, jazz, barber shop, classical, folk, country – happened anywhere near what it did during the golden era.

And the music wasn’t just good, it was innovative. I think the reason why bands now have to take years to release an album is because they need to work so hard to be perfectionists and manage to create something unique. It’s still possible, just like making that college graduate more productive is possible; it just means you have to spend five years giving them a phd, whereas when they were illiterate all you needed to do was teach them to read to make them more productive. Fleet Foxes is awesome, but I’d hesitate to call them truly innovative. Whatever hip-hop is coming out may be good, but it’s not as innovative as Paul’s Boutique (yes, I know this wasn’t in the Golden Era, but I state it just as a point to emphasize the difference between quality and innovation).

Today recording equipment, access to audiences, and a richer global economy imply that the music industry has many tools and financial resources needed to create incredibly innovative music. Before, the industry was dominated by middlemen called record companies that basically decided who was going to even have a chance at succeeding. They owned the capital (the recording studios), the means of distribution, and an essential monopoly on the ability to promote, so there were huge barriers to entry for musicians. Today, musicians can record at home, go viral on the internet, play live shows, afford equipment because we’re all richer, have endless access to musical influences. No matter how one looks at it, the barriers to entry for musicians is a lot less than it was 70 years ago.

It is in spite of these facts, not because of them, that musicians in the golden era were able to produce the music they did at the quick rate they did. That they were able to achieve their quick rate of release makes it even more impressive that they were able to overcome the past barriers to entry for musicians.

Sure, musical culture has changed. Bands rely more on touring it seems to produce revenues. This means more time away from the studio and less time sitting around writing songs. But this didn’t stop the Beatles in the first half of their career, Dylan during his first three electric albums, or Frank Zappa from churning out quality music quickly.

Think of what the most famous classic rock musicians were able to achieve during this time period: those rich sounds and timeless songs on what we’d now think of as primitive technology. No ProTools to redo that one 10 second take to get that right sound from farting on keyboards, sometimes only 4 tracks at one time, and generally less sophisticated instruments. The Flaming Lips create new sounds because they have tons of new technology at the ready – new pedals/effects, lots of recording options, etc. The golden era musicians didn’t have this. Still Wayne Coyne needs to work tirelessly to create a new sound. Before, it seemed Phil Spector could open his fridge and find a new “Be My Baby” or another wall of sound gem.

Most of my favorite albums were not in the Golden Era, so I don’t state all of this as a dork who listens exclusively to classic rock. Instead, I merely see the rate of production during this time period to be phenomenal. Sure Radiohead has grown from Creep to Lotus Flower, but that happened over twenty years. The Beatles went from I Saw Her Standing There to Helter Skelter in FIVE.

Yeah, I am writing this from the perspective of my musical collection/taste. But maybe, though I may be wrong, you can extend it to genres I’m not as familiar with. I’d have to guess punk bands today can’t churn out stuff equal to Give Em Enough Rope and London Calling in the 13 month The Clash did. Overall, I think no matter what your musical preference, bands don’t release music nearly as quickly as they used to.

It could be that we are getting genre-defiers and massive innovators right now that will spur another golden age, and we just don’t know it yet. Much like we have arguably not extracted all productive efficiencies from computer or the internet yet, or it took decades for the mass innovations of the 1870s to be realized fully, we could be on the brink of another mass innovation fest.

What do I think this generally implies? We’ll have to have some sort of industrial revolution equivalent in music to reach the rate of innovation we had in the golden era. We’ll continue to have great music, but we’ll have to wait two or three times as long to get another OK Computer or Veckatimest than we did to get Pet Sounds or After the Goldrush.

This is an admittedly working theory, so I’m happy to hear criticisms or points that I have not mentioned.

I wouldn’t say I have much of a sophisticated palate. I am not very conscious of herbs, spices, oils, and different flavorings when I cook. That being said I do not eat fast food (and haven’t in probably a decade), eat relatively little red meat, and generally don’t like junk food. I believe my culinary tastes are purely a reflection of the household I was raised in as well as my generally active lifestyle. Growing up my mom always managed to make a pretty diverse array of meals each day of the week. My brother was also a vegetarian and so I became accustomed to, and developed a taste for, foods that were not based around a piece of meat.

There is a ‘food crisis’ in America, many would argue. Depending on one’s views it is one or more of factors including obesity, the over-industrialization of food production, the blandness of American food, rising food prices, and the need for quick and convenient food. I tend to not blame agribusiness or consumerism for any of these problems. I recently purchased (long overdue) Tyler Cowen’s An Economist Gets Lunch for my iPhone (also available in physical text form). In addition to explaining contemporary American culinary tastes, Cowen goes through interesting personal narratives of food exploration, macro-food solutions, locavorism, eating environemtally friendly, and some valuable general rules for finding the best bang-for-your-buck in terms of food.

While the book is interesting throughout, what I find most interesting thus far is how he explains how American cuisine got to where it is today. Despite having more options than ever, American cuisine is generally boring. He doesn’t blame it on agribusiness or consumerism, though. He divides it into three main historical occurrences.

Cowen notes that Europeans used to come to America in the 19th century and marvel at how fresh and high-quality our food was. Not anymore, of course. So what happened?

  1. Prohibition – Making alcohol illegal had a significantly negative impact on American culinary tastes. For decades America couldn’t cook with wines like Europeans do. Eating fine food with alcohol no longer became a regular occurrence. Speakeasies weren’t interested in developing a fine culinary reputation. Similarly, drink tastes in America switched to more hard liquor than beer or wine in an order to binge drink quicker. This has had a long-lasting impact. Think of ‘quintessential’ American eating establishments – the diner, the candy shop, the soda shop. Diners are a reflection of eating entirely without alcohol. They also, with candy and soda shops, reflect that without alcohol we suddenly were switching our tastes to cater more to children’s. He elaborates on this more, showing how as a culture we are more willing to give our kids what they want (sugars, salts, etc) instead of what we want. Having lived in Britain for four years, I can confirm that diners don’t really exist. Cowen argues convincingly how this has negatively impacted most of America’s culinary tastes.
  2. World War II – we switched from better quality meats to SPAM. Even in a world war, we Americans don’t want to cut back on meat. So we developed a taste for a conveniently packed but terribly tasting meat. Further, more women went into the workforce. This meant less time in the kitchen and suddenly more convenient and less time-intensive food were demanded by American consumers. Why didn’t this happen in Europe, which was literally destroyed in some areas? We had the infrastructure to mass transport foods, whereas Europeans necessity needed to eat local and have things fresh. If you can’t ship and store, you’ve got to have what’s nearby. Ironically, European cuisine had more in the way of quality cuisine by having less.
  3. Immigration – immigration was essentially open for the first century and a half in America. We had ‘old world’ tastes and recipes being mixed with American ingredients and ideas. Food innovation, Cowen argues, was our greatest contribution to world food. In the 1920s and for several decades later, nationality quotas and other immigration restrictions outlawed this. Suddenly “ethnic” restaurants were run by second or third-generation immigrants with little memory of what their ethnicity’s cuisine was like in the old world. This made for a blander cuisine all around. Furthermore, xenophobia and the desire to be more “America” produced a homogenization of foods. Only recently has immigration picked up and this trended started to reverse. Most interestingly, Cowen notes that barbecue and Tex/Mex are America’s greatest original contribution to food. Because of the history of lax immigration enforcement of the Mexican border, the immigrant influence was still felt in Texas and the southwest, producing barbecue and Tex/Mex food. Being in Austin, and never really having had such delicious barbecue before, I agree wholeheartedly with him.

These points obviously have much more elaboration than I have provided here. Still, I think thinking about these three things and their effect on American cuisine is pretty interesting. American tastes are thus not the effect of dumb consumerism or agribusiness tricking us into eating high levels of saturated fats and high fructose corn syrup, but instead cultural and historical events. Check out Cowen interviewed on the EconTalk podcast and the Freakonomics podcast. Also, consider buying the book. It has been positively reviewed by pretty much everyone (NYT, USA Today, The Independent) and is a very easy read.