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Diane Coyle
Says More…
This week in Say More, PS talks with Diane Coyle, Professor of Public Policy at the University of Cambridge.
Project Syndicate: You have welcomed efforts by competition authorities to strengthen their capacity to open up digital markets, “both by adding new tools and engaging in the analysis needed to use them.” In your forthcoming book, The Measure of Progress, you point out that, beyond wielding monopoly power in product markets, digital platforms seem to enjoy considerable monopsony power in labor markets. Has progress been made in measuring this type of market power, and which gaps still impede effective responses?
Diane Coyle: The big digital platforms wield a lot of power, full stop. So, it isn’t surprising that there is mounting evidence that this includes considerable monopsony power, which they exploit by keeping workers’ wages or sellers’ fees lower than a competitive market would demand. Unfortunately, it is very difficult to compile the evidence that would be needed to push back, because the platforms control access to their data. But some evidence is unmistakable: the prevalence of non-compete clauses in both the United States and the United Kingdom is a clear indication that some employers are undermining the functioning of competitive markets.
PS: More broadly, you have lamented that data on the digital revolution’s economic impact “remain inadequate.” One complication, as you note in The Measure of Progress, is that we have traditionally defined the economy according to monetary transactions, but consumers expect many digital services to be free. How must our conceptual framework change to account for such “free” production and consumption?
DC: How to measure “free” exchanges and, more broadly, how to understand the changing structure of the digital economy is becoming an active area of research. And for good reason: since the mid-2000s, what gets produced and consumed, and how, has changed dramatically, but new economic activities and transactions – such as the provision of services in exchange for user data and attention, rather than a monetary payment – are invisible in traditional economic statistics.