Shallow Markets

Over on Economic Humanities, another necessarily bonkers foray into economic sociology, trying to develop the notion of shallow markets. Inspired in the first place by trying to capture what is distinctive about the market structures of platform capitalism (Uber, Airbnb, the "sharing" economy, etc.), but in a way which can also be used to refine our understanding of "traditional" market structures.

Glancing over it now, I'm less confident about the centrality of negative externalities. Perhaps what I'm really interested in here is the old notion of a producer entering a market in expectation of profit, and leaving a market in response to losses. In this context, are there differences between platforms and markets? Platforms are designed to easily assimilate productive capital which was recently used for some other purpose, but is that really lowering barriers to entry, or is it cultivating a spectrum of market presence, where producers are neither completely in nor completely out of the market, but ghosts with a transparency slider, 0% to 100%? What is the status of a seller who has developed a good reputation profile, and still has all the productive capital necessary to compete on a particular platform, but just isn't bidding and/or checking that particular inbox any more? Have they exited the market or not? What if they start checking more frequently after a few months? Should this change the way we think about sunk costs / transitional costs / stranded costs?

Partly what I'm trying to capture is what these relatively new modes of provisional and flexible market participation mean for competition as it is traditionally conceived in mainstream economics. Okay, yes, platform capitalism has discovered devious new ways of continuing neoliberal trends of casualization and deregulation. But also: many of these markets are not only de facto extremely exploitative, they are also uncompetitive or only ambiguously competitive.

It is true that producers encounter pressure to improve the quality and cost of their offering, in ways which are favorable to the consumer. But other features of competition are not present. The relative ease with which producers may defer or offload costs, and may come and go from the market, means that the market does not cultivate technical innovation, robust structures of intangible capital, nor real growth. Instead of facing pressure to improve productivity, producers face pressure to begin their "going out of business, everything must go, big bargain sale" from the moment they enter the market.

(Some of these incentive dynamics may be obscured, at the moment, by the institutionally and culturally originated waves of innovation (and innovation marketing and rhetoric) which are a compulsory feature of any tech company's existence. The provisional, one-foot-in-and-one-foot-out quality of these microentrepreneur markets may also not entirely hold true in the case of flagship platforms like Uber and Airbnb, since there's a big physical capital investment involved: the situation of some Uber drivers if it were to continue would verge on indentured slavery. TaskRabbit et al. are slightly more clear-cut examples).

Perhaps an interesting model to play with would be a market in which all firms are loss-making, average total cost is greater than price, but marginal variable cost is less than price per unit. Barriers to entry are not low but negative.

(You could perhaps get clever and explain these negative barriers in terms of a kind of "grass is greener" epistemology of capital asset valuation. New producers do not literally have a monetary incentive to enter; they have a sort of accounting incentive to enter, in that by switching their underperforming capital, its value rises on the basis of anticipated returns. But underperformance is the rule across all platforms. The producer's incentive to enter a market is their own capital, which appears constantly undervalued in whatever market it is participating in, and overvalued in whatever markets it's not).

Hmmmmmmmmmmmmmmmmmmmmmmmm.

From "How to Behave: a pocket manual of Etiquette, and guide to correct personal habits, etc" (1865)

Marta and the Demons

... a novelette about the games people play, available today on Kindle, for about 99p.

Stars, suggestions, reviews & feedback appreciated as always. (There have been one or two tweaks already: 1.04th edition is the latest version. Early adopters may have a vestigial "on" and a missing "rain"). Maybe I should add more scalded flesh and brimstone?

From Schiller's letters on aesthetics

"But we know that the condition of the human will always remains contingent, and that only in the Absolute Being physical coexists with moral necessity. Accordingly, if it is wished to depend on the moral conduct of man as on natural results, this conduct must become nature, and he must be led by natural impulse to such a course of action as can only and invariably have moral results. But the will of man is perfectly free between inclination and duty, and no physical necessity ought to enter as a sharer in this magisterial personality. If, therefore, he is to retain this power of solution, and yet become a reliable link in the causal concatenation of forces, this can only be effected when the operations of both these impulses are presented quite equally in the world of appearances. It is only possible when, with every difference of form, the matter of man's volition remains the same, when all his impulses agreeing with his reason are sufficient to have the value of a universal legislation."