Political Economics Prof

Tag: Economy

  • Bilateral Oligopoly

    Bilateral Oligopoly

    The best movie about the Gunfight at the O.K. Corral is titled My Darling Clementine.
    A great western – great cast, great photography. 

    DEFINITION OF A BILATERAL OLIGOPOLY


    Models of market structure assume that the demand side is
    represented by a large number of buyers. 
    The structure of the market, and the assumed market outcomes, depends on
    the number of suppliers and how they compete. 
    Suppliers either post one price or exploit their knowledge of buyer
    categories by using price discrimination. 
    Despite the comments about the key role of consumers in determining
    economic performance, consumers are fairly passive when the discussion focuses
    on imperfectly-competitive industries. 
    But many markets are not structured this way; the buyers are not passive
    consumers but large corporations that do not passively accept suppliers’
    prices.  Net prices are actively
    negotiated.  These markets are often
    bilateral oligopolies.



    In a bilateral oligopoly the buyers are not an
    undifferentiated mass of consumers but rather a small number of purchasing
    agents or professional buyers representing large purchasers.


     

    There are now a small number of large
    corporations on both sides of the market. 
    The same company could be on different sides of two bilateral
    oligopolistic markets.  For example,
    Boeing Aircraft is a major purchaser of jet engines from the three big engine
    producers and one of two major suppliers (with Airbus) of large commercial
    aircraft to a limited number of large airlines.     

    THE MARKET FOR CAPITAL EQUIPMENT


    Economics textbooks talk about putting inputs together in
    the most cost-effective way possible to produce some level of output.  But if capital goods markets are not
    perfectly competitive, there is no mechanism on how this is done.



    Markets for capital goods and many other inputs are
    structured differently than the consumer products markets that are the usual
    examples in economics.  Capital goods,
    processed metals like steel and aluminum, chemicals and petrochemicals,
    packaging material, transportation equipment, IT hardware and software, and
    other inputs are often produced by large corporations in oligopolistic
    industries.  There are usually large
    economies of scale and scope compared to the size of the market.  Economies of scale producing differentiated
    products define the size of the market and the net price of the product for
    each customer.  Yet, contrary to the
    impression in economics textbooks that concentration leads to collusion,
    companies in these types of industries are very competitive, including fierce
    price competition.  Even duopolies, such
    as Coke and Pepsi or Boeing and Airbus, can be very price competitive markets.  Long-run economic profits (profits above the
    cost of capital) are surprisingly rare. 
    Outcomes in many of these industries approach the ideal outcomes as if
    these industries were perfectly competitive.



    One of the reasons for price competition and lack of market
    power by large sellers is the lack of asymmetric information.  Large corporations on the buy side of the
    market spend a great deal of resources to be well-informed about
    suppliers.  Size plus market information
    gives them countervailing market power.  The
    result is a bilateral oligopoly market structure.      

    DESCRIPTION OF A BILATERAL OLIGOPOLY

    Many producers sell intermediate goods and
    capital goods to final producers and assemblers.  Final producers often sell to large
    wholesalers, distributors and retailers. 
    Even small retailers often purchase through franchisors, buying offices
    or big coop distributors like True Value. 
    In all these situations, it is professional buyers who make the buying
    decision.  Purchasing agents and new
    product committees are well-informed about their suppliers.  They demand a great deal of information about
    products and services from potential suppliers but do not share actual price
    and product information with competing suppliers.


    Because they represent large customers, they have
    substantial market power, playing off one supplier against another.  They buy in large volume, often for their own
    private label, and are compensated for negotiating low prices.  In the extreme, retailers like Wal-Mart force
    suppliers to offer prices close to the suppliers’ marginal cost, the same
    prices that would prevail in a perfectly-competitive market. 


    In many bilateral oligopolistic markets, price is
    a primary consideration in the purchasing decision.  Professional buyers along the supply chain
    are not swayed by marketing or advertising. 
    Brand names are often unimportant or irrelevant in markets for raw
    materials, commodities, industrial products, intermediate goods, commodity
    chemicals, information technology, products made to buyer’s specifications,
    generic products, and private label products. 
    Price at or near marginal cost occurs when competing products are close
    or perfect substitutes in the eyes of the professional buyers.  When buyers view alternative sources of
    inputs as close substitutes, sellers can not charge a premium price based on
    perceived superior value.


    Corporate buyers have leverage if their company
    is a relatively big part of the market or if producers have large economies of
    scale.  One implication of large
    economies of scale is that producers are forced to run plants at a high percent
    of capacity to make a profit.  Industries
    with large economies of scale also often have industry overcapacity so that not
    all companies can run their plants at full capacity.  As long as price is above marginal cost, some
    companies would be willing to expand output to increase profit or reduce
    loss.  For example, auto company
    purchasing agents negotiate with large suppliers from the steel, aluminum,
    plastics, and tire industries, all of which currently have excess
    capacity. 


    There
    are a small number of producers in many markets for raw material,
    semi-processed goods or industrial products because of large economies of
    scale.  Scale economies create the
    “through-put problem” for suppliers. 
    Economies of scale are made possible by large up-front investment in
    fixed assets representing new technology. 
    Units of output have low variable cost. 
    But there is low average (unit) cost only if plants are run at high
    rates of capacity.  If producers have
    high fixed cost relative to variable costs and must operate plants at a high
    percent of capacity to make an adequate rate of return, or plant closing costs
    are high, then large buyers might be able to force the contract or negotiated
    price down close to marginal cost.


    Many
    large manufacturers face large assemblers or retailers as major customers.  If products are viewed as homogeneous by
    buyers, suppliers are chosen primarily on price.  Buyers use a number of bidding and contract
    negotiation procedures to maximize the amount of price competition among
    potential suppliers.  Anyone who has ever
    been a sales rep or purchasing agent knows how complicated this process can be.


    Much
    of the discussion of the Internet is a variation of this description.  Internet companies may have high development
    costs but the marginal cost of one more buyer on the site may be close to
    zero.  A common strategy is then to try
    to grab as much market share as quickly as possible. 


    For some products, like computer hardware and
    systems, the part of the market where computer companies sell computer systems
    to large institutions contains aspects of bilateral oligopoly.  About 40% of total demand for information
    technology comes from large companies, about 45% from midsize to small
    businesses, and only about 15% from individual consumers.  Large banks and other financial companies
    spend over $1 billion a year on information systems.  They have tremendous market power –
    negotiating power – when they decide which suppliers to choose.


    Buyers for assemblers and retailers typically
    face final consumers and competitors in their product markets.  So demand in intermediate markets is derived
    from the buyers’ forecasts of final consumer demand.  Professional buyers are actually negotiating
    part of the cost of the final product for the ultimate consumer.  They have a big incentive to try for the
    lowest cost of inputs, which will give their company a competitive advantage in
    the output market and determine profit margins. 
    Price competition in the final goods or retail market keeps profit
    margins down.


    Unlike other imperfectly-competitive markets,
    here we assume symmetric information.  We
    do not assume that sellers know more than buyers.  There are informed purchasing agents on the
    buy side who spend considerable resources to gather data on suppliers.  They develop technical expertise, force
    suppliers to share proprietary information, visit plants, and demand data from
    competing manufacturers. Sellers often lack valuable information that buyers
    have – the offering net prices and sales conditions of other sellers.


    Large corporations can be fiercely competitive
    for market share and increased profit. 
    Competitors also want to protect proprietary information, negotiating
    positions and marketing strategies from each other.


    Although products and services may be
    differentiated in the eyes of producers, in some intermediate markets the
    competing products may be almost undifferentiated (almost perfect substitutes)
    in the eyes of purchasing agents.  Tires
    and computers are examples.  Demand from
    professional buyers for each product is more elastic than assumed by the
    producers.  Producers misjudge the price
    elasticity of demand.  They offer to sell
    at a higher price than buyers are willing to pay.  Buyers then institute price competition by
    playing off one supplier against another, negating the market power of the
    large suppliers.  By such means as
    competitive or sealed bids, buyers decide mostly on the basis of price.  Final market price is indeterminate, partly
    dependent on negotiating skills. 


    Professional buyers and purchasing agents,
    following the self-interest of their company, are negotiating prices on behalf
    of the final consumer.  This is a major
    source of price competition in retail markets. 
    If buyers have elastic demand and can negate the supplier’s
    market power, the market price will probably be closer to the price reached in
    a perfectly-competitive market.


    MARKET SHARE AND MARKET POWER

    It is usually assumed that a large market share
    translates into market power, the ability of a company to charge prices
    substantially above marginal cost (and unit cost) and thus make above-average
    rates of return.  In a bilateral
    oligopoly market, however, large market shares of suppliers can be negated by
    large market shares of buyers.  In fact,
    if the main reason for a small number of big producers is economies of scale
    relative to the total size of the market, then market power typically swings
    over to the buyers’ side.  This is
    especially true if there is excess capacity in the industry, a common situation
    in manufacturing industries with large economies of scale.


    Large
    producers may also not have much market power if every sale is important.  This is the usually situation in
    transportation equipment – Boeing vs. Airbus selling jet aircraft in
    multi-billion dollar deals, large containerships and oil tankers, and diesel
    locomotives sold to the handful of railroads left in the     United States or national railroads in other countries.  Other examples in large capital goods markets
    are electric power-generating equipment, oil rigs or large earth-moving equipment
    (Caterpillar vs. Komatsu). 
    Another possibility is large construction companies and their suppliers
    bidding on large construction projects.



    This implies that the heart of the strategy of a company in
    a bilateral oligopoly is to use its purchasing power and knowledge of the
    market to hold down the costs of inputs purchased from outside suppliers.  This strategy is crucial if the company is to
    be price-competitive in its output market. 
    In an output market of few suppliers, the company must be price
    competitive if it pursues a market share strategy.  Many companies believe that increasing market
    share in the short run is a tactic to increase profitability in the long run.


    When there are a small number of well-informed
    buyers, they can constantly and effectively monitor the market.  They will be especially sensitive to any
    attempts by suppliers to attempt collusion since the buyers’ companies are the
    immediate victims of supplier collusion. 
    Buyers may find it hard to pass on high input costs to their
    oligopolistic customers.  Buyers and
    purchasing agents can initiate “cheating”, that is, price competition
    among suppliers.  This is one reason for
    the small amount of overt or even tacit collusion in     U.S. industry. 


    Even in a duopolistic retail market like that of
    cola, Coke and Pepsi compete for market share. 
    Supermarkets can often negotiate lower prices with one company in
    exchange for more shelf space and greater volume purchases.  This puts pressure on the other company to
    match the lower price.

    DUAL MARKETS:  SELLING INTO RETAIL AND BILATERAL OLIGOPOLISTIC INSTITUTIONAL MARKETS


    Corporate buyers are in a strong position if the
    same product, such as tires or personal computers, is sold in both retail and
    industrial markets.  Institutional buyers
    initiate a form of price discrimination, demanding lower prices than the
    wholesale prices to the retail market. 
    Price discrimination here works in favor of buyers if sellers are forced
    by competition or excess capacity to offer lower prices to large, well-informed
    corporate customers in the original equipment market.


    Only
    part of the total market, the industrial part, has to be price-sensitive –
    sheets sold to industrial users, tires to car manufacturers, cola bought by
    fast food chains, personal computers bought by corporate buyers. 


    BILATERAL OLIGOPOLY AND VERTICAL
    INTEGRATION


    Being a buyer in a bilateral oligopoly is a good
    reason why an assembler or retailer should not integrate backwards
    (backwards vertical integration).  In the
    short run, the market is characterized by fierce price competition.  In the long run, a company does not want to
    get locked into one development path based on one type of technology.  The examples of what happened to     IBM (fell behind Intel in microprocessors), U.S.
    Steel (did not adopt minimill technology) and General Motors (lack of
    innovation, inefficient internal coordination), all depending almost entirely
    on in-house research and development, caution against vertical integration.  Of course, large corporate buyers in
    intermediate markets can threaten to produce some of the inputs
    themselves.  Given the dynamics of
    bilateral oligopolies, this may not be a credible threat.

     


    INDUSTRY STRUCTURE AND INTERNAL CORPORATE ORGANIZATION


    This brings up the issue of the relationship between
    industry structure and internal organization. 
    Companies that recognize they are in a bilateral oligopoly may be less
    likely to have a fully-developed divisional structure.  The reasons could be a small marketing
    function (supply side), since advertising and promotion have limited effect on
    professional buyers, or a small product development function (buy side).  The result could be a simpler management
    structure.  Supplier firms will tend to
    be production-oriented, not market-oriented. 
    Many of the functions of a self-contained division are not necessary or
    are performed elsewhere (by customers, by suppliers, or by specialized capital
    goods companies) or jointly with customers. 



    An important determinant of the internal structure of a firm
    will be the transaction costs to the firm as a buyer of inputs.  If transaction costs are low, possibly
    because of accumulated knowledge of the market, the firm will have low
    purchasing costs.  Internal coordination
    costs between purchasing and production, and related inventory costs, may be
    low if the purchaser can impose “just-in-time” delivery schedules on
    suppliers.  Also, net transaction
    costs may be low if the cost of accumulating knowledge about suppliers
    translates into lower prices for a large volume of inputs.



    CONCLUSION

    It is hard to find a market or industry, no
    matter how narrowly or broadly defined, that is not an oligopoly or tending to
    oligopoly.  These industries are usually
    part of a supply chain, most of which are structured as bilateral oligopolies.  This limits the market power of large
    corporations and constrains profit margins.

    As discussed in the post on Baldwin Locomotives, producers of complicated products like transportation systems, supplying large transportation companies,  tend to be in bilateral oligopoly markets.  Many health care markets are becoming bilateral oligopolies, mostly through mergers and acquisitions. As one side of the market becomes more concentrated, companies on the other side combine as a defensive strategy.  

    ___________________________________________________________________________________

    For Baldwin Locomotive and other examples of bilateral oligopoly, see Examples of Bilateral Oligopoly 

    For more examples of bilateral oligopoly, see The New York Times Discovers Bilateral Oligopoly.


    For a modern example, see Markets and Large Companies:  A Case Study of Parker Hannifin

    For a list of all posts, see Guide to Posts.

  • The Stock Market is Up and the Economy is Down: What’s Going On?

    The Stock Market is Up and the Economy is Down: What’s Going On?

    It is a puzzlement why the stock market can go up while the economy is in a virus-caused depression. Much of the economy is in lockdown or closed because of decreased consumer demand. As many of one-third of workers and many small businesses are on federal life-support programs. Profits have disappeared. Large numbers of bankruptcies loom. Given the uncertainty, including recent record numbers of new virus cases, the usual stock evaluation metrics are worthless.

    With the economy tanking, how come the stock market has gone up dramatically?

    And continues to go up.

    THE STOCK MARKET

    Let’s decompose the stock market. When people talk about the stock market going up or down, they usually refer to an index such as the S&P 500 as the measurement. The S&P 500 is a market-value (cap, short for capitalization) weighted index. The ten most valuable companies account for over 20% of the total value of the index.

    There are over 3,000 actively traded stocks. But the 500 companies account for over 80% of the total value of all stocks. They also account for a minuscule percent of the 10-20 million companies in the United States.

    Public companies account for about one-fifth of U.S. employment. Small companies account for about half of private sector employment. Government accounts for about 10% of total employment.

    So, the dominant public companies are not representative of the economy. They are not even a representative sample. They are publicly owned. Even the smallest is much larger than almost all other U.S. companies. They are usually multinationals. And the largest, most dominant companies in market value are technology companies. The six companies with the highest market value are Facebook, Apple, Amazon, and Alphabet (the parent company of Google. Counted twice. Don’t ask.), collectively known as the FANG companies, joined by Microsoft.

    Technology companies account for over 30% of the total value of the S&P 500. Digital or online companies are 13 of the 20 most valuable corporations in America. Nine of them did not exist or were small companies 25 years ago.

    THE VIRUS ECONOMY

    The economy has gone into a depression, the worse since the Great Depression of the 1930s. Damage has been limited because of massive federal income maintenance programs for workers and small business owners.

    The severe downturn, caused by the virus and attempts to control the spread of the virus, has made visible that the economy is divided into two parts. (Yes, I know this is a huge simplification but not as simple-minded as most economic theory.) There is the service sector, the largest employer. Most of the companies are small. Many of the employees are low wage. They work in buildings and meet customers. Services and their employees have been very hard hit by the virus and the depression. At the other end are the technology companies that dominate the digital economy. As a group, they have done well during the depression as consumers and business have used their digital platforms and services as substitutes for physical interaction (aka store shopping, visiting doctors’ offices, online entertainment and commuting to work).

    This split is reflected in the stock market and the indexes. Of the 500 largest companies, 44, mostly tech companies, are up 20 percent or more since the market low of March 23. The big six are up over 60% since the bottom of the market, accounting for more than 40% of the increase in the value of the S&P 500. Tech companies like Nvidia and biotech companies account for much of the rest of the increase.

    Less known is that approximately 160 companies of the 500 are down more than 20%. Although the market average is almost the same as at the beginning of the year, the stock prices of about 350 of the 500 companies are down. They are large and important parts of the older economy.

    TIMING

    The timing of the market moves is surprising. The market hit its high on February 19, a month before the president admitted there might be a problem and weeks before the more aggressive governors announced lockdown rules. While the president was telling the country there wasn’t a problem, investors began unloading stocks.

    In the last week of March, as the president began hinting there might be a problem, the stock market hit bottom. As the number of new virus cases and deaths rapidly increased, and lockdown and quarantine rules were extended, the economy tanked. But the stock market began a rapid recovery, one of the strongest and quickest in history. Even as the virus situation worsened in most of the country, the stock market continued to go up.

    During the strong advance no one, not even corporate management, had any firm idea what corporate sales and profits would be in the future. No one could do the usual financial analysis. Every wealth fund manager, financial analyst and investor I’ve talked to said the market was crazy, irrational, unpredictable (usually preceding by a colorful adjective).

    But the main reason is obvious. The dominant companies in the stock market were part of the digital sector of the economy. Besides the monster tech companies, they were into telemedicine, video conferencing for fun, family and business, video streaming and other online entertainment, e-commerce, cybersecurity, and many other online services. Behind them was a large increase in cloud computing services.  

    The accelerated shift to these companies’ services and products indicated accelerated increases in sales and profits. The macroeconomic averages and totals for the economy looked dismal. But not for these companies.

    The stock market looks ahead. Investors forecast. They anticipate. Today’s news and events have little influence, even short run influence, on stock price movements. Investors have placed bets on their best estimate (known among statisticians as SWAG – statistical wild-ass guesses) of what will happen to corporate sales and profits in the future. As my old econ prof used to say, “You puts down yer money and takes yer chances.” Transitory and political events, no matter how dramatic and urgent, usually have very short run or no influence on stock market prices.

    But not the virus. By mid-March, it was obvious it would have a large and lasting impact on the economy. It was the powerful “exogenous shock” of economics (also known as the “black-swan” or “fat-tail” or “big tsunami” event). 

    The unknown was how big and especially how long. Politicians, especially the president and some Republican governors, argued the virus’ effect would be short-lived and not too deadly or disruptive. They dismissed the proposed attempts to limit economic activity to slow down the spread of the virus. The famous “V-shaped” recovery. It seemed that many investors agreed. As the market rose rapidly, new investors flocked to the market. Average daily volume so far this year is up over 60% compared to average daily volume in 2019. Much of the internet chatter sounded awfully familiar to me – it was the same as in histories of the 1929 stock market crash.

    But the market hasn’t collapse (yet). The big difference is the massive income maintenance federal aid programs, along with the Fed’s massive money creation and its underwriting of virtually the entire debt market. Already about 40 million  American workers (25% of the labor force) have received some form of federal aid. The main program has been unemployment benefits. The maximum benefit has been raised by $600/per week and eligibility standards have been loosened. About two-thirds of the workers who have been on unemployment received benefits as high or higher than their pre-virus income.

    Investors are betting that worsening virus news will have little effect on the economic recovery, that federal income maintenance programs will go on as long as needed (or at least to the November elections), that the Fed will keep the Fed funds rate near zero and finance the massive government deficits, and that demand for online and digital services will continue to increase.

    Result? Sometime in late 2020 or early 2021, total earnings would be expected to return to 2019 levels. The S&P 500’s price/earnings ratio (P/E ratio) of this forecast has already returned to the high 2019 levels. 

    New medical protocols are reducing the death rate. Sometime in the near future an effective vaccine will be announced. All of the stock market will go up. Given how crazy this market has been, I suggest waiting a week and then start cashing in some of your winnings.

    THE STOCK MARKET IN 1933

    Something similar happened in 1933. At the depths of the Great Depression, with the entire banking system near total collapse, the stock market started to recover. The main reason seems to have been that investors were encouraged by the optimism and vigorous pursuit of new laws and policies by the incoming president, Franklin Roosevelt. In that year, the stock market went up an amazing 66.7%.

    SUMMARY

    Investors, as investors, are not directly concerned about Covid-19. They are concerned about the economic consequences of the virus, both short term and long term, especially to public companies. 

    The dominant dynamic is that most of the economy’s industries and companies are experiencing accelerated movement to the digital economy. Face-to-face transactions are expensive. Check-out personnel and cashiers are disappearing in supermarkets, Target and McDonald’s. Retail stores will function more like local distribution warehouses. Think about classrooms and doctors’ offices. And, in the future, a shrinking labor force will probably push up the low wage part of the labor market. Digital interaction will continue to be less expensive and more effective.

    The stock market – don’t look at the averages. Look at the winners and the losers. The stock market is up because it is dominated by digital and technology companies. Changes in relative stock prices indicate which economic sectors and companies will innovate and and grow their sales and profits faster than the overall economy.

    One way to think about the stock market (big public companies) is that it is made up of past winners (past innovators), current innovators, and potentially successful (profitable and growing) future innovators. The market mostly invests in future growth based on innovation. It punishes “legacy” companies, in old industries with growth determined by the growth in total income, that stop innovating.

    In short, investors are buying companies that are benefiting from the economic consequences of the virus and attempts to limit its spread. These same companies will continue to benefit after the virus is contained. Since these companies dominate the market and the averages, the market is going up. And, increasingly, these are the companies that will drive economic growth and will dominate the economy in the future.

    For a discussion of some of the economic and governmental budgetary changes caused by the virus, see my After the Virus.   

  • Inconspicuous Consumption in the Age of Affluence


    In an earlier post, Them That Has, Gets: The Rich Get a Lot Richer, I mentioned that the 5% of the households with the highest income accounted for about 35% of total consumption in the United States.  This percent will probably rise in the future if the long-term trend towards more income inequality continues to grow.


    Two related comments. The relatively affluent probably account for an even higher percent of discretionary spending.  Other studies indicate that rising income inequality is a global trend, occurring in most wealthy countries.  Also, there is a rapidly growing elite of super rich in the rest of the world, as the Forbes list of the wealthiest families in the world indicates.


    This raises a number of questions.  Given the level of imports of mass produced products, is mass production still the basis of an industrialized economy?  And what about marketing?  Is it more profitable to go after the mass market or, invoking Pareto’s Law, the small percent with high income and spending?  Will the new basis for economic growth and job creation be more dependent on providing products and services to the affluent, from the high end of the upper middle class to the super rich?


    Branded luxury products and personalized services that were marks of status for the rich have filtered down to the two-income upper middle class family.  Luxury cars, expensive watches, nannies, personal trainers, financial advisers, private schools, and designer clothes and shoes are now common in upper middle class neighborhoods.


    So how can the really affluent differentiate themselves from the merely upper middle class?  I suggest the following:

    ·        Customizing luxury products.  Anyone can afford to lease a Mercedes.  But what if it were customized with a unique color or specially designed wheels?

    ·        Personalized information and services.

    o       Health and genetic screening services, including customized anti-aging programs.

    o       More exclusive boutique doctors and private clinics.

    o       Personalized nutritional advice and sensor screening.

    ·        Personalized high tech products and services.

    o       Unique app on a Smartphone.

    o       Expert information and analysis.


    I’m sure you can think of many more products and services aimed at the affluent.  Some of these are really nothing more than trying to think of more exclusive variants of existing products and services.


    But what is the ultimate product or service?  The one that confers the most status or satisfaction?  One of a kind – unique products, services and experiences.


    Why is there so much status in collecting art?  One reason is that each piece of art is unique.  Someone rich owns something that no one else owns.


    There was a satirical movie, The Freshman, where very rich people met secretly to spend a huge amount of money for a meal featuring an animal on the endangered species list.  It understood the psychology of owning art, even stolen art, could be extended to other products, services and experiences.


    Do you think that someone who is very rich would pay for a unique, one time experience that no one else could have?  What if in the movie Total Recall you could ask for and have programmed a unique virtual experience?


    The latest novels of William Gibson also explore this idea.  If you were wealthy, how much would you pay to own a one of a kind piece of clothing, no label, hand-made from a unique combination of design, fabric and quality finishing?  Can you think of any related examples?


    This suggests that the demand for people with certain kinds of specialized knowledge or skills, including artists, designers and artisans who cater to the rich, may be increasing, and a source of economic growth and new jobs in wealthy societies.


    Maybe even the newly rich will come to realize that the private enjoyment of something unique, or limited sharing among an elite group of connoisseurs, is more satisfying that the conspicuous display of consumption for social status.