Book Review: The Great Reversal by Thomas Philippon
- Journal of Economic Literature (Forthcoming)
Philippon’s The Great Reversal is remarkable piece of research that draws our attention to a timely and relevant issue, the rise of market power and the macroeconomic implications. The book documents the facts and offers a number of hypotheses to explain those facts, and discusses the policy interventions needed to remedy market power. This essay reviews the contribution of the book, especially the conceptual and empirical foundations that lead to the main conclusions. The main virtue of the book is to offer a wealth of facts and implications that highlight the different aspects of the evolution of market power. This essay also considers instances where the book falls short in its analysis. First, this essay argues that the reliance on concentration indices to measure market power can be misleading or even erroneous. Second, the essay shows that to date there is no evidence that bestows a different experience in the evolution of market power in Europe compared to the United States. Third, the book gives most air time to antitrust and merger review as the main cause. While antitrust is relevant, technological change is at least as, if not more, important for the observed rise of market power. This essay argues technological change has fundamental implications for welfare and therefore for policy intervention.
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