Monday, February 24, 2014

Winner takes all: how technology is driving returns to talent

An article that could provide some of the clues of why inequality is growing as it "enable[s] the best producers to extend their reach" (NYT via GregMankiw):

Analogous forces help explain the surge in income inequality that began in the late 1960s. In domain after domain, we reasoned, technology has enabled innovative business models to serve broader markets. Local accountants have been displaced by tax software, brick-and-mortar shops by and other online retailers. And now, there is even worry that live, in-theater HD broadcasts of Metropolitan Opera performances could displace local opera companies across the land.

But similar advances in production and distribution methods also exert countervailing effects. As the former Wired magazine editor Chris Anderson explained in his 2006 book, “The Long Tail” (the title refers to a property of statistical distributions), digital technology has made music, books, movies and many other goods economically viable on a much smaller scale than before.

For example, films once generated revenue only by mustering large-enough audiences to justify screenings in theaters. Many niche offerings, like Hindi-language movies in medium-size American cities, were simply not viable. Services like Netflix, however, changed all that. Because digital movies cost next to nothing to ship, people can now watch them without having to assemble a posse of ticket buyers.

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