Thread on research in economics & its linkage to policy.

Recent top publications on hot competition policy topics, eg
@jan_eeckhout & al on increasing margins
@joseazar @martincschmalz & al on common ownership
@cunningham_lbs @florianederer @ProfSongMa on killer acquisitions

These papers freaked out corporate interests. Big Pharma, Big Tech, ‘Passive’ Investors (& good chunk of the legal community who’s behind them) reacted, as expected.

As they don’t know what academic research in economics is, they use shills under semi-academic camouflage.

They pay for their own self-serving studies. Funding is opaque, to say the least. In some cases, they attack and harass.

These lobbying (sorry, research) centres don’t publish in any academic meaningful sense. And never will.

(btw, you gotta love Florian’s sense of humour here in response to some of them).

But they produce glossy pamphlets, with very polished words (they know how to write), & often with serious misunderstandings of economics (in fact, very few are written by economists with credentials). But they don’t care: their goal is not to speak to an academic community.

Rather, the goal is to throw smoke and doubt in front of the policy makers. Because they know extremely well how to interact with them.

This is an old strategy of course. Think of Big Tobacco or climate change. There is even a term for this: “agnotology”.

A couple of conclusions for the academics.

To the extent you are interested in policy (you may not be, which is fine of course), you need to think how to write your papers. Possibly, next to the academic piece, try to have a policy piece where you explain to policy makers.

Alas this does not give you academic credit, but will have impact. Strike a balance.

You thought of a topic for 5 years, if not more: On balance, where do you stand? Uncertainty is inherent in policy. But it’s not a justification for inaction.

“We need more research” is ok in academic writing. But it’s a *death sentence* in policy: it means the status quo will not change – don’t be naïve. If on balance you think A is 70% likely, that’s probably enough to go ahead. Waiting for 100% is too late for policy.

Acknowledge this. Surface the uncertainties: This is what we know; what we don’t yet know; what we’ll likely never know. Live with that & say where *you* stay. Of course revisit plans as new evidence emerges.

Then there are the policy makers.

They are very risk averse as they fear the courts. They speak a lot to corporations & consultants, almost never to academics. They don’t know how to tell the difference between a top publication & a funded WP paper put on ssrn. Revolving doors with the shills are plenty.

But most enforcers are really well motivated to do the right thing. You need to *help them* with clean arguments, with evidence, with precedents.

Our brains are our greatest asset. Keep doing great research, y’all!


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More from @TomValletti

30 May
Important THREAD on the etymology of CAPPUCCINO.

First the spelling. It’s not capacino, capucino, capucinno, etc.
It's CAPPUCCINO (singular), 2P’s, 2 C’s, 1N. CAPPUCCINI (plural), still 2P’s 2C’s, 1N.

Second the etiquette. 1/
You don’t drink it after noon. You don’t order it after lunch, let alone after dinner. And absolutely terrible to drink it DURING a meal (I feel bad just at the thought of it). You don’t drink it in a plastic cup. You don’t drink it on the go. You don’t drink it with a straw. 2/
(Personal note: I split up with a British girlfriend when I tried to explain all this, observing in shock that the table next to ours had just ordered Hawaiian pizza (the horror!) and cappuccino at 10pm. Obviously the relationship was not going very well.) 3/
Read 8 tweets
26 Apr
I have been asked why, if in normal times we think competition is a feature of market-based economies that produces the best outcomes, we now hear that with corona "putting aside any qualms about competition" should be the best way forward for society (thanks @martincschmalz). 1/
Let me use simple steps using IO. As a starter, I’d say a plausible scenario could be one where there are uninternalized positive externalities, e.g. knowledge spillovers (or coordination problems in the supply chain), so that a competitive equilibrium is not ‘good enough’. 2/
But we already have e.g. a system of R&D exemptions for that… So one has to further ask why a) externalities are now bigger than before, b) a relaxation of comp rules would actually fix those externalities & c) the current system is not good to provide exemptions (too slow?). 3/
Read 6 tweets
10 Dec 19
Little THREAD. Remember Zuck's speech at Georgetown? He argued that FB would not remove of political ads because they make so little money (1-2% revenues) from them, so let's keep 'em as it’s good for democracy to expose lies on FB. This is fallacious on 2 grounds possibly 3. 1/
1) No one really has an idea about how much money FB makes directly from political ads, since their accounts are opaque to say the least. But let me imagine 1-2% is the true figure (still, quite a bit of money since 2019 revenues will be around $90bn). 2/
2) Business model of FB is to keep users engaged as long as possible (ie spend time), so that they can micro target with ads. Politics, as well as sex and violence, keep people online. It’s the indirect effect that matters: political ads drive business. This is a LOT of money. 3/
Read 5 tweets
4 Nov 19
Phenomenal paper by @DrDaronAcemoglu et al.
It responds to “but people don’t care about privacy”, “I have nothing to hide”, “it’s all about revealed preferences”, “we get a barter, it’s all good”. Too fast.
There is in fact a massive negative externality. Here’s how it goes 1/
With fully rational consumers (a big if), individuals who don’t care about privacy release their data. This compromises those who do care and whose information is correlated. (Cambridge Analytica scandal:data shared by 1/4m FB users but allowed to infer info about 50m users!). 2/
A data market? Once information leaks, less incentive to protect privacy. And less to gain from giving data away, as the platform already knows about you: market price of data is low. This gives the “impression” that users do not value privacy, but it’s due to externality. 3/
Read 4 tweets
4 Sep 19
Very interesting and ambitious new paper by young scholar @bpellegr_econ on industry concentration. 1/
Employs a new dataset to measure product similarity (based on computational linguistics of 10-k forms) for every pair of publicly-traded firms in US. 2/
Applies it to a model that yields a metric of concentration based on network centrality, and computes deadweight loss from oligopoly: it increases over time. 3/
Read 6 tweets
12 Jul 19
1/ LIBRA THREAD. People are discussing MANY relevant aspects. FED Jerome Powell has “serious concerns”. @matthewstoller has written this interesting piece.

Let me offer a personal, additional, possibly narrow, view looking at COMPETITION issues.
2/ My idea has already been bashed, both left (but guys: mine is an ADDITIONAL concern) and Koch brothers-funded right.

[Boys, I do have reply tweets, don’t I?]
3/ Here’s my argument. FB makes money, a lot of money, from ADS - period. Behind those ads are products we buy. With Libra, FB can do 2 things: match data of its ecosystem with Libra data on individual daily income, individual purchases etc. Not even credit cards have that info.
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