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  4. December 2021
  5. Book Review: The Great Reversal by Thomas Philippon

Journal of Economic Literature

ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)

Book Review: The Great Reversal by Thomas Philippon

  • Jan Eeckhout
Journal of Economic Literature
vol. 59, no. 4, December 2021
(pp. 1340–60)
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Abstract

Thomas Philippon's The Great Reversal: How America Gave Up on Free Markets is a remarkable piece of research that draws our attention to a timely and relevant issue: the rise of market power and its macroeconomic implications. The book documents the facts, 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 that permit an alternative viewpoint. First, I maintain that the reliance on concentration indices to measure market power can be misleading. Second, the essay argues 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 manifests that technological change has fundamental implications for welfare and therefore for policy intervention.

Citation

Eeckhout, Jan. 2021. "Book Review: The Great Reversal by Thomas Philippon." Journal of Economic Literature, 59 (4): 1340–60. DOI: 10.1257/jel.20211628

Additional Materials

JEL Classification

  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • E22 Investment; Capital; Intangible Capital; Capacity
  • G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
  • G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
  • K21 Antitrust Law
  • L13 Oligopoly and Other Imperfect Markets