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Why We Should Ignore Academics’ Claims About Monopsony Power: In Summary

morganovich e-mailed me after reading my most-recent note in response to Aaron the Aaron.  Here’s the bulk of morganovich’s e-mail, shared here with his kind permission (original emphasis):

If I may, I’d like to propose another line of reasoning:

It is precisely the fact that (as all seem to agree) that these academics “have no skills to run a business” that renders them unqualified to render judgements about the monopsony power of such businesses.

It seems we have 2 possible states of the world:

1.      Academics understand business, its decisions, its challenges, and what the world looks like from a CEO or a HR chair.  in such a case, they would seem qualified to speak to the power such a business has around hiring.  however, also in such a case, they can (justly) be taken to task for failing to put their money where their mouth is.  if this great opportunity exists and they understand the space well enough to see it, then failing to do something about it (even if it’s just consulting or joining a board) does seem to render the sincerity of their claims highly suspect.

2.      Academics do not understand business, its challenges etc and have NO IDEA what the world looks like from the operating side.  in such a case, they are speaking of something they have just admitted they do not understand.  their beliefs about monopsony may well be utterly sincere, but there is no reason why we ought to give them much credence.  they have already told us these are the beliefs of someone who does not understand the subject matter.  I may have some very sincere beliefs about how to remove a tumor.  but, before taking my advice, any sane individual might ask “have you ever performed surgery?”  and upon receiving my response in the negative, quite reasonably choose to heavily discount my advice and instead rely upon someone with actual experience.


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