SOCI 1 Lecture Notes - Lecture 8: Human Capital, Market Power, Financialization
Lecture 11/02/17
❏Kenworthy continued
❏9 suspects (theories with imperfect evidence)
❏Theories we already talked about: marriage and education among high
earners
❏#3: product market size increasing- the number of potential consumers for
products in major corporations
❏Manufacturers and producers in the past used to target their
services to their consumers locally, but now they target globally
❏Ex: movies used to be produced and markets within the
united states but now they’re marketed globally
❏Financial products are also bought from around the world
ex:stocks and bonds
❏When product market size goes up, wealthy people earn more
income
❏The problem: only works for certain organizations, and does not
explain why CEO salaries were so constrained before globalization
❏#4: changes corporate governance- make as much profit as possible,
expand the market, and beat out competitors
❏1990s: Corporations were not governed by managers but by
shareholders and the purpose of the managers was not to make
profits but to bring value to the shareholders
❏Corporations want to make the stocks more valuable
❏Cut costs: lay off many people-> people who weren’t
working as well as others got fired
❏Firms wanted to find superstars who knew what it took to
raise the value of the share price
❏Timing is right, making more money in corporations -> rise of
shareholder value -> rise of the 1%
❏The problem: does not explain why incomes rose in areas that had
nothing to do with businesses
❏#5: large firm market power- “not quite monopolies”/ when a few
members control large sectors
❏To protect themselves, firms bought other firms to create large
firm market
❏Ex: google almost owns the search sector
❏Controls certain areas -> jack up the firms -> up the profits
-> pay themselves large incomes
Document Summary
Theories we already talked about: marriage and education among high earners. #3: product market size increasing- the number of potential consumers for products in major corporations. Manufacturers and producers in the past used to target their services to their consumers locally, but now they target globally. Ex: movies used to be produced and markets within the united states but now they"re marketed globally. Financial products are also bought from around the world ex:stocks and bonds. When product market size goes up, wealthy people earn more income. The problem: only works for certain organizations, and does not explain why ceo salaries were so constrained before globalization. #4: changes corporate governance- make as much profit as possible, expand the market, and beat out competitors. 1990s: corporations were not governed by managers but by shareholders and the purpose of the managers was not to make profits but to bring value to the shareholders. Corporations want to make the stocks more valuable.
