This is so fascinating to me because it means that economically we have never been more diverse. I can't do your job and I never see you at my favorite lunch spot. To some degree. our lives are lived in separate economic universes whether we're on the production or consumption side of the economy.
Meanwhile, we have to come together as a community when it comes to the government we choose and the policies we implement. You don't have to live with the consequences of what I choose in the market - which is becoming increasingly fragmented and diverse - but you do have to live with the consequences of what I choose at the ballot box - which still has to hit 51% and by definition cannot be that fragmented. At no time in history have we had to bring so much diversity into one common cause, creating community even with less and less is in common.
In this way, progress poses a curious challenge to politics. Progress makes us all more distinct individuals. Politics is often built on what we have in common. As we make more progress, what is common between us becomes less obvious.
From the summary:
From the summary:
This paper empirically documents a rise in what we call "niche" consumption. Households are increasingly concentrating their spending. This pattern, however, does not appear to be driven by the emergence of superstar products. Rather, households are increasingly buying different goods from one another. The increase in segmentation seen in many other walks of modern life also applies to consumption: our grocery baskets look less and less similar. As a result, aggregate spending has become less concentrated.
From the intro:
We show that over the last 15 years, the typical household has increasingly concentrated its spending on a few preferred products. However, this is not driven by “superstar” products capturing larger market shares. Instead, households increasingly focus spending on different products from each other. As a result, aggregate spending concentration has in fact decreased over this same period. We use a novel heterogeneous agent model to conclude that increasing product variety is a key driver of these divergent trends. When more products are available, households can select a subset better matched to their particular tastes, and this generates welfare gains not reflected in government statistics. Our model features heterogeneous markups because producers of popular products care more about maximizing profits from existing customers, while producers of less popular niche products care more about expanding their customer base. Surprisingly, however, our model can match the observed trends in household and aggregate concentration without any resulting change in aggregate market power.