Limiting Leakage and Lemons

EconTalk Extra
by Amy Willis
Marina Krakovsky on the Middle... Jayson Lusk on Food, Technolog...

How do middlemen emerge, and what value do they create in the economy? Who isn't a middleman, and why do they seem to suffer such disdain? In this week's episode, EconTalk host Russ Roberts chats with Marina Krakovsky about her new book, The Middleman Economy.

Now it's your turn. Use the prompts below to help us keep thinking about the episode and continue the conversation. As always, we love to hear from you.

wedding planner.jpg 1. In the very beginning of the conversation, Krakovsky notes, "No one likes a middleman, but most of us are middlemen." By the end of the conversation, she's identified six roles for middlemen: bridge, certifier, enforcer, risk-bearer, concierge, and insulator. Does your work fit one of these types? Which of these middlemen stand out for their usefulness in your own life?

2. In their discussion of Open Table, Krakovsky and Roberts discuss why restaurants (generally) don't charge a fee or a deposit on reservations, like hotels do, for example. What do you think the cultural norm is behind this phenomenon? How likely is it that you think this norm will soon change?

3. Both Roberts and Krakovsky emphasize the "soft skills" of [human] middlemen. Is anyone who makes their living by employing "soft skills" to be considered a middleman? Or, who then is not a middleman? Explain.

Extra Credit: If you go through the EconTalk archives, you'll find an episode in which Roberts spoke with a famous insulator. Who was it? How does this individual illustrate the insulator role? Is this the sort of middleman you love or hate? (P.S. We'd like to share some of these responses...and we've got a pile of books that need homes...)

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COMMENTS (1 to date)
Trent Whitney writes:

Going straight for the Extra Credit question...

I think the famous insulator was Leigh Steinberg, the sports agent who was the inspiration behind the "Jerry Maguire" movie.

As discussed in the podcast, the sport agent functions as the insulator when he negotiates contacts for an athlete with a team. The agent can push for an outrageous sum that the player might be too embarrassed to ask for (or that he might not know to ask for). The agent can also take the heat from the media, talk radio, etc., by being the buffer.

One thing not discussed in the podcast is the advantage for a team in dealing with an agent. When a team is arguing for a low salary, they have to point to a player's weaknesses (e.g. not a strong arm, not a great hitter, not great speed, etc., etc.). There are cases where players without agents react negatively because they think the team is badmouthing/dissing them/putting them down.....why then would you want to play for that team when another team isn't putting you down. The agent thereby acts as that buffer/insulator against the player having to hear the team's negative comments.

As for the question of love/hate, I just view them as part of the game that's emerged over time. You hate them when a player on your favorite team is holding out & asking for 'outrageous' love them when one of their clients joins your favorite team, fills a need, and does great.

As with all middlemen, there are good ones and bad ones. You don't have to Google search far to find many stories of athletes who have gone bankrupt shortly after they left the game - all sorts of reasons of course, but in some cases there are shady financial dealings. But there are good ones who do seem to care about the players' long term. I don't remember his name, but I remember he represented Larry Bird back in the early 1980s, and he wouldn't represent a player unless he took a chunk of his initial money to buy a house & set some money aside for life after sports. Why? Because if that player got injured/got cut/otherwise left the game, he had something to fall back on for the long run.

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