Automation, markets, and scale: can flexible niching modernize US manufacturing

The nimble use of programmable automation to permit small- and medium-sized manufacturing firms, individually and in concert, to create and respond to growing ‘niche’ markets has been held up as a key to the revitaization of mature industrial regions and, by extension, developed national market economies. Are formerly mass markets indeed becoming more fragmented, more ‘nichified’? If so, is the trend a structural, fundamental one, reflecting changing consumer tastes and/or the eclipse of scale economies as determinants of industrial structure? Or is the apparent success of niche-focused producers a corollary of growing income inequality and its impact on the structure of consumption? As for the supply side of the phenomenon, are small- and medium-sized firms closing their productivity gap with large, mass producers? Or is ‘nimble niching’ instead part of a US productivity problem rooted in excessive industrial dualism? Can one imagine a progressive type of dualism, in which specialization rather than wage differentials drives the division of tasks among different kinds of firms? If so, can and should public policy help such a regime to emerge?