This has been a thread in the economics profession for a long time. Just now getting renewed policy attention. For a perspective, take a look at Adams, Walter, and James W. Brock. Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire. Princeton University Press, 1991. JSTOR, www.jstor.org/stable/j.ctt7zvv8c. Accessed 22 July 2021.
Nice writing on an important topic. It seems likely though that the antitrust machinery would be taking on our mega tech firms anyway, regardless of intellectual support from economists. The tech excesses have become large enough that one doesn’t need a research paper to know that it’s time for pushback. But intellectual support does help in making the case. Ultimately what happens will be less to do with economic research and more with politics. Congress will reduce the power of the tech giants but also tread lighter than their rhetoric may imply. These are the remaining crown jewels of the US economy and no one wants to kill the golden goose.
This article is fantastic. It’s also kind of cool because I’m currently finishing up Dietrich Vollrath’s book “Fully Grown”. Towards the end the book there are a few chapters on market concentration where he cites most of these same papers and does a deep dive into the effects of market concentration and whether it impacts growth. The book led me scan some of these papers as well as buy Philippon’s book.
The original economists were progressives who sought to understand economics in order to identify areas through which societal good could be improved. John Stuart Mill, David Ricardo, Adam Smith etc are all examples of this. In particular, they created the concept of unearned rent (rentier income).
However, it is a mistake to think that the "economists" crusading against anti-trust today are in the same category as these giants.
Among the biggest inconsistencies: Lina Khan and what-not are crusading against Big Tech, but they do nothing against the health care oligopolies. Health Care in the United States is the biggest scandal of all - the US spend nearly twice as much per capita, yet has enjoyed a falling life expectancy long before COVID. This overspend is in the $1T to $2T per year - more than the official Defense Department budget. The overall FIRE (finance, insurance and real estate) sector is another example.
Thus what is happening is primarily political: both parties are afraid that they will lose their monopoly on political power to Tech, rather than these efforts representing any real desire to improve American's lives by reducing unearned rent.
To put it very frankly (and hopefully not to crassly) this late push by the Biden administration ain’t got nothing to do with improving outcomes for consumers. It has everything to with wanting to fuck up the companies that haven’t done what they wanted em to. Anti trust is simply the particular club which democrats want to bash facebook in for not moderating their enemies out of existence.
Perhaps some some government that does not seek power, that does not reward cronies, and which can’t be bought out can apply anti-trust law in a useful manner. Until such a government is found, I must regard anti-trust law as being a racket, by which the consumer is fleeced in favor of inefficient small businessmen.
( And a further aside, while I regard the author nowadays to be a noxious jackass, and extraordinarily petty jackass at that (just a year I stumbled on one of his articles on that lew rockwell site, and was so appalled by the sexism I sent him a polite, but bristling, email (it was about Sarah Fuller - he had no idea what he talking about) and got a sneering reply back, about me wanting *girls*, to play *mens’*, football. Truly charming)) this paper is still excellent, and from before he lost his mind. (I know this is hardly the way to introduce a paper, by steadily undermining the author via digression. I’ll do better in the future))
It makes some degree of sense that some socialists disdain anti-trust law. Large firms are easier to nationalize and competition is anathema to central planning. Of course, these socialists are ones who forgot their New Left counterparts who abhorred corporatism and centralized bureaucracies, who also wanted to turn British SOEs into co-ops.
There's maybe no more hilarious, bizarre alliance in all of politics than socialists who are pro corporate monopoly power because "we'll nationalize it during the revolution". It's a notable change in leftist philosophy, which spawned organizations like the Institute for Local Self Reliance in the 70s, which advocates for anti-trust efforts to this day.
In any case, it seems a lot of economists have gone the opposite route - if you are sufficiently globalist, you want our corporations to be big to compete on the global scale. I've heard seriously that Google isn't a monopoly, because someday, someone might edge them out. Someday.
I suspect a lot of this comes down to a bias for what's pleasing us now (Amazon - so convenient!), or a misunderstanding of how big got big (Walmart, an expression of nothing more than the free market)!
Needless to say, I'm cheering on the anti trust effort.
Big vs. small, centralized vs. decentralized is clearly a matter of context. If something is good, we want it everywhere, so it should be big. If we don't know how to do something well, we should have lots of experiments, so it should be decentralized. Neither is really an endpoint in itself, just a means to an end, and yet philosophies of government like Federalism ossify them into fossilized positions like "big government bad" or socialism's "big government good."
For most things in life, we either don't actually know how to do them well, or we don't know how to maintain a culture of doing them well, so decentralization and competition are good. But some things can't be decentralized, so the alternative is to closely guard a culture of virtue that insists that things are done well. For example, we can't have two US Armies, so instead it has a very elaborate culture about being "warriors" but also following civilian leadership.
I'm not a fan of big=bad. However big means we should be watchful. Getting big by organic growth seems like less of a problem then getting big then M&Aing your way to concentration. Traditional anti-trust law is fairly narrow in its application and is something that should be updated.
I do wonder what preventing more M&A activity from large companies would due to the VC funded companies who's entire model seems to be "get bought out"
Usually the economists revolt but today is the economists' revolt.
I feel us health economists could revolt more (not like that!). Massive consolidation in healthcare and pharma in recent decades. I don't get the impression that the implications of have been investigated enough.
Noah’s premise for this article is just plain mistaken. I am in a profession which causes me to meet lots of people, from exceedingly wealthy to homeless, and I can tell you I hear people from all walks of life complaining about monopoly, and a rigged economy. If anything, the complaints are louder and more common at the lower end. The idea that the anti-monopoly movement is arising because of economists simply isn’t true.
I think it’s likely they can win, because anti-monopoly or anti-concentration is something that is almost cross partisan. I know I support it.
But wow, those socialists come across as sort of idiots. Then again, they just want the government to have a monopoly on everything.
This has been a thread in the economics profession for a long time. Just now getting renewed policy attention. For a perspective, take a look at Adams, Walter, and James W. Brock. Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire. Princeton University Press, 1991. JSTOR, www.jstor.org/stable/j.ctt7zvv8c. Accessed 22 July 2021.
Nice writing on an important topic. It seems likely though that the antitrust machinery would be taking on our mega tech firms anyway, regardless of intellectual support from economists. The tech excesses have become large enough that one doesn’t need a research paper to know that it’s time for pushback. But intellectual support does help in making the case. Ultimately what happens will be less to do with economic research and more with politics. Congress will reduce the power of the tech giants but also tread lighter than their rhetoric may imply. These are the remaining crown jewels of the US economy and no one wants to kill the golden goose.
This article is fantastic. It’s also kind of cool because I’m currently finishing up Dietrich Vollrath’s book “Fully Grown”. Towards the end the book there are a few chapters on market concentration where he cites most of these same papers and does a deep dive into the effects of market concentration and whether it impacts growth. The book led me scan some of these papers as well as buy Philippon’s book.
The original economists were progressives who sought to understand economics in order to identify areas through which societal good could be improved. John Stuart Mill, David Ricardo, Adam Smith etc are all examples of this. In particular, they created the concept of unearned rent (rentier income).
However, it is a mistake to think that the "economists" crusading against anti-trust today are in the same category as these giants.
Among the biggest inconsistencies: Lina Khan and what-not are crusading against Big Tech, but they do nothing against the health care oligopolies. Health Care in the United States is the biggest scandal of all - the US spend nearly twice as much per capita, yet has enjoyed a falling life expectancy long before COVID. This overspend is in the $1T to $2T per year - more than the official Defense Department budget. The overall FIRE (finance, insurance and real estate) sector is another example.
Thus what is happening is primarily political: both parties are afraid that they will lose their monopoly on political power to Tech, rather than these efforts representing any real desire to improve American's lives by reducing unearned rent.
To put it very frankly (and hopefully not to crassly) this late push by the Biden administration ain’t got nothing to do with improving outcomes for consumers. It has everything to with wanting to fuck up the companies that haven’t done what they wanted em to. Anti trust is simply the particular club which democrats want to bash facebook in for not moderating their enemies out of existence.
Perhaps some some government that does not seek power, that does not reward cronies, and which can’t be bought out can apply anti-trust law in a useful manner. Until such a government is found, I must regard anti-trust law as being a racket, by which the consumer is fleeced in favor of inefficient small businessmen.
(An aside - that’s always how it was. http://mason.gmu.edu/~trustici/LAW108/The%20Origins%20of%20Antitrust-%20An%20Interest%20Group%20Perspective.pdf Anti-trust law was explicitly passed to increase inefficiency and prices)
( And a further aside, while I regard the author nowadays to be a noxious jackass, and extraordinarily petty jackass at that (just a year I stumbled on one of his articles on that lew rockwell site, and was so appalled by the sexism I sent him a polite, but bristling, email (it was about Sarah Fuller - he had no idea what he talking about) and got a sneering reply back, about me wanting *girls*, to play *mens’*, football. Truly charming)) this paper is still excellent, and from before he lost his mind. (I know this is hardly the way to introduce a paper, by steadily undermining the author via digression. I’ll do better in the future))
It makes some degree of sense that some socialists disdain anti-trust law. Large firms are easier to nationalize and competition is anathema to central planning. Of course, these socialists are ones who forgot their New Left counterparts who abhorred corporatism and centralized bureaucracies, who also wanted to turn British SOEs into co-ops.
There's maybe no more hilarious, bizarre alliance in all of politics than socialists who are pro corporate monopoly power because "we'll nationalize it during the revolution". It's a notable change in leftist philosophy, which spawned organizations like the Institute for Local Self Reliance in the 70s, which advocates for anti-trust efforts to this day.
In any case, it seems a lot of economists have gone the opposite route - if you are sufficiently globalist, you want our corporations to be big to compete on the global scale. I've heard seriously that Google isn't a monopoly, because someday, someone might edge them out. Someday.
I suspect a lot of this comes down to a bias for what's pleasing us now (Amazon - so convenient!), or a misunderstanding of how big got big (Walmart, an expression of nothing more than the free market)!
Needless to say, I'm cheering on the anti trust effort.
Big vs. small, centralized vs. decentralized is clearly a matter of context. If something is good, we want it everywhere, so it should be big. If we don't know how to do something well, we should have lots of experiments, so it should be decentralized. Neither is really an endpoint in itself, just a means to an end, and yet philosophies of government like Federalism ossify them into fossilized positions like "big government bad" or socialism's "big government good."
For most things in life, we either don't actually know how to do them well, or we don't know how to maintain a culture of doing them well, so decentralization and competition are good. But some things can't be decentralized, so the alternative is to closely guard a culture of virtue that insists that things are done well. For example, we can't have two US Armies, so instead it has a very elaborate culture about being "warriors" but also following civilian leadership.
I'm not a fan of big=bad. However big means we should be watchful. Getting big by organic growth seems like less of a problem then getting big then M&Aing your way to concentration. Traditional anti-trust law is fairly narrow in its application and is something that should be updated.
I do wonder what preventing more M&A activity from large companies would due to the VC funded companies who's entire model seems to be "get bought out"
Usually the economists revolt but today is the economists' revolt.
I feel us health economists could revolt more (not like that!). Massive consolidation in healthcare and pharma in recent decades. I don't get the impression that the implications of have been investigated enough.
Noah’s premise for this article is just plain mistaken. I am in a profession which causes me to meet lots of people, from exceedingly wealthy to homeless, and I can tell you I hear people from all walks of life complaining about monopoly, and a rigged economy. If anything, the complaints are louder and more common at the lower end. The idea that the anti-monopoly movement is arising because of economists simply isn’t true.
Fewer words: The consequence of technology and the economics of scale.
Let's see, empirical evidence that Monopoly capitalism reduces wages and increases profit margins. Sounds vaguely like Marxism to me.