Just in case you've missed it—and you probably have—the current kerfuffle on progressive Twitter is about whether you can fight inflation by breaking up monopolies. I guess Joe Biden started it, by suggesting that he would do just that. Then Larry Summers, bête noire of the progressive econo-Twittersphere, chimed in to say this was stupid. Not only that, he said, but literally no serious economist holds this view. Then the PET fought back because they hate Larry Summers, blah blah, blah.
This is kind of dumb on two levels. First, even the PET would agree that this has nothing to do with fighting inflation over the next six months. So who cares? Biden was just engaged in political puffery.
Second, the whole problem that progressives have with modern, Borkian antitrust law is that it's based almost entirely on "consumer welfare." That is, if you can show that consumers benefit from a merger—for example, by offering them lower prices—then the merger should be approved. This narrow interpretation makes it almost impossible to fight a merger since corporations can almost always demonstrate this. If you could demonstrate that the merger results in higher prices then it would be easy to fight them. But that's vanishingly unlikely, as progressives know all too well.
Meh.
It's amazing what a trail of feces Robert Bork has smeared over modern jurisprudence and economic thought. Whenever I feel negative about the Senate I think: "At least they got it right with Bork!"
+1
I don't really think it's worth taking the Larry Summers bait. He is a man who has proven him incapable of acting in good faith. Time and time again, he has demonstrated that his opinions are based on nothing more than he immediate need to advance himself or to advance the interests of his patrons. He is utterly without integrity and should henceforth be ignored by the political and economic communities—and also by the media who should either drop him like a dead rat or else question him about his lack of integrity.
Five months ago, he was saying exactly the opposite. The thing that changed was Larry Summers hurt feelings about not being offered a big job in a new Democratic administration. Larry Summers is the very definition of a hack and a bad-faith actor.
https://twitter.com/sarahmillerdc/status/1475280616706957324/photo/1
"Five months ago, he was saying exactly the opposite. .."
He was not saying the exact opposite. The earlier tweet appears to say there is already sufficient competition in the US to keep prices in check. In which case allowing monopolies to form might be bad but breaking up existing monopolies won't do anything because there aren't any (or at least not enough to matter) existing monopolies.
*****slightly off topic********
Spoke to my daughter in MA earlier today. Asked about COVID and such. Its bad and getting worse
But then we talked business for awhile.
All Subway stores are franchised. They operate under guidance from the CORP but each of them can offer different things in different areas.
But they are independently owned.
Get this. They all are closing at 5pm. They cannot find help. They are losing MILLIONS of dollars. Some Dunkin' franchises doing the same. Here in NC we're not that bad but bad enough. Subway is raising wages here (they are historically one of the lowest paying fast food jobs in this area).
Even Hobby Lobby has raised the starting wages for FULL TIME staff to $18.50/hr. Part timers get paid less.
Between raising wages, offering health dental and vision to part timers many companies are beginning to realize that the lack of help is really hurting their businesses and they have to do something to attract and even more to retain workers.
Talk about a supply chain issue !!!!!
And with Omicron rearing it's ugly head? This will only get worse over the coming months and years
I have to admit that I don’t know any fast food workers. I do know people in relatively fine dining restaurants and their situation is mixed. Mostly, because the money in fine dining tends to be pretty good. Even line cooks and runners typically make quite good wages.
So it’s possible that some of the problems fast food places have is that their basically the job of last resort. People with restaurant skills want to move up and everyone else hears about a labor shortage and that all kinds of places are hiring at good wages and they jump ship.
Also, vaccinations are a mixed bag. Of the two places I eat these days, nearly everyone has all three shots and are very concerned to avoid Covid-19. Out of all three places there’s basically 3-4 people who are antivaxers—for a lot of them, the signal to return was that the restaurant was reopening using vaccine passports and with virtually every worker being vaccinated. Los Angeles County has really pushed food service workers to get vaccinated and even set up a special mega-vaccine center just for them.
Ultimately, if the people at the bottom (like fast food) want workers, they must compete in the market. More money, less crappy working conditions, more regular and predictable shifts is what’s going to be required as the labor market re-sorts itself.
It's getting worse, but hospitalization is decreasing. Give it up bub.
...but hospitalization is decreasing
Well, not for the unvaccinated part of the population.
Most of us are getting past the pandemic thanks to being deliberately sensible about our lives.
For the rest, it's going to be a very hard winter.
But heck, live free or die as they like to chant...
Hospitalization is not decreasing...do you just say things? It is up 6% over the last 14 days in the US, but it is up a LOT more than that where Omicron is established...60% to 100%.
Divided on this as I did study antitrust law in depth. Borkian/U-Chicago economic theory held that mergers with the potential to increase consumer welfare should be allowed because the potential would always be actualized. This view is wrong in both practice and current behavioral theory. What often results is short-term lower prices, followed by shrinkflation through decreased competition (no point of comparison) and the corporate retention of the most of the economies of scale. The reason that this approach worked for so long is that "potential consumer welfare" is easy to prove; shrinkflation is lagging and counterfactual, making it almost impossible prove.
The Borkian belief is that businesses will pass the savings resulting in efficiencies of scale on to customers. Why would any business do that? The businesses that I worked for had increasing profit as a goal, not making customers happier than necessary. (Note that finagling things to get management bigger bonuses was always the main objective...not profits per se.)
Anyway, the fewer competitors, the bigger the profits. Customers are not better off. Two examples: 1) major household appliances used to have a dozen or so manufacturers in the US. Now there are only 2 or 3 making all those trade names. Appliances cost much more and the quality is shit.
2) In 1960, 3 shipyards built large aircraft carriers for the Navy. One, the Brooklyn Navy Yard, was owned by the government. (That ass McNamara closed it) and the other two were commercial. The USS Enterprise was built back them for a bit over $4 Billion adjusted for inflation. After getting down to a single commercial yard the Nimitz class clocked in at about $10 Billion each adjusted for inflation. Now we are buying the Ford class at about $13 Billion each plus $5 billion in R&D and they don't even work.
One more note on the carriers: it is normal that the lead ship of a class costs about 20% more than the follow-on ships due to one time engineering costs and the yard having to figure out the best way to do things. Follow-on ships should be 20% or more cheaper. The ten Nimitz class carriers should have cost less than $3.5 billion each based on the cost of the Enterprise. A $65 billion dollar bonus for monopoly.
I feel pretty confident that when most people talk about monopolies, they're actually talking about oligopolies. We really don't have many monopolies in this country.
In terms of anticompetition, the opposite end of Bork is undoubtedly Ordoliberalism. Give me an explanation as to where optimal policy should be.
Keep in mind that we do have tons of monopolies in the United States, we just normally do not think of them that way. To wit: electric and gas utilities.
They fall into the classic definition of a monopoly as being the sole provider of a good or service, privately owned. The crucial factor is that they are both legally recognized and formally regulated.
Monopolies raise prices.
WHY? Because they CAN.
Does that cause inflation?
If we have more monopolies this year than we had last year then they cause inflation.
If we have fewer monopolies then it will reduce inflation.
The more pricing power I have, the more I can raise prices above the market rate.
Cable companies used to be a textbook example of monopoly pricing. In the few cities that had competition, they had a far better product for lower prices than in cities where you just had one provider.
I am not sure where we have monopolies now. Facebook is close to one. Windows was close to one. Iphones kind of are. Some drugs have monopoly pricing.
I am sure I am missing obvious ones.
But do these cause inflation? Not really.
As you say, meh. There is a rising consensus that too many industries are controlled by too few large players. Where did this consensus come from? How about rising prices and lousy to mediocre products? Even before COVID, these were a problem in a lot of industries, from internet ISPs to cheerleader competitions. There's a reason supermarkets stopped selling five pound bags of sugar and now only sell four pound bags, and it had nothing to do with COVID, but everything to do with the handful of sugar companies that own the business and chunks of Congress.
COVID has just intensified inflation and, by pushing people out of the workforce and giving them time to reassess their lousy employment situation, added wage pressure inflation to our long standing price pressure inflation. We're seeing two solutions being pushed. Now that wages are rising, we're seeing push back. There's the old Stalinist work or starve approach favored by capitalists, and there's the attack corporate power and profits approach favored by people who work for a living.
Expect the reds to double down on the work or starve approach. They're probably putting out contracts for new gulags even now. Expect the blues to use any weapon they can get to weaken corporations by making them compete and limiting their profits. This is how politics works.