Wednesday, October 5, 2016

Yesterday’s antitrust laws can’t solve today’s problems

From Tyler Cowen.
"I view antitrust law as a body of doctrine that is largely obsolete.  Here is one part of my broader argument, from today’s Bloomberg column:
Or consider the body of law assessing resale-price maintenance in the book trade. Today you can buy used books online. That constrains the prices of both used and new books, no matter how judges might rule. In 1998, the U.S. Justice Department initiated an antitrust suit against Microsoft, partly on the grounds that the company sought to extend its market power to browsers. Few people today think the company’s Internet Explorer browser failed because the government restored competitiveness; Firefox and Google built better software. Yet prosecutors spent years distracting the talent of one of America’s most successful companies, as they had with IBM earlier in a 13-year case dropped in 1982.
Policy should instead focus on the real problems that depress living standards for the middle class and the poor. Rates of inflation have been high for housing, medical care and higher education, major budget items for many people. As for housing, there are harmful restrictions on cheaper building, but in the expensive areas there is no monopolistic landlord who owns all the housing stock. So that is not an antitrust issue, nor is university tuition for the most part.
On the other hand, there is a strong case that growing concentration in the hospital market has raised health-care costs. Some major metropolitan areas have only a small number of hospital chains. Part of the problem is that highly regulated environments encourage consolidation and larger firms to deal with compliance costs, so antitrust law won’t provide an easy fix. Nonetheless, hospitals probably should be the biggest area of concern for antitrust enforcers, as competition does not now operate freely.
And this:
The major internet companies are a new target of antitrust attention, yet most of them give their main product away for free. Contrary to charges that they were going to stifle innovation, Google and its parent company, Alphabet, have led or subsidized innovation in driverless vehicles, artificial intelligence and wearable devices. Most major tech companies also are seeking to expand their innovative presence outside their main businesses, with artificial intelligence being a major new field of competition. Complainers about Amazon are more likely to be suppliers than consumers, the presumed beneficiaries of antitrust enforcement.
The best we can hope for is benign neglect, as I cannot imagine today’s politics producing an improved version of antitrust laws.  Do read the whole thing, I consider IP law, cable regulation, and a number of other issues too."

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