“You Can Put the Monopoly Tiger in a Cage but You Cannot Transform a Tiger Into a Vegan” — TheMarket interviews Luigi G. Zingales

Even from a conservative point of view, the concentration of power at large tech companies is scary. As a true conservative, you’re afraid of the constitutional power in the government. Not because the government is evil per se, but because you don’t trust human nature and concentration of power. So if you have the same concentration of power in the private sector it doesn’t become fine all of a sudden. If anything, it becomes more dangerous. At least, we have ways to address the concentration of power in the public sector. In contrast, we have none in the private sector, especially with regard to such large companies like Google and Facebook where the control is in the hands of only three people because of the dual stock class structure. In the case of Google, they are Larry Page and Sergey Brin, at Facebook it’s Mark Zuckerberg....

How to deal with natural monopolies.

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
“You Can Put the Monopoly Tiger in a Cage but You Cannot Transform a Tiger Into a Vegan”

TheMarket interviews Luigi G. Zingales, professor of finance at the University of Chicago Booth School of Business

ProMarket — “The World Has Changed”: the New York Times on Luigi Zingales, the “Chicago School,” and the Threat of Tech Monopolies

A New York Times profile summarizes the work done by Luigi Zingales and the Stigler Center on regulating digital platforms and describes it as a necessary evolution in the traditional Chicago approach....

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
“The World Has Changed”: the New York Times on Luigi Zingales, the “Chicago School,” and the Threat of Tech Monopolies

See also at ProMarket
Presenting: The Stigler Center’s Report on How to Rein in Big Tech

How Robert Bork Fathered the New Gilded Age — Sandeep Vaheesan

Much like in the first Gilded Age, antitrust enforcers today are hitting labor, not capital. This is thanks to Robert Bork’s radical and influential reinterpretation of antitrust law. In helping successfully rewrite antitrust, Bork left a legacy of corporate supremacy and individual powerlessness.

Yeah, that Robert Bork as it "getting borked."

Promarket
How Robert Bork Fathered the New Gilded Age
Sandeep Vaheesan

Zero Hedge — Barr And State AGs Discuss Big Tech Monopolies As 'Flipped' Facebook Co-Founder Helps Devise Antitrust Action

More anti-trust talk.

Zero Hedge
Barr And State AGs Discuss Big Tech Monopolies As 'Flipped' Facebook Co-Founder Helps Devise Antitrust Action
Tyler Durden

Reuters — Treasury's Mnuchin says Amazon 'destroyed' U.S. retail sector

“If you look at Amazon, although they’re certain benefits to it, they’ve destroyed the retail industry across the United States,” Mnuchin told CNBC. “I don’t have an opinion other than I think it’s absolutely right the attorney general is looking into these issues and I look forward to listening to his recommendations to the president.”

Are we finally going to start talking about anti-trust, which. incidentally, was at the heart of US progressivism historically.

Reuters
Treasury's Mnuchin says Amazon 'destroyed' U.S. retail sector

Fiona Scott Morton — Modern U.S. antitrust theory and evidence amid rising concerns of market power and its effects

Overview

The experiment of enforcing the antitrust laws a little bit less each year has run for 40 years, and scholars are now in a position to assess the evidence. The accompanying interactive database of research papers for the first time assembles in one place the most recent economic literature bearing on antitrust enforcement in the United States. The review is restricted to work published since the year 2000 in order to limit its size and emphasize work using the most recent data-driven empirical techniques. The papers in the interactive database are organized by enforcement topic, with each of these topics addressed in a short overview of what the literature demonstrates over the past 19 years....

Literature review.

WCEG — The Equitablog
Modern U.S. antitrust theory and evidence amid rising concerns of market power and its effects

Fiona Scott Morton

See also at WCEG

Modern U.S. antitrust research supports strict enforcement of the law
Raksha Kopparam

John O'Day — When India Tries to Regulate Amazon, US Media Qualms About Monopoly Disappear

Double standard.

FAIR
When India Tries to Regulate Amazon, US Media Qualms About Monopoly Disappear

John O'Day

Jerri-Lynn Scofield — India Forces Amazon to Choose Between Operating e-Commerce Platform and Selling Goods on that Platform

This is equivalent to anti-trust in a platform economy. On the other hand, economic liberals will charge that it is government interference in free markets and free trade.
India’s not exactly breaking new ground here with it restriction. As antitrust expert Lina Khan noted in a February tweet: “[T]his sort of structural separation has been a key principle in US competition policy. For example, Congress in 1906 passed a law prohibiting railroads from transporting goods they owned.”
Khan continued:

We applied a similar rule to TV networks, telecom carriers, banks. There’s good reason to debate whether structural separations should apply to digital monopolies. But framing the rule as highly invasive or exotic misunderstands our own history (& success) applying it.

Khan’s the author of an influential paper in the Yale Law Journal on Amazon, Amazon’s Antitrust Paradox, and has a paper forthcoming in the Columbia Law Review on structural separations, The Separation of Platforms and Commerce.…

This is key in a platform economy, which is now one of the key factors in building out the Digital Age. The obvious danger is increase of market concentration and therefore of monopoly and monopsony power as owners of digital platforms control their markets and supply chains.

Great wealth in the digital age has come not from ownership of land, factories, chains, or financial institutions but rather digital platforms, first hardware and software systems and service provision, and now distribution platforms.

Of course, this is not new. Firms have always attempted to gain market power through horizontal and vertical integration "for efficiency," but this amplifies economies of scale and creates the potential for erecting gateways. Previous anti-trust legislation has eventually been brought forward to address this.

Hopefully, India will set a precedent, but the neoliberal US will oppose it vigorously as a form of protectionism that contradicts the spirit of free markets and free trade.

The US experience is troubling, however. First, retail giants like Walmart devastated small retailers and "mom & pop stores" across the country and then ecommerce, with the proliferation of platforms it brought, made it difficult for smaller sellers to compete with the giants on the Internet.

Secondly, owing to capital intensity, concentration and dominance of a few platforms increased their market power and enabled rent extraction as competition dwindled.

There's a name for this, monopoly capital. And the antidote is anti-trust as a means for decreasing concentration and increasing competition.

Naked Capitalism

India Forces Amazon to Choose Between Operating e-Commerce Platform and Selling Goods on that Platform
Jerri-Lynn Scofield, attorney

Mark Paul and Mark Stelzner — Rethinking collective action and U.S. labor laws in a monopsonist economy

Discussions today are pervasive among economists and policymakers about the increasing rise of firms’ market power and the potential negative effects of that power on the U.S. economy. Of particular concern is the rise of new technologies and the dominance of platform giants—such as Amazon.com Inc., Alphabet Inc.’s Google unit, Apple Inc., and Uber Technologies Inc., among others—which are not improving the U.S. socioeconomic landscape by reaping gains from potential economies of scale, but rather are throwing around their weight to suppress wages, raise prices on consumers, and enter the political arena to ensure the federal government allows the U.S. economy to continue on the path of market consolidation.

Many economists point to this disconcerting rise in market power as leading to a simultaneous rise in monopsony power—the ability of the firm to have an influence over the determination of workers’ wages—which may contribute to the persistence of stagnant wages despite relatively low headline unemployment numbers in recent times.

This is in stark contrast to decades of research and modeling in economics following the so-called marginalist revolution in the discipline, which resulted in most economists simply treating monopsony power as a special case only existing in the now long-gone company towns of Homestead, Pennsylvania, and Pullman, Illinois, of the 19th century or in highly concentrated island economies of introductory economics textbooks.4

Recent empirical investigations into U.S. labor markets no longer allow reasonable economists to bury their heads in the sand about market power and assume that workers’ wages are simply equal to the value of their marginal product or service. There’s now insurmountable evidence that monopsony power is prevalent throughout the U.S. economy, though the degree to which it may contribute to widening income inequality and underemployment remains an open question. These findings imply that employers can siphon off “rents”—economic parlance for excessive profits beyond the cost of production—from workers through the exercise of monopsony power. These findings are the complete opposite of the dynamic formulated in most current labor market models.

In our new Washington Center for Equitable Growth working paper, “Monopsony and Collective Action in an Institutional Context,” we seek to better understand the theoretical implications of this new and growing empirical literature on monopsony power and the resulting lower wages for workers

WCEG — The Equitablog
Rethinking collective action and U.S. labor laws in a monopsonist economy

Mark Paul, assistant professor of economics at New College of Florida and a fellow at the Roosevelt Institute, and Mark Stelzner, assistant professor of economics at Connecticut College

See also

Oxfam Blogs — From Poverty to Power
Book Review: New Power: How it’s Changing the 21st Century and Why you need to KnowDuncan Green, strategic adviser for Oxfam GB

Jonathan B. Baker — Market Power or Just Scale Economies?

In this post, which is based on my FTC testimony, I explain why growing market power provides a better explanation for higher price-cost margins and rising concentration in many industries, declining economic dynamism, and other contemporary US trends, than the most plausible benign alternative: increased scale economies and temporary returns to the first firms to adopt new information technologies (IT) in competitive markets.

The benign alternative has an initial plausibility because the efficient size of firms has likely grown over time in many industries. That is the natural consequence of the high fixed costs of investments in information technology, the growing importance of network effects, and an increased scope of geographic markets. Under such circumstances, firms could grow larger, concentration could rise, and price-cost margins could increase even if markets are competitive. In addition, the first firms to invest in new information technologies may earn substantial rents. The rents should be temporary if those investments don’t confer market power and rivals follow suit with investments of their own.

Yet six of the nine reasons I gave for thinking market power is substantial and widening in the US in my testimony cannot be reconciled with the benign alternative. I set forth evidence showing that anticompetitive coordination, mergers, and exclusion are underdeterred, that market power is durable, that increased equity ownership of rivals by financial investors softens competition, and that governmental restraints on competition have grown. As I explained in my testimony, none of the reasons is individually decisive: there are ways to question or push back against each. But their weaknesses are different, so, taken collectively, they paint a compelling picture of substantial and widening market power over the late 20th century and early 21st century....

The bottom line is that growing market power is a better explanation for declining dynamism, rising concentration and markups in many industries, and the other reasons for concern, taken as a whole, than the alternative of increasing scale economies and early-adopter rents in competitive markets. The benign alternative may be a partial explanation for some trends, but increasing market power is a key part of the story.

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
Market Power or Just Scale Economies?

Jonathan B. Baker | Research Professor of Law, American University Washington College of Law,  former chief economist at the FTC and the FCC,  and author of The Antitrust Paradigm: Restoring a Competitive Economy, forthcoming from Harvard University Press.

See also

WCEG — The Equitablog
Understanding the importance of monopsony power in the U.S. labor market
Kate Bahn

Douglas A. Irwin — Stigler on Monopolies: “Competition is a Tough Weed, Not a Delicate Flower”

Many of Stigler’s views on monopoly and antitrust were consistent through the decades. Even after his concerns of monopoly began to recede, he continued to believe that monopolies and oligopolies were still prevalent in the American economy and that they “should be a source of serious concern for public policy.”...

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
Stigler on Monopolies: “Competition is a Tough Weed, Not a Delicate Flower”
Douglas A. Irwin | John French Professor of Economics in the Social Sciences in the Department of Economics at Dartmouth College and Visiting Professor at The University of Chicago Booth School of Business

Noah Smith — Bust Up America's Monopolies Before They Do More Harm

Economists have been sounding the alarm about this trend for a while now. John Kwoka, an economist at Northeastern University, has literally written the book on the follies of the modern age of antitrust. In a new report, he shows how much more complacent the government has gotten toward oligopolies. The government still doesn’t tend to let a single company dominate any industry, but it’s usually fine with just five or six. Kwoka traces the change in attitudes to the rise of the so-called Chicago school approach to antitrust policy:

Bloomberg View
Bust Up America's Monopolies Before They Do More Harm
Noah Smith, contributor

Matt Stoller — America’s Amazon Problem

The objective of the tech industry is monopolization. The answer to it is anti-trust legislation and strict enforcement.

There is only one force that can stop Amazon from organizing and regulating basically all American retail commerce — our democratic institutions and our political system. We the people.

Bezos knows Amazon is a political enterprise at this point. The day before he announced his company’s attempt to buy this supermarket chain, he released a request on Twitter to have people offer ideas for where he can direct charity money. That is the kind of public relations undertaken by political leaders. And Amazon put out an ad for a Ph.D. economist-cum-lobbyist “to educate regulators and policy makers about the fundamentally procompetitive focus of Amazon’s businesses.” And he has put political fixers, like Ivanka Trump’s lawyer and ex-Clinton administration officer Jamie Gorelick, on his board of directors. He also bought The Washington Post.

However, Amazon is not the only offender.

The tech industry is not only disruptive technology but it is presenting fresh challenges to regulation in the public interest.

On the other hand, other companies are not going to rollover. Walmart is already awakening to the threat that Amazon poses for their business model. But thus far, Walmart has not developed a competitive tech game to challenge or even hold off Amazon.

Meanwhile, Sears is reeling on the ropes.

But Montgomery Ward (Wards.com) is trying to make a comeback.

Huffington Post
America’s Amazon Problem

Matt Stoller | Fellow at the Open Markets program, New America Foundation

Ariel Ezrachi and Maurice Stucke —

In a series of papers published in the last two years, Ezrachi and Stucke explored the world of big data and artificial intelligence and argued that network effects can raise barriers to entry, enabling big platforms to engage in behaviors such as collusion, tacit collusion, and price discrimination, to the detriment of consumers. Their recent book Virtual Competition (Harvard University Press, 2016) explores the changing nature of competition in the age of big data and algorithms.

In a brief interview with ProMarket, Ezrachi and Stucke shared some thoughts on market power and the digital economy.... 

ProMarket
“Our New Economy Enables the Winners to Capture Much More of the Welfare”

Ariel Ezrachi, Slaughter and May Professor of Competition Law, a Fellow of Pembroke College, Oxford, and Director of the University of Oxford Centre for Competition Law and Policy; and Maurice Stucke, a co-founder of the law firm the Konkurrenz Group and law professor at the University of Tennessee

Mark Thoma — Paul Krugman: Robber Baron Recessions

Krugman on monopoly power.

Finally, some economists are waking up to the fact that it's the rent, stupid, and that economic rent flows from economic power that is based on political power.

Economist’s View
Paul Krugman: Robber Baron Recessions
Mark Thoma | Professor of Economics, University of Oregon

Diane Coyle — Capitalism and the law

Short review of The Great Leveler: Capitalism and Competition in the Court of Law by Brett Christophers. 

I greatly admired his previous book, Banking Across Boundaries, and this new one has the same compelling combination of analysis and historical detail. The theme this time is capitalism as a constant balance between competitive markets and market power, these two forces applied by laws and their enforcement. Anti-trust laws are enacted or enforced with greater rigour when monopoly power gets out of hand. Intellectual property laws are strengthened after periods of cut-throat competition. In contrast to those – often Marxist – writers who have seen a single direction of travel toward ever-greater monopoly power, Christophers argues here that there is a cycle. He cites Kalecki, but also Marx’s dialectics: “Monopoly produces competition, competition produces monopoly,” Christophers quotes Marx as writing in a letter of 1846.…

Christophers ends with Lenin’s prediction that the future is capitalist monopoly on the international stage, monopoly imperialism. I have more confidence in self-correcting mechanisms. We will see.

The Enlightened Economist
Capitalism and the law
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Robert Reich — Whatever Happened to Antitrust?

Last week’s settlement between the Justice Department and five giant banks reveals the appalling weakness of modern antitrust.

The banks had engaged in the biggest price-fixing conspiracy in modern history. Their self-described “cartel” used an exclusive electronic chat room and coded language to manipulate the $5.3 trillion-a-day currency exchange market. It was a “brazen display of collusion” that went on for years, said Attorney General Loretta Lynch.

But there will be no trial, no executive will go to jail, the banks can continue to gamble in the same currency markets, and the fines – although large – are a fraction of the banks’ potential gains and will be treated by the banks as costs of doing business.

America used to have antitrust laws that permanently stopped corporations from monopolizing markets, and often broke up the biggest culprits.

No longer. Now, giant corporations are taking over the economy – and they’re busily weakening antitrust enforcement....

Because "free markets." How does that follow? Doesn't have to.

And it's not just the big banks. It's also pharma, insurance, you name it.

The result is economic power, economic rent extraction, prices higher than they would be in a competitive market, higher "profits"and higher corporate share to worker share.

Welcome to neoliberalism.

Robert Reich
Whatever Happened to Antitrust?

Russia Insider — Bridge Burning 101: Europe to Bring Antitrust Charges Against Gazprom

Apparently Russia isn’t rushing into the arms of China fast enough for Europe. Schnell, schnell!

The EU already tried this on South Stream and was shocked, shocked, shocked, when Russia cancelled the project and rerouted though Turkey. Now they are coming back for more? What was that about doing the same thing and expecting different results?

Talk about backing yourself into a corner.

Russia Insider
Bridge Burning 101: Europe to Bring Antitrust Charges Against Gazprom

Yves Smith — How Oligopolies Undermined Competitiveness and Produced Inequality

More on the neoclassical myth of the free market that provides the foundation for neoliberalism, neo-imperialism, and neocolonialism. Ordinary Americans were OK with neo-imperialism and neocolonialism when they were among the beneficiaries through trickle down. Not they are now noticing that they themselves are becoming marks. It always comes down to asymmetrical power, which the mob's crony-run propaganda machine in turn always suppresses.

Naked Capitalism
How Oligopolies Undermined Competitiveness and Produced Inequality
Yves Smith

L A Times — Banks lobby to kill credit unions.

Credit unions have been snatching customers from banks amid consumer frustration over rising fees and outrage over Wall Street's role in the financial crisis. 

Now banks are fighting back by trying to take away something vital to credit unions — their federal tax exemption.

With fast-growing credit unions posing more formidable competition to banks, industry trade groups are pressing the White House and Congress to end a tax break that dates to the Great Depression....

Credit unions said the effort to take away their tax exemption was simply an attempt to stifle competition and remove one of the only checks on bank fees for consumers.And it comes as some in Congress are pushing to loosen regulations on credit unions so they can expand their business further, including legislation that would lift a cap on the amount of money they can lend to businesses.

The tax exemption is crucial to credit unions, which by law can't raise capital through public stock offerings the way that banks can, said Fred R. Becker Jr., president of the National Assn. of Federal Credit Unions, a trade group with about 3,800 federally chartered members.

"They'll have to convert to banks, which is what the banks want," he said. "Then they'd have, for lack of a better term, a monopoly."

Los Angeles Times
Banks pushing for repeal of credit unions' federal tax exemption
Jim Puzzanghera

Also:

Miami Herald

Credit unions fight back against tax repeal efforts 
George Joseph | Dade Couty Federal Credit Union

At the moment, it’s a war of words, but very soon the debate to tax credit unions will hit the streets. 

This week, credit union supporters from South Florida and throughout the country will descend on Washington, D.C. to “Hike the Hill” and meet with lawmakers to stress the importance of keeping in place the federal tax exemption for credit unions.

The debate is nothing new. For years, the big banks have lobbied Congress to repeal the tax exemption status. This time around, they declared war.....

Any individuals who feel strongly about the taxation issue are encouraged to ... sign the “Don’t Tax My Credit Union” petition.