This week in political economy.
- Italy’s elections are on Sunday, and with the polls being inconclusive and the reemergence of former PM Silvio Berlusconi as the potential kingmaker, no one really knows what the outcome is going to be. In Foreign Policy, Luigi Zingales [director of the Stigler Center and one of the editors of this blog] writes about the “shipwreck” that is Italy’s current election cycle. “Will the election change anything? I do not think so, and neither does the market. Italian decline is likely to continue slowly and inexorably, gradually accelerated by decisions made elsewhere,” he writes.
- In the New York Times, Lina Khan of the Open Markets Institute writes about a recent Supreme Court case, Ohio v. American Express, which concerns the credit card industry but could potentially weaken antitrust scrutiny and shield Amazon, Google, and Facebook from effective antitrust scrutiny. In Forbes, Hal Singer also provides a great review of the AmEx case and the enormous implications it could have for tech platforms.
- In 1978, Robert Bork published The Antitrust Paradox, one of the most influential policy texts in American history. Now, 40 years later, the American Conservative’s Daniel Kishi writes about the impact of Bork’s work on antitrust, which, he argues, “fundamentally changed America’s economy for the worse.” With the publication of The Antitrust Paradox, he writes, “the American citizen was, in a very real sense, reduced to a mere consumer.”
- From Axios: a seismic shift in the public’s perception of Silicon Valley—a majority of Americans (55 percent, including 45 percent of Republicans) now think the government is not doing enough to regulate Big Tech firms.
- In other techlash updates: Is Amazon too big to tax? Amazon paid zero federal taxes in 2017, and is still being rewarded with further tax breaks at the state and local level, reports The New Republic. And in the Wall Street Journal, Christopher Mims explains why propagandists found it so easy to hijack Facebook: “The internet was supposed to disrupt and flatten old power structures, but instead it has become like every other network in history.” CNN chief Jeff Zucker calls on regulators to scrutinize the power wielded by Google and Facebook. And the SEC wants to know why Alphabet (Google’s parent company) does not report YouTube’s revenues.
- In a new Brookings paper and subsequent New York Times op-ed, Eric Posner and Alan B. Krueger find growing evidence that firms are suppressing wages by exerting monopsony power. A quarter of all American workers, they find, are covered by a noncompete agreement with their current employer or a past one, limiting their bargaining power and ability to find new jobs.
- Posner and Krueger join a growing list of scholars and policymakers concerned about the role of monopsony power in suppressing wages. Democratic Senators Cory Booker (D-NJ) and Elizabeth Warren (D-Mass.) introduced a bill this week that would make “no-poaching” agreements illegal, calling them an “anti-competitive” practice and giving workers the ability to sue and the right to claim damages.
Also, don’t miss our extensive coverage of the US labor market concentration here, here, here, and here.
- The Federal Trade Commission and the European Commission cleared the merger between Luxottica and Essilor without conditions, with both determining that the creation of a $58.5 billion eyewear giant won’t harm competition.
- Emails show Louisiana’s close relationship with the oil industry and it monitoring of opponents of the Bayou Bridge pipeline, The Intercept reports. And in West Virginia, gas companies wined and dined lawmakers before scoring favorable fracking legislation, reports Alex Kotch in DeSmogBlog.
- From The Nation’s David Dayen: How Big Law has captured the Trump administration.
- Dayen also gave a great speech on concentrated corporate power this week. The full transcript is worth reading. Monopoly power, he writes, “lies at the heart of every issue, and serves as the roadblock to progress at every level.”
- The Washington Post’s Brian Fung on “the huge, low-profile alliance” between tech giants, experts, industry groups, and Democrats fighting to save the FCC’s net neutrality rules.
- JPMorgan CEO Jamie Dimon says he’ll call the governor of whichever state Amazon picks for its HQ2 project and fight to get the same benefits.
- Comcast is taking on Rupert Murdoch with a $31 billion 11th-hour bid to buy Sky.
- The New York Times’ Noam Scheiber and Kenneth P. Vogel on the “web of conservative donors” behind the Janus v. AFSCME case. And in internal documents obtained by The Intercept, the Charles and David Koch-led network of wealthy conservative donors celebrate the long list of policy achievements they managed to get from the Trump administration.
Chatter from the Ivory Tower
- An odd new finding in one of this week’s NBER papers: birth rates aren’t simply procyclical over the business cycle. Drops in the number of conceptions in fact appear to anticipate recessions by a few quarters. How this mechanism operates is anyone’s guess. The Guardian this week recapped other strange indicators for spotting recessions, including Barclay’s famous skyscraper index and movements in divorce rates.
- Unexpected monetary easing makes income inequality worse because wage gains tend to be lopsided towards higher-skilled workers, say Dolado, Motyovzski, and Pappa in a new discussion paper. A silver lining, perhaps, for those concerned that the Fed is set to hike rates to loosen up a tight labor market (and in doing so forestall wage growth).
- Bryan Caplan is certainly making waves (as he likely aimed to do) with his new book The Case Against Education: Why the Education System Is a Waste of Time and Money. Yet the Economist broadly agrees with some of his points: “The ubiquity of the degree means that for many workers going to university is more of an obligation than a choice. Moreover, university does not suit all learners,” writes blogger W.Z. “Governments…should look beyond just universities.”
- Are the days numbered for capitalism in its current form, as Paul Mason argues in Postcapitalism: A Guide to Our Future? Nope, says Branko Milanovic: he sees no end in sight of the “commercialization of daily life” that serves as capitalism’s new “field of action.”
Stigler Center Goings-on
Listen to the newest episode of Capitalisn’t! This time, Luigi Zingales and Kate Waldock ask whether doctors and pharma companies are to blame for the opioid epidemic, and discuss the regulatory ramifications for medical marijuana.
Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.