ICYMI: Review Of Tim Wu’s Book Finds It Ignores Benefits To Consumers
Earlier today, Richard Epstein published an extensive review of Tim Wu’s new book and overall antitrust framework, arguing Wu’s criticism of leading tech services “overstates the benefits and ignores the high costs of an aggressive application of the antitrust laws.”
Epstein is the just the latest to rebut Wu’s arguments—Alec Stapp of the Niskanen Center pointed out tech companies are “engines of productivity growth,” and Judge Douglas Ginsburg contended Wu has not “convincingly explained the need to replace the consumer welfare standard in the first place.”
More rebuttals to Wu below.
It is “dangerous” to equate firm size with market power, Epstein writes. “The most critical factor is the number competitors in a given space.” “Wu also ignores all the advances in antirust [sic] theory over the past hundred years. Most notably, it is dangerous thinking to equate, as did Brandeis, firm size with market power when the most critical factor is the number competitors in a given space, not their absolute or even relative size. Thus, any static measure of concentration, such as the well-accepted Herfindahl-Hirschman Index systematically overstates the risk of monopolization, because by definition it has to ignore the impact that potential new entrants have on established firms, often by using leapfrogging technologies or superior marketing strategies.” (Richard Epstein, “Beware Of Populist Antitrust Law,” Forbes, 1/23/19)
As Epstein notes, leading tech services compete fiercely amongst each other, producing victors, yes, but also a “fair share of casualties.” “Large multi-billion [sic] firms routinely compete with each other for market share in global and national markets. Often, they face intense local competition from well established players in niche markets as well. These battles do not only produce victors. They also produce their fair share of casualties.” (Richard Epstein, “Beware Of Populist Antitrust Law,” Forbes, 1/23/19)
According to Epstein, the standardless antitrust framework Wu outlines would lead companies to attempt to “curry favor in order to get some special privilege from a remote and uninformed bureaucrat.” “Heavy-handed state intervention will typically hurt some companies and help others, but the aggregate effects are always negative, as firms both large and small abandon their own sensible development programs to curry favor in order to get some special privilege from a remote and uninformed bureaucrat.” (Richard Epstein, “Beware Of Populist Antitrust Law,” Forbes, 1/23/19)
Wu’s vague and ambiguous antitrust framework “ignores the benefits to consumers of lower prices and higher quality goods,” per Epstein. “Wu’s recent book points to ‘noneconomic values’ that are said to trump overall efficiency. Ironically, in making this dubious claim Wu engages in the very kind of misguided industrial policy that he attacks elsewhere, by assuming that some government official somewhere knows which small businesses are good for a community and which are not. In so doing, Wu loses sight of the simple point that any effort to save the corner grocer commits two sins. First, it ignores the benefits to consumers of lower prices and higher quality goods. Second, it incurs heavy government expenses needed to define and enforce the new antitrust regime that he wants to create. Industrial policy is not unwise only because it seeks to subsidize big players. It is unwise no matter whom it wishes, large or small, to subsidize.” (Richard Epstein, “Beware Of Populist Antitrust Law,” Forbes, 1/23/19)
As Alec Stapp of the Niskanen Center notes, Wu advocates for company “smallness” despite desiring business and labor outcomes that are directly correlated to firm size. “Professor Wu fetishizes ‘smallness’ despite the evidence showing that most things progressives and free-marketers alike value increase with firm size. He conflates natural and de jure monopolies, underrating the role that regulations and patent law play in establishing and sustaining monopoly power. He advocates returning to a structural approach in antitrust enforcement despite it being abandoned by empirical researchers decades ago because ‘market structure and competitive effects are not systematically correlated’ except in special circumstances. And lastly, in an attempt at narrative, Wu constructs a morality play in which he lobs ad hominem attacks at monopolists for their ethical shortcomings and abhorrent political viewpoints, when many of the same viewpoints were held by the trustbusters he otherwise praises.” (Alec Stapp, “Tim Wu’s Morality Play: A Review Of ‘The Curse Of Bigness,'” Niskanen Center, 12/12/18)
As Judge Douglas Ginsburg notes, Wu’s book “does not provide any evidence” that a departure from the consumer welfare standard is necessary or prudent. “As noted by economist Carl Shapiro, there is a ‘broad consensus among antitrust scholars and practitioners in favor of the ‘consumer welfare’ standard. No evidence whatsoever has been put forward calling this consensus into question.’ [10] Wu does not provide any evidence in his book, preferring to advocate an overhaul that abandons all the benefits of the consumer welfare standard rather than acknowledge its flexibility.” (Douglas Ginsburg, “Judging A Book: Ginsburg Reviews ‘The Curse Of Bigness,'” Law 360, 12/3/18)