Recent Statements Are At Odds With Both The Economic Consensus And The Administration’s Stated Objectives On Competition Policy
The administration has made clear that protecting consumers and keeping prices down are key to its agenda, yet some are advocating for antitrust enforcement changes that would harm consumers, reduce convenience, and raise prices.
For example, while administration economists argued that corporations were not to blame for unprecedented inflation, some in the administration are at odds with businesses and consumers by promoting inefficiency.
— While the administration has said it supports lower prices and added convenience for American consumers, some are advancing “neo-Brandeisian” ideas that would raise prices.
— There is an expert consensus that the tech sector is a bright spot in the economy that is resisting the inflationary surge.
— Experts and former administration officials warn that shifting away from the consumer welfare standard toward a neo-Brandeisian approach to antitrust will have negative impacts for American consumers.
While the administration has said it supports lower prices and added convenience for American consumers, some are advancing “neo-Brandeisian” ideas that would raise prices.
Speaking on last July’s Executive Order on competition, President Biden discussed the need for “lower prices.” “I’m going to be signing shortly an executive order promoting competition to lower price — to lower prices, to increase wages, and to take another critical step toward an economy that works for everybody.”
However, a key administration advisor recently said that the United States economy should be “more like” Brandeis’s vision of the economy—a vision that deprioritizes consumer welfare. “What we’re working towards is something more like what Louis Brandeis thought the American economy could be, had been, and should be.”
In a 2018 New York Times op-ed titled “The Tyranny of Convenience,” that same advisor questioned the value of prioritizing convenience, a view which is at odds with what American consumers want. “We must never forget the joy of doing something slow and something difficult, the satisfaction of not doing what is easiest. The constellation of inconvenient choices may be all that stands between us and a life of total, efficient conformity.”
There is an expert consensus that the tech sector is a bright spot in the economy that is resisting the inflationary surge.
Innovation and investment in the digital economy is a “bright spot” in the overall economy, which is struggling with rising inflation, says Michael Mandel of the Progressive Policy Institute. “While prices for traditional goods like energy, food, and autos have skyrocketed, digital economy inflation has remained almost non-existent. This relative lack of inflation in the tech, broadband and ecommerce worlds — including ecommerce margins — is a stunning phenomenon that deserves a lot more attention than it is getting.”
— Mandel continues: “One real possibility is that innovation and investment in the digital sector may have a dampening effect on inflation. Basic economics tells us that when tech and telecom companies spend tens of billions of dollars to create new capacity and deploy new technology, it’s going to be hard for anyone to raise prices, including themselves.”
Economist Trevor Wagener of the Computer & Communications Industry reminds that digital technology counters inflation. “Digital technology tends to counter inflation for a number of reasons: First and most straightforwardly, digital goods and services tend to be less expensive than, and increase in price more slowly than, their offline counterparts. As consumers use more digital goods and services, they pay lower prices than they did previously, and they experience smaller price increases going forward, so inflation is reduced. Second, because digital services, platforms, and marketplaces tend to facilitate price comparisons and transparency to consumers, increased use of digital tools by both consumers and producers tends to put downward pressure on prices by enhancing competition. Third, digital tools are often prerequisites for productivity enhancements, supply chain improvements, and cost reductions on the supply side that result in reduced prices for consumers.”
An Economist article explains that online is “no place to go in search of inflation.” “[T]he internet in general is no place to go in search of inflation: in America online prices have been falling fairly steadily since about 2012 and are lower than they were at the turn of the millennium.”
75% of economists surveyed by the Chicago Booth Initiative on Global Markets believe that antitrust intervention would not successfully reduce inflation over the next year and 67% believed that market power is not a significant factor for inflation today.
Experts and former administration officials warn that shifting away from the consumer welfare standard toward a neo-Brandeisian approach to antitrust will have negative impacts for American consumers.
FTC Commissioner Christine Wilson pointed out that members of the administration have criticized American companies for attempting to keep consumer prices low. “I was surprised to see a NYT op-ed criticizing companies for using efficiencies of scale to keep prices low. A beauty of our market economy is product differentiation.”
— Wilson Continued: “If consumers want to buy them, companies can offer a variety of origins, qualities, and prices. Like Tim Wu, I personally prefer to buy from small and local sellers. But also like him, I can afford to pay the higher prices that regional grain companies charge for their flour.”
— “Wu decries making the economy ‘highly specialized,’ but the lower prices & innovation enabled by specialization have raised the standard of living.”
Neo-Brandesian antitrust is more likely to raise than lower prices, explains Former Treasury Secretary Larry Summers. “The emerging claim that antitrust can combat inflation reflects “science denial”. There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”
— Summers continues: “However, as described, hipster Brandesian antitrust, with which the Admin and its appointees flirt, is more likely to raise than lower prices.”
Former OMB and CBO Director Peter Orszag replied to Summer’s tweet saying: “Count me on @LHSummers’ side here.”
Rejecting the consumer welfare standard could hurt consumers and worsen current inflation, warn Former Senator Phil Gramm and Mike Solon. “[R]egulators’ open hostility toward America’s economic system, and the return to Progressive-era antitrust enforcement will stifle growth. All the ingredients will be present to turn the current inflation into stagflation.”