Ep. 32 Why Antitrust Is the Problem, Not the Solution

23 April 2016     |     Tom Woods     |     10

Krugman is now blaming poor economic times (but hasn’t he been trying to tell us things are much better than the stupid right-wingers say?) on a lack of competition. Lax antitrust enforcement is the problem! Sure it is. In fact, antitrust itself is the problem, as we show in this week’s episode.

Krugman Column

Robber Baron Recessions” (April 18, 2016)

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Contra Columns

The Antitrust Economists’ Paradox,” by Thomas J. DiLorenzo (PDF)
‘Regime Uncertainty’: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,” by Robert Higgs (PDF)

Article Mentioned

The Misplaced Fear of “Monopoly”,” by Thomas E. Woods

Books Mentioned

The Myth of the Robber Barons: A New Look at the Rise of Big Business in America, by Burton Folsom
Antitrust and Monopoly: Anatomy of a Policy Failure, by Dominick Armentano

Event Mentioned

Mises Circle in Seattle, May 21, 2016

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  • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

    Does Krugman disapprove of the United States Postal Service government granted monopoly in the delivery of first class mail? Should the Federal Reserve have legal competitors in the issuing of fiat currencies? How about competing police services, or criminal courts? Would Krugman approve of competition for Government schools? How about having more than two political parties? Are not all government regulatory bodies monopolistic?

    • Luke Sacher

      EXCELLENT points! Bravo and golf claps and G&Ts on the terrace for YOU, sir. 🙂

      • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

        I must say,… it is much more fun to argue the anarcho-capitalist position, and often easier. There are some real big practical problems with competing police services and criminal courts,… but, if done under the full understanding that there is No Sovereign Immunity, it is hardly more problematical than the present system. Any decision making process makes mistakes,… that’s a given. But, if everyone involved in law enforcement understands that, like a doctor with their patients, they are fully liable for any untoward damage they may cause to either the criminally accused or innocent third parties,… then most of the inevitable problems are self limiting,… ideally. https://uploads.disquscdn.com/images/9f57aa94bab3cae5d1cb6f90b35c24f20baca9bd41dd06a881d57a34ccd5f1b1.jpg

  • Adrian Gutierrez

    Great podcast. I specifically enjoyed Dr Murphy’s description of the Rothbardian example of monopolies. Awesome!

    On another note, I have noticed that depending on how people look at profits, things can seem deceiving. Profit margins have fallen, whether it be slightly, they still have fallen. It also depends on how analysts measure value within financial statements. How is inflation taken into account? Which asset classes are inflated and by how much? Things are deceiving, so it makes no sense to look at one measurement and believe the manner in which it was rendered. An analysis is more important, and thus the theoretical outlook is essential. This is where Austrians are far superior to the mainstream in all aspects of finance.

    • caso0

      Great points and also reminds me of other problems of comparing one metric over time. The population mix changes. Perhaps “aggregate rate of profit” has increased because newer industries operate less on high volume turnover (like tech) than the old obsolete industries of 30 years ago. Those new industries by their nature will produce higher profit relative to revenue, but this doesn’t make it a “highly profitable” business per se. Profit margin is always using *revenue* as a reference point (the denominator) which can cause you to compare apples and oranges when comparing different industries. Profit margin as an accounting measure can be very misleading. Grocery stores by their nature produce a TON of revenue relative to profit so they have very low profit margins, and that doesn’t make it a bad business. Other industries can have high profit relative to revenue but actually be a pretty unattractive business.

      But… bumper sticker Facebook memes like HIGHER PROFIT = EVIL HAS OCCURRED reigns supreme in social discourse today.

  • Jabor

    I get tired of people like Krugman using aggregate statistics to justify an action. I used to fall for this type of argument, until Dr. Sowell opened my eyes when he first destroyed the 77% gender pay gap myth. We are simply an uneducated population when it comes to statistics and economics, and therefore easily duped. Unfortunately, I believe most of our politicians are in the same boat, and small businesses in the service, hospitality, and restaurant industries are going to be the big losers with initiatives like minimum wage.

    While I understand the monopoly view presented by Mr. Murphy & Woods, I have my reservations when it comes to real world application (probably due to my ignorance). For example, I live near the Greater Cincinnati Airport, which was a central hub for Delta for years. It was also almost always in the top 5 airports in ticket prices. A number of times, low-cost airlines would come to the airport, and Delta would lower their rates often below the low cost airline until the new airline was driven out..then their rates would go back up. I am certain that Delta lost money on these lower-cost flights, but were able to make it up in their other flights out of the airport. Isn’t this an example of a monopoly keeping a competitor out?

    The other issue when companies get as dominant as Google, Microsoft, or Apple is that they can buy out competitors once they see the competitor has a popular product, eliminating the competition.

    • Luke Sacher

      “when companies get as dominant as Google, Microsoft, or Apple is that
      they can buy out competitors once they see the competitor has a popular
      product, eliminating the competition.” When did that ever happen? Just asking…

  • Luke Sacher

    submitted for your consideration: the great Dr. Tom DiLorenzo, “fellow traveler” of Drs. Woods and Murphy at the Mises institute:
    https://www.youtube.com/watch?list=UUmT6-ChKpaiIVu2fhEIsNtQ&t=2412&v=vCUGORblyCo

  • Luke Sacher

    Woo hoo and BRAVO to Dr. Woods.
    http://tomwoods.com/search/antitrust/

  • http://tklist.us TKList

    Big government is owned by the wealthy and paid for by the middle class and poor one way or another. The tax code is manipulated by the wealthy; cost to comply is paid by consumers through higher prices. It increases lobbyists, corrupts politicians and increases difficulty of entry for competition, which causes less employment opportunities for workers and higher prices.

    Excessive regulation increases cost for consumers, decreases job opportunities, corrupts politicians, increases lobbyists and increases difficulty of entry for competition. National debt: $154,000 cost per household paid by the consumer not the rich, through higher prices or lower standard of living. Federal Reserve: low interest loans for wealthy and connected, by the time it reaches lower rungs, rates higher, prices higher, including CEO pay increasing the inequality gap.

    We have more socialism now than the liberal left’s golden age of the 1950s. We have the FHA, HUD, Freddie Mac and Fannie Mae, Community Reinvestment Act, Social Security, Medicare, Student Loan Programs, Obamacare/ACA, Snap Program, Earned Income Tax Credit, Unemployment Insurance Program and more. So the theory is false and the opposite is true. Socialism hurts the middle class. Big government equals more income inequality, smaller government equals less income inequality.

    The national debt keeps increasing because of deals, aka compromises, between Democrats (social programs and entitlements) and Republicans (corporate welfare and defense). The middle class pays the heaviest burden for the debt; as it goes up, it further increases the inequality gap by lowering their standard of living. National Debt: $19 trillion costs or is financed by each household, who is ultimately responsible for that debt. This comes out to $154,000 per household if paid for in one lump sum. Financed for 15 years at 5% interest it would take a monthly payment of $1218. Do not be fooled each household pays this one way or another, not the rich; whether you pay it directly in taxes and fees, higher prices or by a lower standard of living than you would otherwise have if the government had not spent that money. The question is: Is your household getting its money’s worth?

    Politicians promise you a fantasy land, that they can make your life golden by decree, raise your pay, give you free education, free health care, paid retirement, cheap housing, easy credit and protect you from the evils of the greedy businessman. In reality they can do nothing of the sort.

    To give you anything they have to take something from you, do not be fooled when they say they will take it from the rich, the rich get it from you (increased prices), in the end it always comes from you. Politicians point at the rich guy as they pick your pocket. They are selling you an illusion that does more harm than good, because in the process they disrupt the free flow and balance of the market causing unintended consequences.

    Politicians that promise to fix your life by taxing the greedy rich to cover the cost are really the sleaziest of middlemen that are selling you pixie dust while they take their cut, which is power..