Thursday, March 17, 2016

At root, it's always unintended consequences of policy, overlooked by policy makers.

At Reddit, jimrosenz links to Our Four-Decade Antitrust Experiment Has Failed by Kevin Drum.

My response:

If I set aside my sympathies for Kevin Drum's view, I am left with a problem. Drum writes:

The federal government should do its best to ensure that markets have plenty of competition, and then it can afford to get out of the way and regulate fairly lightly.

But ensuring that markets have plenty of competition is regulation. Heavy regulation. Drum wants to use a crude old rule: "ensuring that there are plenty of competitors in every market and refusing to allow any single company to become too dominant." If that's not an explicit call for heavy regulation, it could easily become one.

Drum admits that "even a crude market share rule" would have problems:

You'll have arguments over just how big a single company should be allowed to get (30 percent share or 50 percent share?).

When I read of calls for that sort of regulation, my mind goes to The Road to Serfdom. We can't solve problems that way. We mustn't solve problems that way.

Take a step back, and consider the possibility that our problems are self-created. We have too little competition? Too much dominance by single companies? Maybe such common problems are the result of existing policy -- an unintended consequence, so to speak.

The business tax structure favors bigness. The more you can spend, the more you can avoid tax. That's the driving force behind merger and acquisition.

Kevin Drum brings up the returns to scale. I read a Kiplinger letter, decades back, where they wondered why agribusiness grows beyond its economies of scale. It's not only agribusiness that grows beyond economies of scale. It's business in general. And it's the business tax system, favoring bigness, that drives it.

No comments: