Friday, October 4, 2019

Thomas DiLorenzo vs. Elizabeth Warren on 'Big Bad Trusts'

Phil Gramm, a former chairman of the Senate Banking Committee and currently visiting scholar at the American Enterprise Institute and Jerry Ellig, a former chief economist at the Federal Communications Commission and a current research professor at the George Washington University Regulatory Studies Center, cite a Thomas Dilorenzo study to support their contention that Google, Amazon and Facebook are not monopoly operators that must be broken up.

They write in the Wall Street Journal:

The resurgence of progressivism in America has brought growing support for a return to Progressive-era trustbusting. Sen. Elizabeth Warren has a plan to break up tech companies like Google, Amazon and Facebook. Berkeley professor Robert Reich, once the resident progressive of the Clinton administration, opines, “Like the robber barons of the first Gilded Age, those of the second”—the tech giants—“have amassed fortunes because of their monopolies.” Even in Amazon’s hometown of Seattle, a newspaper headline declares, “Big tech needs to face a Theodore Roosevelt -style trust busting.”

According to progressive legend, when trusts and cartels in the late 19th century exploited consumers, trustbusters rode to the rescue. Today’s progressives are ready to reincarnate yesteryear’s remedies. The problem with this narrative is that it has little basis in fact.

If the Gilded Age was plagued by anticompetitive behavior, the data should show output falling and prices rising in monopolized industries. In a 1985 study, economist Thomas DiLorenzo tested this hypothesis for industries accused of being monopolistic during the debate on the Sherman Antitrust Act of 1890. He found that output in those industries actually increased by an average of 175% from 1880-90—seven times the growth rate of real gross national product. On average, prices in the so-called monopolized industries fell three times as fast as the consumer-price index. When it comes to the progressive itch to attack large firms, a famous line comes to mind: “Ignorance lies not in the things you don’t know, but in the things you know that ain’t so!”...

The rise of Big Tech is virtually a replay of the rise of scale-driven industrialization at the turn of the 20th century. We’ve seen rapid growth of large firms fueled by technological innovation and economies of scale accompanied by declining prices. This time around, extraordinarily, the new “monopolies” are giving many of their products away.

There are legitimate policy concerns involving Big Tech, such as claims of censorship. But history shows little evidence that breaking up big tech companies or regulating them as monopolies will benefit consumers. Before policy makers repeat the failed experiments of the past, they should determine whether trustbusting is really about protecting consumers or merely about expanding the power of government.
-RW


1 comment:

  1. Its all lip service. The Spineless in congress dont have the balls to do anything but give it lip service like they always do.

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