Posted by Business Insider
Nobel Prize-winning economist Joseph Stiglitz says it’s time for the US to update its antitrust laws
By Richard Feloni & Andy Kiersz
There are plenty of companies that may feel too big to you, whether it’s trillion-dollar monoliths Apple and Amazon, or even the cable company you’re forced to deal with every day.
But the question of whether they’ve got so much power that they’re harming the economy is the subject of a debate in the spotlight once again.
For Nobel Prize-winning economist Joseph Stiglitz of Columbia University, there is indeed a monopoly and monopsony problem in the United States, and it’s high time to address it with new antitrust laws.
At a recent Federal Trade Commission hearing on the subject, Stiglitz said, “The point is, if our standard competitive analysis tools don’t show that there is a problem, it suggests something may be wrong with the tools themselves.”
Trust busting
The bedrock of America’s antitrust law was primarily built in the late 19th and early 20th century, during the democratic and reform-minded Progressive Era that followed the Gilded Age’s reign of robber barons and progression of inequality.
Even Adam Smith, the father of capitalism himself, warned in “The Wealth of Nations” against the consolidation of market power in the hands of a few. This is represented on the selling side by monopoly and on the buying side by monopsony, a term coined in the 20th century that refers to firms using their size to push down suppliers’ prices (Walmart is arguably an example).
Years of economic research has found that when market power is highly concentrated, barriers to entry prevent new competitors from building businesses, consumers have fewer options, and employees receive lower wages. This in turn slows overall economic growth.
Even before data on market power was routinely gathered, the federal government established the definition for an illegal monopoly and an illegal merger with the Sherman Act of 1890 and the Clayton Act of 1914. It also created the FTC in 1914 to enforce these rules.
