Categories
Regulation

Second Thoughts about Government as the Origin of Property

It has been a common progressive move for more than a century to argue that property rights are not sacrosanct because the government creates them. Government creates them and government can take them away. I heard this in seminars in law school. And I recall Elizabeth Warren making this argument on the campaign trail in 2020. And Morris Cohen said it in 1927.

But I do not understand why this argument has so much appeal to progressives, because it does nothing more than assert a contrary position to that taken by libertarians. It does not prove anything in favor of government intervention.

The question, after all, is how the government should use its power. Should the government use it to protect and expand property rights? Or should the government use it to dissolve and restrict property rights?

The libertarian asserts that the government should protect property rights because these are in some sense prior or fundamental.

And the progressive, in arguing that the government giveth and so can taketh away, asserts no more than that government action—regulation—is in some sense prior or fundamental.

There is no more substance than that to the government-giveth argument.

It resolves nothing, just as libertarians’ assertion that property rights are prior and fundamental resolves nothing. It merely asserts the opposite of what the libertarians assert.

The fact that government is needed to enforce property rights does not in itself imply that government need not enforce them. It does not imply that property rights are not in some sense prior or fundamental. It may well be that property rights guaranteed by government are prior and fundamental in relation to all things. And that government elimination of property rights is posterior. I do not personally believe this to be so, but I do not see why the fact that government is needed to guarantee property rights implies that property rights need not be fully and absolutely guaranteed.

And that is before we even get to social contractarian arguments that claim that government is no more than a mutual defense pact between prior possessors of things that come to be called property under the terms of the social contract.

Moreover, as a historical matter, it is not clear to me which side has the better of the argument. On the one hand, government enforcement does reduce outside interference with one’s possessions, and one cannot speak of property in the legal sense without assuming the existence of a legal authority committed at least in principle to recording and enforcing such rights.

On the other hand, it is the case that people living in places that have no central government possess things and enjoy them quietly for long periods of time, so long as they are individually powerful enough or in sufficient harmony with their neighbors to protect their possession of the things.

The only thing that progressives’ assertion that the government giveth really does is to demonstrate to progressives that there is an alternative to the view that property is fundamental—namely, that government regulation is fundamental.

But it does not answer the question how much to protect property and it does not even establish that the libertarian view is necessarily wrong.

Categories
Regulation

Democracy as the Heart of Debates about Regulation

There is a tendency among free marketers to say: “if markets are bringing it about, it is necessary.” And the big insight on the left for at least the past fifty years has been to say: “ah, but the market is shaped by the law, so if we pass a law preventing it from happening, then markets won’t bring it about after all.”

So, in the context of the influx of American digital nomads to Mexico City, and the opposition to gentrification they have aroused, the free marketer says: “locals are getting rich selling to the Americans, and the Americans clearly believe they are getting something of value, so this is natural; it’s going to happen; if you try to stop it you might as well try to use your pinky to dam the Nile.” And the left winger replies: “the only reason the Americans can move here is that Mexico permits them to stay for six months without a visa. Change the rule, and this goes away. Mexico has a choice.”

The free marketer seems to espouse market naturalism: society is self-organizing and policymakers have little choice regarding outcomes. The most they can do is create a temporary disequilibrium—a dam that will break. By his reply, the left winger restores the policymaker’s freedom to decide social outcomes.

Both the free marketer and the left winger miss the point.

The proper argument for free markets is not that market outcomes are natural. The left winger has the better of the debate on that score: the state does in fact come first, then the market. That is why free marketers fear Communism. Because the state really can shut down the market—and, by extension, use a lighter touch to shape the social outcomes to which the market leads.

A proper free market argument accepts that policymakers can channel or override market outcomes but the argument holds that policymakers shouldn’t do that, because the people speak clearest through markets. That is, the only really coherent argument for free markets is that markets are more democratic than the electoral process. When people buy and sell, they vote, and the free market position is that un- or lightly-regulated markets process those votes in a way that is more faithful to the preferences of the voters than are the institutions of representative democracy that process the votes that people cast in electing the policymakers who would otherwise regulate market outcomes.

So, the argument would go, while activists might not like the fact that Americans are moving to Mexico City, the fact that Mexicans themselves are willing to rent them places to live and sell them tacos is the clearest possible indicator that Mexicans want the Americans to come.

The left winger’s response that the state comes first is not a good rejoinder to this proper form of the free market argument. For the free marketer can argue that the state ought to embrace the system that most faithfully reflects the will of the people, and that markets, in his view, are that system. The only way for the left winger to strike back is to argue that the electoral process, through which people can choose to alter market outcomes, does an even better job of reflecting the will of the people.

That might be true—and I tend to think that it is. But unlike the question whether the law is prior to the market and can influence market outcomes, the answer is easier to contest, as several generations of public choice theorists have done.

In the market, one’s ability to speak is mediated by wealth—more money and more ownership means more votes. But even were it possible to keep money out of politics—and if not, then elections are mediated by money, too—elections would still be prone to distortion by small, highly-organized interest groups. Many voters don’t show up to the polls, and their representatives don’t always do what they want even when they do.

Indeed, it is difficult even to compare outcomes under these approaches because they represent, in effect, different social welfare functions. Are the sale decisions of landlords and street food vendors a more accurate expression of the abstraction that is the “will of the people” than the decisions of representatives elected by the subset of the population that showed up to vote in the last election?

The debate over regulation of markets is really a debate over norms—and specifically democratic legitimacy—not market naturalism.

It won’t be resolved until both sides start acting that way.

Categories
Meta Regulation

The Other Conflict of Interest and the Root of Inequality

It is common in the study of corporate governance to worry about the conflict of interest between shareholders and managers. Managers are supposed to run the firm to maximize shareholder value, but because they run the firm on a day-to-day basis, not the shareholders, they have plenty of opportunity to enrich themselves are shareholder expense. Others worry that the power of shareholders and managers over firm governance enables them to cheat creditors, workers, and sometimes even suppliers.

But there is another interest that no one ever talks about, and which is even less able to defend itself than are shareholders against managers, or creditors, workers, or suppliers against shareholders and managers.

That is the firm itself.

The firm is not its shareholders. It is not its managers. It is not its workers, creditors, or suppliers.

It is a fiction in the sense that a firm always is a fiction, a thing that exists only because shareholders, managers, workers, creditors, suppliers, and the government act like it exists. It has no flesh and no blood. It cannot be found anywhere; or, rather, it is located wherever the law says that it is located rather than where the laws of physics place it.

But it has a name: the name of the business.

It can open bank accounts.

It can own property.

It can sue.

It even has a right not to be deprived of life, liberty, or property without due process of law.

The firm exists in the way that the mime’s wall exists. There is nothing there, but his hand stops as if it were there.

Just so, the corporation exists because we speak as if it exists. Because we find all of our legal institutions bending around its form as if there were something there to bend them.

And yet, despite all the care that we take to act as if there really were an independent, living, breathing thing that is the firm, when it comes time to count up conflicts of interest, we never talk about the conflict between the interests of shareholders, managers, workers, creditors, and suppliers—and the firm itself.

We recognize that there must be such a conflict, and we even have an entire body of law—agency law—devoted to protecting the firm itself against managers and employees who put their interests before the firm’s. We say that managers and employees have duties of loyalty and care to the firm.

And yet we seem hardly able to take such duties seriously, or, at any rate, fully to appreciate that they are owed to the firm—to the mystery, to the fiction, to the hollowness beneath the mime’s hand.

We say that the board of directors owes a duty to the firm, but we think that the duty is really owed to the firm’s shareholders, or to its workers, or to whatever set of actual, living, breathing persons are ultimately harmed by the cupidity of the firm’s agents.

We comply with the fiction that managers and employees owe their duties to the firm by describing the shareholders who sue careless or disloyal managers as filing a “derivative” lawsuit on behalf of the firm. The shareholders have no direct claim against the wrongdoers, we say, because the wrong was done to the firm and not directly to the shareholders.

And we comply further by asking that any recovery be paid first to the firm as compensation for harm to the firm and only thence to shareholders.

But we experience this part of the fiction of the corporate person as unnecessary. Nothing would be lost were shareholders to be permitted to sue managers directly.

We are wrong to do that.

If we were actually to take conflicts with the firm seriously, we would come to a very troubling thought indeed: that the mute, defenseless fiction that is the firm is surely the worst victim of self-interested behavior of all.

Conflicts run deepest not between shareholders and managers, or even between managers and workers, but between all of these groups and the firm, because of all of these groups only the firm lacks a physical presence and hence even the slightest semblance of autonomy. The firm exists entirely in the unseen world behind the world, and speaks only through the very groups—the shareholders, managers, workers, and so on—from which the firm needs protection.

And the firm does need protection because the firm’s interests are necessarily always in conflict with those of shareholders, managers, workers, and all the other counterparties of the firm.

Because the firm never dies. It alone is in business for the long term and the long term interest is almost always in conflict with the short term interests of mere mortals.

Imagine that a firm generates a billion dollars in net income and that maximizing the long-term—as in over the course of the next two centuries—profits of the firm can be achieved only by investing that billion in clean energy technology.

It is easy to imagine that no flesh and blood humans associated with the firm might be interested in actually investing the money. The shareholders might want it paid out as dividends (they want to party). The managers might want it paid out in executive compensation (they want to party). The workers might want it paid out in retirement benefits (they want to party). The creditors want their debts paid. The suppliers want higher contract prices.

The the profit-maximizing firm—yes, the firm, that metaphysical life force, that abstract interest—would want the money invested and, if all the assumptions of general equilibrium theory hold, the fact that the profit-maximizing firm would want the money invested implies that investing it is necessary for the efficient operation of the economy. It is required to maximize economic growth and otherwise to launch society forward to the greatest extent possible.

But the firm with not invest the money. Because the flesh and blood humans who control what the firm does, who are agents to the firm’s fiction, mimes to its hollowness, don’t want that to happen. The door might want to be opened, but the mime will shut it.

The money will be spent instead on shareholders, managers, workers, creditors or suppliers, and both the firm and the economy will be smaller for it in the long run.

What’s more—and this is important—legal duties will have been breached by this failure to invest. Management will have violated the duty of care, which requires managers to operate the firm with a view to maximizing the firm’s long-term profits.[1]

But no one will sue.

Shareholders will not bring a derivative suit on behalf of the corporation—they wanted to be paid.

Competition will not force the firm’s agents to behave—lest competitors take the firm’s market share and put the agents out of their jobs—because the consequences of a failure to invest for the long term manifest in the long term.

One can only imagine how much bigger the economy would be, and how much more successful the firms in it, if the conflict of interest between the firm itself and its agents were not to exist. Or if there were some way of protecting firms against it.

Imagine all the investments that have not been made throughout history because those in control of firms preferred consumption to saving.

One gets the barest hint of how bad the problem must be in the hysterical objection of business elites to mid-20th-century price regulation in industries such as telecommunications, air transport, and energy distribution. Or the hysterical objection of business elites today to attempts to limit the scope of patent grants in order to prevent windfall gains from intellectual property.

The government, businessmen argue, systematically sets prices—or, in the intellectual property context, rewards—too low, because it fails to take into account all of the investment that must be made in the future of a business.

Firms must invest in research and development.

They must insure against risk.

And so, businessmen argue, what looks like profit really is not profit, but rather a cost of long-term survival and flourishing of the firm.

Ah, but if that is the case, if we cannot trust rate regulators adequately to determine how much must be spent for a firm to flourish, why should we be able to trust shareholders or managers to do that either?

It is not, after all, in their interest to carry out that analysis faithfully, for they can never have an outlook quite as long as the firm’s.

If we think that rate regulation was bad for American business in the mid-20th century, or that stinginess with the patent grant is a big problem for the dynamism of the American economy, we must—must, must—wonder just how bad the totally unaccountable dominance of flesh and blood over fiction, of the agents over their dumb master, must be for American business.

How much less is invested than optimally should be?

This, it seems to me, explains much—not just about a structural inefficiency in the economy but also about the structural maldistribution of wealth.

Why is it that the captains of industry are so rich? Is it just that they control scarce resources? Or that they have some monopoly power? Those are, to be sure, causes.

But I wonder whether the most important is not, quite simply, that they underinvest—and keep the difference for themselves.

When I was in high school, I ran an assassin game with a classmate. I ordered some very cheap waterguns direct from China. We asked every student to pay $30 to participate in the game. We gave each student a cheap water gun and the winner $200 as reward.

There were perhaps thirty participants, which made the game very profitable.

I was so embarrassed about this windfall that I let my surprised coventurer keep all of the profits, which he used to take a trip to Europe.

I was afraid to profit and he rejoiced in it. But the point is that both of us thought of the windfall as profit.

But was it? Neither he nor I thought for minute about the interests of the business.

Perhaps the best thing for our assassin business would have been for us to invest that money in the following year’s game. We could have increased the reward, attracting more participants. We could have ordered better guns. We could have organized a joint game with another school. Whatever.

But while these were the interests of the business, they were not our interests. The business was mute; and so we ignored it.

One sees this also, I think, in how homeowners treat their houses. It is very often the case that a person will buy a house that he would not be willing to rent because the rent would be too high.

Perhaps the house is very large, or there is a shortage of rental units in the area. Whatever the case, when a person owns and lives in a house that he would not be willing to pay to rent, he is putting his own interests as a customer and indeed shareholder (i.e., owner) of the space-selling business that is his home before the interests of the business itself.

His home could generate greater profits by being rented out and indeed those profits could be invested to improve the home or expand the business to include other properties, making the business and the economy better off.

But none of this happens because the flesh and blood person who controls the business would rather forego (read: consume) the profits that could otherwise be generated by renting to others—and which would lead to long-run profits—in order to enjoy the pleasure of living in a big house, or in the right neighborhood, or what have you, right now.

Once you understand the problem, you see it everywhere.

The owner of my car repair shop was kind enough to give me a lift in his personal, very expensive vehicle while I was getting my oil changed. What portion of the purchase price of that car should he have reinvested in his business? We will never know.

Indeed, one wonders what proportion of all the executive compensation, all the share buybacks, and all the dividends paid out to owners over the past few decades—payouts that turned an L-shaped postwar inequality curve into the U-shape of Piketty fame—should optimally have been reinvested in the firms themselves.

That is, one wonders whether, if the fiction that is the firm were real and could defend itself, captains of industry would be no richer than the rest of us, and the economy a whole lot larger.

One might think that the solution is for the state to step in to protect business fictions against their flesh and blood agents.

And perhaps that is right. We need regulation not just to protect consumers against grasping firms, or shareholders against grasping managers, but to protect firms—those helpless fictions—and indeed the economy entire, against all of the grasping human agents that constitute the sum total of a firm’s human capital.

But it might just as easily be right to say that unregulated firms produce more even after taking into account how much less they produce than they might thanks to the cupidity of their agents and the helplessness of the firm.

Regardless, we must see firms as almost always victims of their human controllers. And the wealth of those controllers as almost always funded in part not just by rents—revenues in excess of costs—but by theft in the form of underinvestment in their businesses.

It might well be that, in an optimally efficient world, every businessman would eat one meal a day and darn his own socks, for that is the real minimum that a businessman would accept in exchange for doing business.

And the profits that remain are best reinvested by firms in their own futures.

Notes

[1] Yes, the duty of care is subject to the business judgment rule, which means that courts defer to the judgment of managers regarding what actions will maximize profits, and so, in practice, even were shareholders to sue, it would be very difficult for them to win such a case. But the business judgment rule is meant only to give managers the benefit of the doubt. It does not make legal actions that are known in advance to fail to maximize profits. Indeed, in a world in which there were never any doubt regarding what course of action would maximize profits, the business judgment rule would count for nothing and a manager’s failure to take the known profit-maximizing course of action would give rise to immediate liability.

Categories
Antitrust Inframarginalism Monopolization Regulation

Competition Trumps Information

Scholarly interest in personalized pricing is growing, and with it confusion about what, exactly, empowers a firm to personalize prices to its customers. You might think that the key is information. So long as you know enough about your customers, you can tailor prices to each. That is, however, incorrect.

No matter how much you happen to know about your customers—indeed, even were you to have a god’s total information awareness regarding each of them—you would not be able to charge personalized prices if you were to operate in a perfectly competitive market. Competition trumps information.

That is because in a perfectly competitive market there are always other sellers available who are willing to charge a price just sufficient to make the marginal buyer in the market willing to stay in the market and make a purchase. If there weren’t, then there would be a chance that the marginal buyer would not be able to find a price that he is willing to pay, and so would not buy, and then the market would no longer be perfectly competitive. For the perfectly competitive market is one in which competition leads to a price at which the marginal buyer and seller are willing to transact.

And so any attempt you may make to personalize a higher price to your inframarginal customers—the ones who are in principle willing to pay a higher price than the marginal buyer—will be met with scorn. Your customers will find those other sellers offering prices keyed to the willingness to pay of the marginal buyer and will purchase from those sellers instead at that marginal-buyer-tailored price.

Thanks to this effect, all buyers will transact at the same, marginal-buyer-tailored price, and so we can conclude that in a perfectly competitive market, price will always be uniform—and uniformly equal to the price at which the marginal buyer and seller transact. (More here.)

It follows that while information is a necessary condition for the personalizing of prices, it is not a sufficient condition.

You also need a departure from perfect competition, which is to say, you need: monopoly. Or at least a hint thereof.

I have argued that personalized pricing is one way to break the iron link between redistribution and inefficiency. When you personalize prices, you can personalize one price to the marginal buyer, ensuring that he stays in the market and the market is efficient, and whatever other prices you wish (within limits) to inframarginal buyers, enabling the redistribution of wealth. But it is important to remember that information on buyers is not alone enough to make this possible. The seller must be a monopolist, too.

Thus the use of personalized pricing as a tool of social justice directly conflicts with the mindless “big is bad” rhetoric that one finds today in certain corners of the progressive movement.

To redistribute wealth at the market level you need to start with big.

And then discipline big’s pricing behavior.

Categories
Miscellany Regulation

Central Planning Over a Distributed Network

Distributed network architectures and distributed political decisionmaking are not the same thing. The Department of Defense may be glad we communicate over a distributed network architecture, but Americans love their centrally-planned communications, thank you very much.

We all know that the Internet was designed to resist nuclear attack by being distributed. The idea was that if you have multiple nodes, and connections between each node and other nearby nodes, and the nodes all relay messages to all of their local nodes, then you end up with lots and lots of pathways from any one node to any other.

And so you would have to do a lot of nuking to eliminate all of the routes from any one node to any other, thereby making it rather difficult to cut off communications.

This is in an important sense a physical system.

It does not imply anything at all about governance of the nodes. A centralized one-party state, indeed, a dictatorship run by one man, can run an internet and enjoy all of its benefits.

So long as the nukes don’t knock the dictator himself out, he can be confident that from whatever node he happens to occupy on the network he will be able to bark orders to his minions on any other part of the network, because, again, will be very difficult for the nukes to wipe out all possible routes through the network from the dictator’s node to any other node.

The notion that the Internet is a politically free place is at best a misunderstanding of the implications of a physically-distributed architecture for how human communities who use that architecture make decisions. Just because you have a lot of nodes that communicate with each other rather than only with a central authority does not in the least imply that the humans who use the nodes need to be free creatures unaccountable to any central authority. Or that they must be free creatures who work together only by consensus.

The early web did in some cases happen to have this free and ungoverned political character. People proposed standards of communication of various kinds—for example, standards for how email should be sent and received—and people voluntarily followed them. And it kind of worked, although some message features were only supported by some message readers, and so on.

But by the 2000s it became clear that much more, and more interesting, kinds of communication could be run over the network if you had a central political authority that dictated the terms of communication. Now, the central political authorities that arose to provide these communications were not the government. They were private corporations (e.g., Facebook). And they didn’t dictate in the sense that everyone on the Internet had to communicate their way as a matter of law. Instead, they dictated market-style, which is to say that they set up systems on the Internet that did it their way and let you join if you wanted to join.

And so many people did want to join that before you knew it, these corporate systems were the only way to communicate (more or less). And so by private means they had achieved centralized political control over the Internet (more or less).

The people in effect voted to give these companies centralized political control when they decided that their products were better, and so used them.

And they were better.

Instead of downloading a software client—like an email reader—you went to a website and you logged in and henceforth, during your stay on that website, you were locked into the rules of communication enforced by the private enterprise that ran that website. Before, you had used Eudora to write email, and hoped that the voluntarily protocols of email were followed by the email reader used by your recipient, and that your recipient wasn’t so awash in spam that he would accidentally delete your email along with the rest, or that his server would crash. Now you logged into Facebook and sent a message there, or made a post, or sent a chat, and it just worked because Facebook controlled everyone’s inboxes and all the code governing communication between them.

Now, it would be a mistake to suppose that because Facebook is, you know, one website, that it cannot benefit from the distributed character of the Internet.

There is no reason why, in a nuclear war, you should be forced to do without Facebook anymore than you might escape Internet communications from a political dictator during nuclear war. The distributed nature of the Internet as a physical matter means that it will be very hard to sever all of the connections between any two points, including all of the connections between you and Facebook. (Nuking Facebook won’t work either, because Facebook isn’t a bunch of computers at a particular geographic location; it is itself a network of data centers all over the world, one that can hop onto the Internet whenever it likes through any surviving Internet node.)

And when you do pull up Facebook in the midst of the nuclear storm, you will nevertheless be subject to Facebook’s central planning, to its central political authority.

The placement of the like button on your screen will still have been decided by Facebook. The chat interface will be Facebook’s. What you can say on the system without getting blocked will still be decided by Facebook.

Is this a good thing? This is really the question whether we want our communications technologies to be decided by consensus based on the promulgation of voluntary protocols, or whether we prefer our communications technologies to be determined by individuals—or individual corporations—and then supplied to us on a take-it-or-leave-it basis.

It seems obvious to me that we prefer the latter. That is what the netizens voted for in the 2000s when they gave up their email readers and went in for Gmail.

That is what they voted for when they gave up their IRC chat clients and RSS readers and went in for Facebook.

By logging in before communicating, they submitted to these centralized political authorities because they felt that they got a better product out of it.

Communication was more reliable and it was richer; more could be shared and more easily, than had been possible with the tools of the old way.

The web voted for central planning; because sometimes planning is better.

Categories
Civilization Despair Regulation World

The Free-Market-Will-Save-Us Theory of Great Power Competition

First it was: China cannot succeed because she does not have a free market.

Then it was: China is going to be our friend because she has embraced the free market.

Now it is: China is secretly going into decline because she has turned away from the free market.

Maybe that’s right.

Or maybe we are just very, very high on our own supply.

I do not recall that German markets were free in 1939. I do not recall that German markets were free in 1914. I do not recall that Japanese markets were free in 1931.

In fact, I do not recall that American markets were free in 1941. One quarter of the American economy by GDP was subject to price regulation as a result of the New Deal and decades of progressive activism.

And that was before we entered the war and FDR imposed wage and price controls.

And, you know, we won.

But not alone. Russia did most of the fighting.

And Russia had a command economy.

The free market does have its charms. But please, enough of the you-can’t-be-a-great-power-unless-you-run-on-Reaganomics.

That’s a great way to underestimate your adversaries.

And get killed.

Categories
Philoeconomica Regulation World

Magic Markets: Looking Down on China for the Wrong Reasons Edition

Foreign Policy’s normally pretty good China Brief has this bit of magical thinking about markets today:

But clashing economic and governmental incentives, not generator capacity, are causing the problems [with China’s electricity supply]. Fifty-six percent of China’s power comes from coal, and thermal coal prices have more than doubled around the world after the initial shock of the pandemic. . . . In most countries, these prices would be passed on to consumers, but Beijing tightly limits the maximum price of electricity—causing generators to reduce their supply or shut down rather than lose money.

Palmer J., China Faces an Electricity Crisis. Foreign Policy. September 30, 2021.

Um, if there’s not enough low-cost electricity capacity in China then there’s not enough low-cost electricity capacity in China. Raising prices won’t make the blackouts stop, unless you happen to consider “blackout” too ugly a term to use for having your electricity cut off because you missed your payment. All raising prices will do is ensure that the rich get more of a limited electricity supply, and the poor less. But you don’t need to take my word for it. Just ask Texas.

It’s hard to believe that in 2021 Foreign Policy is still trying to teach China lessons about the virtues of unregulated markets. I mean, this is a country that went from nothing in 1980 to having an economy that’s 20% larger than ours today by purchasing power parity, nationwide blackouts due to the country’s resource poverty notwithstanding. It might be time for us to learn a thing or two from China about how to handle resource constraints equitably.

Or at least to put down our market fetish and actually study a bit of basic economics.

Categories
Antitrust Monopolization Regulation

Biden Antitrust Policy and the Fall of Kabul

The election of a longtime Washington insider to the presidency was, if anything, supposed to mark a return to competent, reality-based government. The astonishing failure of the administration to predict—or adequately plan for—the rapid collapse of the Afghan government this summer is hinting that the new administration is not all that much more competent than the last.

There are warning signs in Biden’s antitrust policy as well. His executive order on competition, for example, misleadingly cited as authority academic sources that either didn’t support the order, or suggested it would fail. And now we learn that the administration actually thinks it can use antitrust action to reduce inflation caused by pandemic-induced supply chain disruption. Oh my.

Antitrust won’t stop inflation caused by supply chain disruption because the profits that firms generate from supply chain disruptions are scarcity profits, not monopoly profits. They are the product of actual scarcity, not the artificial scarcity that antitrust can alleviate by promoting more competition. Only an administration that doesn’t know its Antitrust 101 would miss this.

Indeed, competent progressivism doesn’t make these kinds of mistakes. Take John Maynard Keynes. He was all for killing off the rentier—the earner of the kind of economic profits that supply-chain-induced inflation is dealing to many corporations these days—but he never thought antitrust would do the trick.

Because, like most progressives of his generation—and the competent progressives in ours—he understood that rent is a problem of competition, not monopoly.

The rentier doesn’t need to smash his competitors; he just lies on his fainting couch and watches the numbers tick up in his bank account because he happens to own a uniquely productive resource, one that competitors can’t beat, even if competitors are allowed to try their hardest.

Similarly, the big corporations charging high prices today don’t need to smash their competitors to charge those prices, because their competitors don’t have access to better sources of supply either. No matter how hard these firms compete with each other, there is just not enough production capacity in the supply chain to enable them to ramp up output and therefore no firm has an incentive to reduce prices and increase profits through increased market share.

That is not to say that these corporations are not earning rents, meaning profits in excess of what they need to be ready, willing, and able to produce and sell their wares on the market. They are. Rental car companies, for example, are charging multiples of what they used to charge for a car, while at the same time facing much lower costs than they ever did, because they are unable to expand their fleets. It follows that the price premia rental companies are charging are pure profits that the rental companies do not strictly need in order to remain in business.

But the profits are not a result of anticompetitive conduct. They are due, instead, to shortage. The rental car companies are not expanding their fleets, because a microchip shortage means there aren’t any cars available for them to buy. So, while they wait, the companies ration access to the cars that they do have by charging high prices for them, ensuring that those consumers with the largest pocketbooks get access to cars, and those with less means have to sit on the sidelines and wait for the shortage to end.

Unless it is reformed to adopt pricing remedies—and there is no indication the Biden Administration is seeking to do that—Antitrust has nothing to bring to this situation but trouble. To the extent that Biden’s antitrust initiatives translate into actual cases and the imposition of actual antitrust remedies, we can expect costs that will be passed on to consumers in every competitive market that the Administration mistakenly targets. The costs will be legal costs and also those associated with unnecessary remedies—the firm that actually worked better when it was whole hacked to peaces to please the angry antitrust god.

But the biggest danger posed by the use of antitrust to deal with supply chain disruption is that antitrust will be completely ineffective at actually getting prices down.

Smash three big rental car companies into twenty small ones, but you still won’t increase the number of available cars, and so you won’t, actually, increase competition, or bring prices down. Each of the smaller companies will know that it can raise prices without losing market share to the other nineteen, because the other nineteen don’t have any additional cars to rent out to customers either.

Failing to get prices down would be bad, however, because prices can and should be made to come down. For, as noted above, the fact that prices are currently high due to shortage does not imply that they must be high in order to induce firms to continue to compete and produce as best they can. The rental car companies could just as easily cover their costs by charging the rock bottom prices they charged last summer because the companies are, after all, still fielding the same fleets they fielded last summer. They are charging higher prices because the shortage (but not their own anticompetitive conduct) shields them from additional competition.

How, then to get prices down without antitrust? Keynes’s elegant solution was the euthanasia of the rentier. This was understood by Keynes to mean that the central bank could use monetary policy to drive down interest rates, thereby depriving the rentier of the ability to earn a fat return on his investments.

But the euthanasia of the rentier actually has a deeper meaning. For an actual rentier could always respond to low interest rates in financial markets by using his money to invest directly in actual businesses, especially businesses earning large rents due to shortages. What makes this impossible, and really does euthanize the rentier, is that the lower interest rates created by monetary policy induce large numbers of businesspeople to borrow money and invest it in new businesses, and this investment ultimately eliminates shortages across the economy, driving rents down and killing off the rentier.

But it takes time for money invested in new businesses to eliminate shortages and drive prices down. To get prices down now, before supply-chain disruptions can be eliminated, there are two other options.

The first is direct price regulation. Government could impose price controls in industries subject to pandemic-driven supply chain disruptions. President Biden could order rental car companies to revert to charging their low summer 2020 prices, for example. President Nixon imposed price controls in the 1970s; it can be done.

The second is taxation. Congress could vote a special corporate tax aimed at hoovering up the rents generated by firms enjoying pandemic-driven shortages. That would not bring respite directly to consumers, who would continue to pay high prices, but Congress could vote to redistribute the proceeds of the tax to deserving groups, or spend the money on projects like infrastructure that benefit everyone, rather than leaving it to firms to pay the proceeds out to wealthy shareholders to stimulate the market for yachts.

I am having trouble deciding whether the Biden Administration’s obsession with antitrust as cure-all is the legacy of President Biden’s long career as a centrist Democrat or a result of the meathead radicalism that the Trump Administration inspired in some progressives.

Either way, like relying on the Afghan government to defend Kabul, he can’t say no one warned him it wasn’t going to work.

Categories
Regulation

The Airplane Seat as Liberal Dilemma

People are fighting on airplanes because seats are too small.

The seats are not too small because airlines are forcing passengers to fly on small seats.

They are too small because most passengers do not insist on larger seats—they are willing to fly without them—but at the same time most passengers find the way they are packed into airplanes intolerable.

What gives?

There can be two explanations. The first is that passengers are in denial about their own preferences. They say they hate being packed in, but they still fly packed in, which means they can’t really hate it that much.

The second is that people don’t do a good job of protecting their own dignity. They would never, ever, let a guy come up to them on the street and rub their forearm and thigh for two hours. But it turns out that’s just because they don’t get anything out of the bargain. When that visit to grandma is at stake, by contrast, they acquiesce. People make deals with the devil all the time. They indenture themselves. They abase, and grovel, and beg, and they do it all for things, like getting home for the holidays.

The question is, then: should we respect them when they don’t respect themselves?

The airline seat size question gets to the heart of consumer sovereigntist market ideology.

What could possibly be wrong about letting consumers decide for themselves what they want out of air travel?

That was the question that destroyed the Civil Aeronautics Board, the federal agency that once ran the American airline industry, dictating the number of airlines in the market, the prices that airlines could charge, and, indirectly, the quality of service that they could provide. Before the Carter Administration killed the CAB, it was piano bars all the way up.

In the small seat you have your answer to the question.

The mob voted, overwhelmingly, for cheap at any cost, including to their own dignity.

In a world in which the only value is the democratic value, in which all that matters is what the people want, you are stuck here. You must leave the airlines to torture their passengers; they accept abuse.

If instead you believe in your heart that government should do something about it, that there should be a federally-mandated larger minimum seat size, then you must accept that you are not, in fact a democrat. Not really.

Passengers have voted, already. They prefer cheap. And they have voted far, far more directly than they will have if some elected representative, who ran on a dozen other issues not involving airlines, happens to vote in their name for a larger minimum. Whatever minimum is imposed will drive up the price of a seat, and whether passengers pay the higher prices or not (I think they will), four decades of consumer voting in deregulated airline markets says that they do not actually prefer to pay it.

If you want to impose a minimum seat size, you must accept that you worship at a different altar from that of democracy. Perhaps you worship at the altar of human dignity—of the human form divine. But you must accept what that makes you: a paternalist, a scold, a schoolmarm.

Do not tell me that you think we need minimum seat sizes to forestall violence, that the skies have become a battleground and that is unsafe. For anyone who has suffered through two hours in a packed plane knows just what primeval brain centers are thereby stimulated. But they fly anyway, and when they do, they always go for the cheapest tickets! They accept the risk.

One way out of this cul-de-sac is to say that there is not, in fact, any tradeoff between price and seat size: passengers want bigger seats at the same prices (who wouldn’t?) and airlines could give them to passengers, but they don’t because they have monopoly power.

This helps because it means that passengers aren’t choosing smaller seats—smaller seats are being forced on them.

It follows immediately that if someone is going to do some forcing, it might as well be the government, which can act as medium, divine what consumers would want (larger seats), and dictate them.

While there is almost certainly some power there, seat size hasn’t fallen by half since deregulation, whereas prices have. That’s hard to square with a narrative of oppression.

And anyway, even a monopolist can’t make a passenger accept a smaller seat if the passenger won’t accept a smaller seat; the problem here is that consumer demand is extraordinarily inelastic in price—inelastic unto indignity.

In other words, the demand curve, of a self-respecting public, for today’s super small economy class airplane seats should look like this:

Self-respecting consumers should have perfectly elastic demand at a price equal to zero for very small airplane seats. That would prevent airlines from turning a profit on these seats, forcing airlines to offer bigger economy class seats.

Instead, it looks like this:

Consumers actually have relatively inelastic demand for very small economy class seats (that is, their demand line is relatively steep). To the extent that airlines have monopoly power, it is the inelasticity of consumer demand for these seats that allows airlines to use their power to charge high prices for these seats and thereby to generate monopoly profits on them. The inelasticity of consumer demand here is an embarrassing measure of consumers’ tolerance for indignity.

It is sometimes said that flying was better under regulation because, by setting fares, the CAB forced airlines to compete on quality. But that absolves the passenger of too much. It would be better to say that in setting fares, the CAB prevented consumers from cheerfully trading away their dignity for a discount.

Passengers want lower fares; airlines need to pack in more seats to provide them (whether that need is driven by a need to earn a monopoly profit or not); and airlines oblige.

Should the airlines not offer passengers this devil’s bargain? We have told them: serve you.

And they do.

In the old days, prices were higher, fewer people flew, and flying was dignified.

That was not a democratic world.

But it was better.

Categories
Antitrust Monopolization Regulation

The Executive Order on Promoting Competition That Isn’t

President Biden’s Executive Order on Promoting Competition in the American Economy does a great job of targeting a range of business practices across the economy that harm workers and consumers.

But the order—and the fact sheet accompanying it—also highlight how much wishful thinking is currently going into the contemporary progressive romance with competition as an economic cure-all.

The fact sheet declares that economists have found a link between competition and inequality, even though whether a link exists remains the most important open question in antitrust economics today and the subject of much ongoing debate. And despite the competition rhetoric, most of the order is actually about consumer protection or price regulation by other means, not competition.

Wishful Thinking about Competition and Inequality

Anyone who has been following the unresolved debate over the existence of a link between competition and inequality is going to be surprised to learn from President Biden’s fact sheet that “[e]conomists find that as competition declines . . . income [and] wealth inequality widen.”

The surprised might include Thomas Piketty, the dean of the contemporary economic study of wealth inequality, who has observed that the fundamental cause of inequality “has nothing to do with market imperfections and will not disappear as markets become freer and more competitive.”

But it might also be news to the authors cited by the fact sheet itself.

Follow the first of the quoted links and you get to a paper that connects the decline in labor’s share of GDP (a proxy for inequality) to rising markups (firms charging higher prices relative to their costs), but not to a decline in competition.

The author is careful not to link rising markups to a decline in competition because increases in markups have two potential causes, not one: monopoly power and scarcity power—as I have highlighted in a recent paper.

That is, firms can obtain the power to jack up prices by excluding competitors and achieving monopoly power, or they can do it by making better products than everyone else (or the same products at lower cost), in which case even the price prevailing in a perfectly competitive market will represent a markup over cost.

The great open question of contemporary antitrust economics is whether the evidence of an increase in markups in recent years is evidence of monopoly markups or scarcity markups. As Amit Zac has pointed out to me, this is the essence of the disagreement between the work of De Loecker et al. (monopoly markups) on the one hand and the work of Autor et al. (scarcity markups) on the other.

The point is: this is an unresolved question. Economists haven’t “found” a connection between declining competition and contemporary increases in inequality. They haven’t even found a connection between declining competition and contemporary increases in markups. They’re still looking.

But you wouldn’t know that from the fact sheet.

Follow the second of those links and the support is equally weak. The title of the cited article, “Inequality: A Hidden Cost of Market Power,” would no doubt appeal to a fact sheet writer fishing Google for quick cites. But the paper itself could not be more timid about its conclusions, telling readers that it does no more than to “illustrate[] a mechanism by which market power can contribute to unequal economic outcomes” and warning that “[a]lternative models and assumptions may yield different results.”

The authors have good reason to be timid, because the paper’s attempt to distinguish between monopoly markups and scarcity markups extends no further than this: “we attempt to compare actual mark-ups with the lowest sector specific mark-ups observed across countries, in order to estimate an unexplained or excess mark-up.”

So: find the lowest markups in an industry, assume they are scarcity markups, and attribute any markups you find that exceed them to monopoly.

Not exactly convincing, as the authors themselves seem to telegraph—which is why the character of the higher markups we are observing today very much remains an open question.

Highlighting Antimonopolism’s Intellectual Deficit

The last revolution in antitrust policy happened in the 1970s, and however one might feel about the path it beat toward less antitrust enforcement, there is one thing one must grant: it carried the day as an intellectual matter.

You can’t read the book of papers produced by the epochal Airlie House conference and not get the impression that the Chicago Schoolers really got the best of the old antitrust establishment on the plane of ideas. I once asked Mike Scherer, who carried the banner for the old pro-enforcement establishment more than anyone at that conference, why he comes across as so timid in the dialogues reproduced in that book.

His answer: Chicago had convinced him, too.

The current inflection point in antitrust has not been built on anything like that level of intellectual consensus. I have argued elsewhere that this is because the current movement didn’t need to win the academy to achieve liftoff, as Chicago did. The current movement got its thrust instead from a highly sympathetic press, which has a competitive interest in unleashing a reinvigorated antitrust on its nemeses, the Tech Giants.

It is a symptom of contemporary antimonopolism’s intellectual deficit that our new, self-consciously reality-based administration can go to war against monopoly only by passing off economic conjecture as economic fact.

Did Golden-Age Antitrust Drive Postwar Economic Growth and Save Consumers “Billions”?

Before moving on from the order’s wishful thinking, I can’t help but also mention the fact sheet’s claim that mid-20th-century antitrust “saved consumers billions in today’s dollars and helped unleash decades of sustained, inclusive economic growth.”

Was mid-20th-century antitrust enforcer Thurman Arnold responsible for America’s 2% annual growth rate from the 1950s to the 1970s?

The press release doesn’t cite any economic study taking that position—because there is none. But there are plenty that think those twenty years of 2% growth had something to do with the nation’s return to the peacetime production possibilities frontier after nearly two decades of depression and war.

And did mid-20th century antitrust really save consumers “billions?” You might be forgiven for thinking that link leads to a recent economic study. Instead, it is to a set of figures, released by Thurman Arnold himself, that are cited by legal historian Spencer Weber Waller as possible exaggerations. For example, Waller: “[Arnold’s] case against the milk industry in Chicago supposedly produced $10,000,000 a year in consumer savings” (emphasis mine).

All the figures cited by Waller do probably add up to billions in today’s dollars. But Waller cited them as evidence that Arnold knew how to use hyperbole to win political support for his antitrust campaigns.

Not that the Biden Administration would be doing the same thing.

Competition as Price Regulation by Other Means

But what about the order itself? Here’s where things really get interesting. For despite the rhetoric little of it is actually about competition: it is, amazingly, largely about price regulation and consumer protection instead.

Why? Because the competition business and the inequality business are two very different things; and no matter how hard you tell yourself you are doing competition policy, if you’re trying to equalize wealth, you’re going to end up doing something else.

To see why the order is mostly about price regulation, consider that competition really has two virtues, one more important than the other. The smaller virtue is that competition can reduce prices. The greater virtue is that competition promotes innovation, which is the principal driver of economic growth and benefits to workers and consumers alike.

The reason competition’s effect on prices is a lesser virtue is that competition is wasteful. It means duplication of management and often diseconomies of scale. As I have argued at length elsewhere, if you want to get price down it’s far less expensive simply to order lower prices than to try to jerryrig markets into producing them through unregulated competition.

Antitrust gets this, and so it does not actually prohibit the charging of high prices. Antitrust is much more interested in prohibiting conduct aimed at excluding competitors from markets, because this keeps out the sort of innovative challengers that are responsible for the link between competition and innovation.

The striking thing about Biden’s order is that it is mostly aimed at promoting the first kind of competition—competition meant to lower prices—rather than the second.

Which makes it price regulation by other means. Let’s consider some of the initiatives contained in the order.

Canadian Drugs

The order calls for lowering prescription drug prices by importing drugs from Canada. The thing is: the drugs imported from Canada will be the same as drugs sold in America, only cheaper, which means that the only competition this will create will be between the same products sold at different prices on different sides of the border.

Promoting competition between iterations of the same product produced by a single producer isn’t going to promote innovation. It’s just price regulation by other means.

And wasteful means at that. There’s a reason why Canada has lower drug prices than the U.S., and it’s not because there’s more competition in Canada—a lot of Canadian drugs come from America in the first place. It’s because Canada regulates drug prices directly.

So why can’t we just do that, too, instead of sending American drugs north to be price regulated so that we can bring them back down south at lower prices?

Because, I guess, that wouldn’t sound like a competition policy solution, and progressives today are convinced that competition cures all.

Generic Drugs

The order also simultaneously calls for more antitrust enforcement against “pay-for-delay” drug patent settlements and “more support for generic and biosimilar drugs.”

As in the case of drugs from Canada, competition from generic drugs doesn’t promote innovation. Generics are, by definition, copies of preexisting drugs; generic drug companies don’t invent new drugs, they just strive to bring old ones to market at low prices. So generic competition is just price regulation by other means, and particularly futile and inefficient means at that.

For branded drug companies use pay-for-delay settlements to undermine generic competition, and enforcers have wasted untold hours litigating to stop them, to only modest effect. Plus, forty years after Congress embraced generic competition with the Hatch-Waxman Act, we still have a drug price problem.

That makes an order telling the agencies to stop pay-for-delay and to promote generic competition at the same time more than a little odd. It is like telling a fireman to pump harder and stop more leaks. It might be time to find a different hose.

If Congress wants to get drug prices down, the easiest way to do it would be to follow the Canadians and, you know, order drug prices down, rather than trying to manage the Herculean task of creating and maintaining a competitive generic drug market. The Biden Administration should call for that.

But competition cures all.

The Right to Repair

The order also calls for protecting the right of buyers to repair a host of items from cell phones to tractors.

Now, one can imagine that competition between repair shops might lead to innovation. But it will be innovation in repairs, which is not going to do much to raise living standards. The innovation that matters is not in repairs but in the design of the products being repaired.

Opening products up to third-party repairs isn’t really about competition at all, therefore, but about price regulation by other means.

And not regulation of the price of repairs, but rather of the price of the product to be repaired. The Biden Administration probably believes that making products reparable will drive down the all-in price that buyers pay for the products, because buyers will be able to avoid paying high repair fees to manufacturers, or will be able to go for a longer period before having to replace the item with a new one.

But if manufacturers are able to extract extra revenues from their buyers by charging them for repairs today, what’s to stop them from simply raising their up-front prices to compensate for lower revenues on repairs tomorrow?

If the Biden Administration thinks cell phones and tractors are too expensive, a better way to actually reduce the amount people pay for these products would be to order manufacturers to charge lower all-in prices for them.

But competition cures all.

Small Business Procurement

The fact sheet says that the order will “[i]ncrease opportunities for small businesses by directing all federal agencies to promote greater competition through their procurement and spending decisions.”

But “competition” here means the opposite of what we normally mean. It means that the firm offering the best products at the lowest prices shouldn’t get the contract; the smallest firm should get it instead, even if it offers shoddy products at high prices.

This is regulation of the price paid by government for goods and services by other, deeply inefficient means.

Here’s a better way to redistribute wealth from taxpayers to small businesses that can’t make it in the market: just write their owners checks to stay home. That way the (presumably) poor get their money without the federal government having buy anything but the best.

But competition—or its semblance—cures all.

Protecting Third-Party Sellers on Amazon

The order also directs the FTC to create rules for “internet marketplaces” and the fact sheet suggests that the rules should prevent Amazon from copying the products of third-party sellers.

As the use of generic competition to tame drug prices suggests, the sort of competition that comes from copying is primarily about getting prices down, rather than innovation. If Amazon wanted to beat its third-party sellers by innovating, it wouldn’t create close matches of their products, but rather something new. By selling an identical product, Amazon instead places all the competitive pressure on price.

So we can understand rules preventing Amazon from copying as attempts to drive the price of goods sold on Amazon’s ecommerce platform up, presumably to redistribute wealth from consumers to third-party sellers. Such rules are, in other words, price regulation by other means.

Because the rules would drive prices up, they are the least consumer-friendly initiative described in the fact sheet (unless one expects Amazon to respond by competing more with its third-party sellers based on innovation).

But precisely because the rules seek to drive prices up rather than down—to squelch duplicative and wasteful competition between Amazon and third-party sellers rather than to promote it—they are also the order’s least inefficient example of price regulation by other means.

But they represent price regulation by other means all the same.

Non-Competes

According to the fact sheet, the order “encourages the FTC to ban or limit non-compete agreements.”

Non-compete agreements in high-skilled jobs are associated with higher wages, suggesting that at the high end they help firms invest in their employees, and that investment, in leading to new skills and abilities, counts as a kind of innovation in human resources.

But the fact sheet is interested in the application of non-competes at the low end: to “tens of millions of [presumably ordinary] Americans—including those working in construction and retail . . . .” Here, the evidence suggests that non-competes don’t induce firms to invest more in their employees; they just prevent employees from using outside options to bid up their pay.

A ban on non-competes for ordinary Americans would therefore not have any effect on innovation in worker training, but it would raise wages, making it price regulation by other means.

If we really want to get wages up, of course, the way to do it is to order them up, through initiatives like an increase in the minimum wage. And I get that the Biden Administration indeed also wants to raise the minimum wage.

But that doesn’t make banning non-competes any less price regulation by other means.

Direct Price Regulation

To President Biden’s credit, the order also calls for plenty of direct, and therefore more efficient, price regulation. The remarkable thing is that he does this in a competition order.

The Federal Maritime Commission is to protect American exporters from “exhorbitant” shipping charges. Railroads are to “treat . . . freight companies fairly,” which means charging them lower prices for access to track. The USDA is to “stop[] chicken processors from . . . underpaying chicken farmers.” The FCC is to “limit excessive early termination fees” for internet service. And airlines are to refund fees for wifi or inflight entertainment when the systems are broken—a regulation of the all-in price of a flight.

(Ok, the reason the order doesn’t do more direct price regulation might be that the requisite statutory authority to act in other areas is lacking. But I’m not aware of any Administration calls for Congress to pass new price regulatory legislation, apart from raising the minimum wage and adopting reference pricing in drugs, which latter would apply only to Medicare.)

Consumer Protection

The amount of price regulation—of both the wasteful, competition-mediated sort and of the direct sort—in this order is rivaled only by the amount of consumer protection.

Hospital price transparency is to be fostered, surprise billing condemned. Airline baggage and cancellation fees are to be clearly disclosed. The options in the National Health Insurance Marketplace are to be standardized to facilitate comparison shopping. So too broadband prices.

The common thread to all of these initiatives is that they correct cognitive limitations of consumers that make it difficult for them to find the best, lowest price options on the market, and so leave them poorer. That’s why I class them as consumer protection initiatives, and why they are a good thing.

Consumer protection is competition-adjacent policy—competition does work better, and firms may be more likely to innovate, when consumers have good information about the products offered by competing firms. But the main focus of these initiatives is on empowering consumers to avoid paying out more cash than necessary for goods and services.

Like the price regulation initiatives, it’s directed, ultimately, at the distribution of wealth, not competition. Which is why it is surprising to find so much consumer protection in a competition order.

Unions and Occupational Licensing

The focus on price regulation and consumer protection are a welcome surprise. But the dangers for progressives of confusing these things with competition policy are also on display, for competition is just as likely to be the enemy of equality as it is to be its friend, and it is very easy to lose sight of this when pursuing an equality agenda in competition terms.

Thus in a press release that is already pretty deaf to irony, this takes the cake: “the President encourages the FTC to ban unnecessary occupational licensing restrictions [and] call[s] for Congress to . . . ensure workers have a free and fair choice to join a union . . . .”

Here’s a secret about those “unnecessary licensing restrictions”: they’re state-created unions. The only difference between them and actual unions is that they operate by restricting labor supply, and thereby driving up wages, whereas unions operate by driving wages up, and thereby restricting labor demand. If you’re against occupational licensing because it makes it hard to get a job, you should be against unions, and if you’re in favor of unions because they drive up wages, then you should be in favor of occupational licensing.

The way to minimize mistakes in fighting inequality is to focus on fighting inequality.

Indeed, one cannot help but feel that this order, despite being well-intentioned and expansive, is a sideshow to the real work of fighting inequality that the Administration has undertaken on the tax side. Given the breadth of applicability of the corporate tax—all industries are swept in at once—and the power of the corporate tax to target the proceeds of excessive pricing directly, last week’s agreement of 130 nations to a global minimum corporate tax will likely do far more to divest firms of their markups than anything in today’s order—even were it all implemented as direct price regulation.