Free Enterprise in Three Minutes with Ray Keating – Episode #109: Entrepreneurship is the Right Answer to Worries over “Big Business”

For those worried about big business, while pointing out that such concerns are unwarranted, Ray makes clear that providing a policy environment in which entrepreneurship can flourish is the response that makes the most economic sense. Tune in now! 

Rebuilding Conservatism #4: Lessons in Economics, Part II – Understanding the Economics of Monopoly and Antitrust

 by Ray Keating

The Keating Files – January 10, 2021

 

(Editor’s Note: Much damage has been inflicted on conservatism, conservative thought, and the conservative movement in recent years. The effort to heal and rebuild conservatism promises to be a difficult, but necessary undertaking. The Keating Files will regularly weigh in to help that process. This is our fourth “Rebuilding Conservatism” column.)

 

Politics drives grandiose claims about monopoly, and calls for government antitrust crackdowns. Little of this, to be generous, has anything to do with actual economics.

In the aftermath of insurrection and invasion on Capitol Hill, and grossly irresponsible assertions and outright lies by assorted politicians, there predictably has been a backlash – much of it justified and some not so much. One consequence that actually made me chuckle was Simon & Schuster deciding not to publish a book from U.S. Senator Josh Hawley reportedly titled “The Tyranny of Big Tech.” Knowing Hawley’s populism, cynicism and opportunism, along with this hyperbolic title, I’m pretty sure this isn’t a tome offering sound economic reasoning. 

 

But both left-wing and populist politics have long abused the idea of monopoly and calls for government to intrude in the marketplace. Indeed, it’s been going on since the end of the nineteenth century. While ignoring or denying economic reality, antitrust action ultimately is about politics overruling decisions made by consumers.

 

The following episodes of the “Free Enterprise in Three Minutes Podcast” offer assistance in clarifying matters regarding monopoly and antitrust. I hope you’ll tune in for some sound economics on these crucial matters.

 

1. Free Enterprise in Three Minutes with Ray Keating – Episode #12: No, Apple and the NFL Not Monopolies – Politicians, the media and more than a few economists rather haphazardly toss around the word “monopoly.” Ray Keating sets the record straight on what a monopoly actually is, and no, Apple, the NFL and Major League Baseball are not monopolies.

http://www.buzzsprout.com/155969/707801-episode-12-no-apple-and-the-nfl-are-not-monopolies

 

2. Free Enterprise in Three Minutes with Ray Keating – Episode #73: Antitrust is About Politics, Not Economics, Part I – Ray Keating illustrates that antitrust regulation is all about politics and has nothing to do with sound economics. https://www.buzzsprout.com/155969/4764017-episode-73-antitrust-is-about-politics-not-economics-part-i

 

3. Free Enterprise in Three Minutes with Ray Keating – Episode #74: Antitrust is About Politics, Not Economics, Part II – Ray Keating explains that antitrust regulation is not about protecting consumers, and that it ignores the dynamism of the marketplace.  

https://www.buzzsprout.com/155969/4845794-episode-74-antitrust-is-about-politics-not-economics-part-ii

 

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Other articles in the Rebuilding Conservatism Series…

 

“Rebuilding Conservatism #3: Lessons in Economics, Part I – Thinking about Trade”

 

“Rebuilding Conservatism #2: Free Trade Rocks and Protectionism Sucks”

 

“Rebuilding Conservatism #1: What is Conservatism?”

 

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  His new book Vatican Shadows: A Pastor Stephen Grant Novel is the 13th thriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. 

 

One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.

A Flood of Bad Economics on Tech and Immigration

 by Ray Keating

The Keating Files – October 7, 2020

 

With a presidential election less than a month away, the political silly season has shifted into high gear. And that’s saying something because we now live in a 24/7, 365-days-a-year political silly season.

It’s not just the calendar that signals the current stage of such silliness, but what politicians are saying and doing as well. For example, these days it’s standard fare to rail against technology firms and immigrants, while, of course, ignoring actual economics. After all, economics and reason can be an annoying distraction when trying to turn out one’s political base.

 

So, we have a hot-off-the-presses report from the Democratic staff of the House Antitrust Subcommittee that accuses tech companies Amazon, Facebook, Alphabet (i.e., Google), and Apple of wielding monopoly power, and stomping out competition and innovation. The Democrats ominously declared, “Our economy and democracy are at stake.” Golly.

 

The Democrats tossed out some ideas for government action, including forcing companies to separate certain lines of business and more forceful antitrust powers.

 

Not to be out done, Republicans on the subcommittee chimed in with their own report, which asserted that “Big Tech is out to get conservatives.” Golly … again.

 

In reality, this political stunt fails to take note of the vast innovation that is ongoing in and around the internet; the ever-multiplying choices and reduced costs for consumers; the expanded opportunities for entrepreneurs and small businesses; and the fact that no tech company, no matter how big it happens to be today, can afford to sit back like a fat monopoly, and raise costs or reduce quality for consumers. Were that to happen, that company would be crushed by new or existing competitors, and consumers would quickly move on.

 

Political grandstanding and antitrust regulation are by nature backward looking. Trying to guide and regulate a sector of our economy via antitrust is the equivalent of putting a government bureaucrat in an industry driver’s seat – which should make us all very uneasy – and then have that political appointee drive the car while looking in the rearview mirror. This has always been the case, but given the fast-changing, dynamic nature of our tech economy, it’s particularly ridiculous and dangerous.

 

The question really is quite simple. Who do you want calling the shots in the end: consumers or government? If you favor consumers, then let tech companies – big, small, emerging and still-yet-to-be-born – compete to serve consumers. If you favor government, then forget consumers, let politics reign, and pull more technology under the control of government. After all, how could that possibly go wrong?

 

Oh yeah, and by the way, regarding accusations from Republicans – in particular, populists – who say that tech companies are out to get them, well, while Silicon Valley clearly leans strongly Left in terms of its prevailing politics, the tech tools they produce seem to be serving Republicans and populists quite well. Hmmm, go figure.

 

For good measure, Democratic presidential candidate and former Vice President Joe Biden also favors increased antitrust regulation. For example, a Biden campaign spokesman toldThe Wall Street Journal recently: “Many technology giants and their executives have not only abused their power, but misled the American people, damaged our democracy, and evaded any form of responsibility. That ends with a President Biden.” Golly, one more time.

 

But attacks on so-called Big Tech can’t stop there during the political silly season. How about a two-for-one policy change that not only slaps U.S. tech companies, but immigrants as well? President Trump and his administration certainly can’t pass up that opportunity. After all, that anti-immigration base needs shoring up.

 

As a result, the Departments of Homeland Security and Labor have announced a tightening of requirements for H1-B visas, which cover high-skilled foreign workers. Apparently, it’s time to make it tougher to bring in such immigrants and to raise the costs of doing so.

 

The new regulations, according to officials, will increase the level of rejected H1-B visa applications, and mandate that H1-B visa workers receive higher pay. Wait, is that like an increased minimum wage for immigrants? The political folks might want to take a closer look at that – could be a bad look with the base. 

 

Joe Biden also favors jacking up government mandated wages for H1-B visa workers.

 

This entire effort, of course, is built upon the fiction that immigrants coming to the U.S. take jobs from native-born Americans, drive down wages, and contribute nothing. But the truth is that these and other immigrants fill jobs that U.S. businesses cannot fill otherwise; do complementary work that enhances the productivity and incomes of native-born workers; generate further growth as producers and consumers; and have a higher propensity for entrepreneurship than do the native born. Immigration, as most economists will tell you, is a net-plus for the economy, and studies overwhelmingly show no negative effects on wages of the native born due to immigration.

 

The U.S. economy is not a zero-sum game, whereby one person’s gain is another’s loss. Instead, when not held back by pandemics, government shutdowns, and/or costly public policies like high taxes and onerous regulations, entrepreneurs, investors, businesses and workers – including tech companies and immigrants – drive wealth creation, economic growth, productivity, income growth, and job creation forward.

 

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Recent and Related Columns by Ray Keating…

 

“Polls Before the Dreaded Presidential Debates”

 

“Voting Your Conscience Isn’t Wasting Your Vote”

 

“Character-Rich Sci-Fi: Take the Netflix Journey with ‘Away’”

 

“Applaud, Don’t Attack, Robinhood”

 

“Sports Are Back But Americans Aren’t Happy”

 

“Should We Take Our Ball and Go Home When Pro Athletes Disagree with Us?”

 

“‘Greyhound’ Ranks as Strong Storytelling – Even on a Smaller Screen”

 

“2020 Politics as the Conventions Get Rolling … Kind of?”

 

“Biden Picks Harris: Will It Matter on Election Night?”

 

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

Keating’s latest novel is  The Traitor: A Pastor Stephen Grant Novel, which is the 12thbook in the series. The best way to fully enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.

Free Enterprise in Three Minutes with Ray Keating – Episode #74: Antitrust is About Politics, Not Economics, Part II

Ray Keating explains that antitrust regulation is not about protecting consumers, and that it ignores the dynamism of the marketplace. Tune in here!

Check out all of the Free Enterprise in Three Minutes episodes here.

An Uncomfortable Shave from Antitrust Zealots

Republicans and Democrats Want Big Government to Stop “Big Razor,” “Big Cereal,” “Big Pharma,” “Big Tech” – Do You See a Pattern Here?

by Ray Keating

The Keating Files – February 12, 2020

Wow, that was a close shave. But thank goodness that the Federal Trade Commission (FTC) has saved us all from the power and abuse of the razor monopoly. What would we do without government stepping in to stop “Big Razor” in its tracks? We can all rest easier while shaving each morning.

That’s right, the FTC sued to stop Edgewell Personal Care Co., maker of Schick razors, from buying razor rival Harry’s Inc. The deal was announced in May 2019. The FTC got around to opposing it early this month, and subsequently, the proposed purchase was cancelled by Edgewell.

What’s the deal? In general, this is another glaring example of stepped-up antitrust regulation based on bad economics, blind ideology and/or shortsighted politics.

On the shaving issue, the FTC decided to define the relevant market as the “wet shave market,” and asserted that it has been dominated by “two main suppliers.” The FTC’s decision was to simply ignore other kinds of razors that consumers use. Well, that’s convenient if one is looking for an excuse for government antitrust action. 

Daniel Francis is the deputy director of the FTC’s Bureau of Competition. Yes, there’s a governmental entity called the “Bureau of Competition.” Anyway, Mr. Francis said, “Harry’s is a uniquely disruptive competitor in the wet shave market, and it has forced its rivals to offer lower prices, and more options, to consumers across the country. The Harry’s and Flamingo brands represent a significant and growing competitive threat to the two firms that have dominated the wet shaving market for decades. Edgewell’s effort to short-circuit competition by buying up its newer rival promises serious harm to consumers.”

Besides the ridiculously narrow market definition, there are all kinds of absurdities at work here. The most glaring is that these bureaucrats assert that consumers would be harmed. How? Well, that’s not clear. After all, the opportunities in the free market that were open to Harry’s being created in 2013 still exist for other potential competitors. Plus, the FTC bureaucrats fail to recognize efficiencies that might be gained through this kind of merger, thereby creating further savings for consumers. 

No one should be surprised that the government’s Bureau of Competition doesn’t grasp how competition works.

This action by the FTC follows on others that are equally farcical. For example, in December 2019, the FTC announced that it was challenging Post Holdings, Inc.’s proposed acquisition of TreeHouse Foods, Inc.’s “private label ready-to-eat cereal business.” Private label products are made by one company and offered for sale by a different firm under its brand. The FTC argues for government action to stop a merger in a small portion of the breakfast foods market because, as stated by another FTC bureaucrat, it “would likely lead to higher prices and reduced quality of the store-brand cereals that consumers enjoy today.” Such notions again spring from failing to understand how markets work, including the realities of competitive dynamism and efficiency gains.

The Post-Treehouse merger was called off in January due to the FTC’s opposition.

Apparently, FTC bureaucrats are very concerned about morning activities – in terms of both shaving and eating cereal.

And then there’s the recent all-out political attacks against a variety of large tech firms. The FTC is looking for antitrust abuses by Amazon, Apple, Facebook, Alphabet (Google’s parent company), and Microsoft, including issuing an order this week for the companies to fork over information on small tech deals occurring over the past decade. Can you say “fishing expedition”?

The Justice Department, Congress and state attorneys general also are looking into the undertakings of large technology firms. 

The problem with all of this is that it has everything to do with politics and vague laws, and little to do with actual economics. This has been the case since antitrust legislation was passed in the late 19^thand early 20^thcenturies. The Sherman Act (1890), the Clayton Act (1914), and the Federal Trade Commission Act (1914), in effect, granted the federal government the power to break up monopolies, prevent monopolies and cartels, and stop mergers that could substantially reduce competition. And this is all supposedly focused on protecting consumers. 

Unfortunately, these laws are pretty vague, and assume that politicians and their appointees can figure out how industries operate, will develop and change; and what new ideas, products and services entrepreneurs will offer. Those are heady assumptions regarding petty politicians.

In reality, monopolies in private, competitive markets rarely, if ever, occur, and firms that do gain significant market share can only do so by better serving consumers. For good measure, even those businesses earning large market share must be aware of emerging and future competitors. That’s the economic reality of markets. 

Given that antitrust regulation is directed at monopolies it’s critical to actually understand what a monopoly is. Properly understood, a monopoly means that a market is served by only one seller. Also, there must be no close substitutes for the product and high barriers to enter the market. Again, economics tells us that a true monopoly emerging from the competitive market is truly rare. Instead, monopolies occur when government acts to create, grant or protect a monopoly.

And rather than seeing current and future markets with near-perfect clarity, politicians and their appointees often ignore economics, the definition of a monopoly, and assorted market realities. After all, the antitrust legislation passed in the late 1800s and early 1900s emerged from complaints by competitors, not consumers (and that remains the case today), and from anti-big-business ideologies within both the Progressive and populist movements. Interestingly, in 2020, the same coalescence of Progressivism and populism has spurred the current re-energizing of government antitrust regulation.

Progressives via the Democratic Party never gave up on an anti-business agenda, including antitrust activism. Meanwhile, though he veers for and against large businesses on seemingly a day-to-day basis, President Trump’s populism often rails against large businesses when it fits his political agenda, or when he feels slighted. 

Much of the rest of the Republican Party has followed Trump’s lead, including his own Justice Department and FTC. While Republicans generally had been far less enthralled with antitrust regulatory intrusions in the recent past – especially from Ronald Reagan to George W. Bush – that seems to have changed, with assorted GOP voices in Congress joining Trump in attacking large businesses. 

This has been particularly the case with Republicans feeling frustrated by real and perceived anti-Republican biases lurking among various large technology firms. While anger among conservatives (including myself) is justified at assorted actions taken by some tech companies, in particular, Google, against conservative voices, the proper response is to encourage and create alternatives in the marketplace. However, various Republicans prefer tossing aside free market principles, and instead, embracing big government to do their bidding against certain businesses – doing the same thing that they used to criticize the Left for doing. Senator Josh Hawley, a populist Republican from Missouri, leads the way against “Big Tech,” ranting against social media, supporting price controls on prescription drugs, and looking to use big government to fight big business.

Golly, what could go wrong?

What’s most striking about Hawley is how this Republican falls in line with Democrats who fail to grasp the dynamism and staggering benefits of the market. He cannot see beyond a very narrow, biased view of a current moment in time, and apparently lacks the ability to understand that even the biggest of companies remains at the mercy of consumers, and therefore of competitors now and to come. 

To drive home this point about the dynamism of the market, a few years ago, AEI scholar Mark Perry pointed out: “Comparing the Fortune 500 companies in 1955 to the Fortune 500 in 2014, there are only 61 companies that appear in both lists. In other words, only 12.2% of the Fortune 500 companies in 1955 were still on the list 59 years later in 2014, and almost 88% of the companies from 1955 have either gone bankrupt, merged, or still exist but have fallen from the top Fortune 500 companies (ranked by total revenues). Most of the companies on the list in 1955 are unrecognizable, forgotten companies today (e.g. Armstrong Rubber, Cone Mills, Hines Lumber, Pacific Vegetable Oil, and Riegel Textile).” 

Now we have both Democrats and Republicans basically saying, “Oh, don’t bother us with such inconvenient facts about how business and the market actually work.”

Yes, a quick study of economics and history would reveal such realities. But it’s hard for populist politicians, even one often labeled as an “intellectual,” as is the case with Hawley, to get by ideology and plain old politics to clearly view the lessons of economics and history.

For those craving bipartisanship today, well, here it is. Just look to assorted Republicans joining Democrats in an ideologically-driven anti-big-business crusade pushing for more big government antitrust regulation.

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Ray Keating is a columnist, an economist, a novelist (his latest novels are The Traitor: A Pastor Stephen Grant Novel, which is the 12^thbook in the series, and the second edition of Root of All Evil? A Pastor Stephen Grant Novel with a new Author Introduction), a nonfiction author (among his recent works is Free Trade Rocks! 10 Points on International Trade Everyone Should Know), a podcaster, and an entrepreneur. The views expressed here are his own.

Free Enterprise in Three Minutes - Episode #12: No, Apple and the NFL Are Not Monopolies

Politicians, the media and more than a few economists rather haphazardly toss around the word “monopoly.” Ray Keating sets the record straight on what a monopoly actually is, and no, Apple, the NFL and Major League Baseball are not monopolies.

Tune in at http://www.buzzsprout.com/155969/707801-episode-12-no-apple-and-the-nfl-are-not-monopolies