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Economists: Was "Amazon’s Antitrust Paradox" really as big of a deal as the reporting says? As someone who doesn't know much about economics, I never assumed t

Economists: Was "Amazon’s Antitrust Paradox" really as big of a deal as the reporting says? As someone who doesn't know much about economics, I never assumed that a monopoly would be merely defined as a cost-based analysis of corporate products. I assumed basically what the paper was arguing was how the system worked - you can be a monopoly even while providing the lowest cost to consumers.

huitzitziltzin 5y ago
This is my field. I read the article some years ago and looked over parts of it again yesterday. I was and remain _extremely unimpressed_. I do not think the article had much of any influence on the thinking of economists on the issues it covers. I have never heard it discussed or mentioned in an economics seminar, nor is it taught. There are economists in industrial organization who think big tech firms need a different regulatory approach. This is fair. But this opinion is not generally informed by khan’s arguments. In my opinion, you can make the case for regulating tech firms most easily for Facebook (which acquired competitors WhatsApp and Instagram and probably shouldn’t have been allowed to). The big tech firms have also done things occasionally which are clearly anticompetitive. Google and Facebook had a (recently revealed) secret anticompetitive agreement about bidding on ads, for example. That was a clear antitrust violation. Likely Google’s payment to Apple to remain the default search engine on iOS is at least questionable. I say all of this to illustrate that I’m not a skeptic about regulating tech firms vis antitrust law. However, the firm where I think this is hardest is Amazon. I don’t see them as being too large or too dominant. As of 2019 Walmart did about 3 times as much retail business as Amazon, iirc. Amazon faces competition from Walmart, Target, and any firm who sells a product online. The cost of going to a competitor’s website is zero. If consumers are repeatedly buying from Amazon instead, that’s a sign that Amazon is doing something right. The claim is made here frequently that AWS is a monopoly. That is very hard to square with the existence of serious competitors like Microsoft and Google. To respond to one more of your points: if you achieve a near monopoly by offering lower prices we economists would say that is good! Quantities are high and prices are low. You are a better option than your competitors. Khan seems to think that this is somehow bad for consumers, perhaps bc “eventually” Amazon will raise prices. (This is not remotely plausible.) If you want a vastly, VASTLY better take on modern antitrust which includes good discussion of tech firms and dominant platforms, read “the antitrust paradigm” by jonathan baker.
- akiselev 5y ago
  > The big tech firms have also done things occasionally which are clearly anticompetitive. Google and Facebook had a (recently revealed) secret anticompetitive agreement about bidding on ads, for example. That was a clear antitrust violation. Likely Google’s payment to Apple to remain the default search engine on iOS is at least questionable. Why occasionally? The vast majority of their products at the very least seem like textbook cases of predatory pricing to this layman. Throw in all the other anticompetitive stuff and big tech starts to look like the Uber/Airbnb of the rule of law.
  - huitzitziltzin 5y ago
    They occasionally do anticompetitive things IMO bc that’s what I’m aware of. There may be (likely are) other anticompetitive things that they do which I am not aware of bc they have not been discovered yet. “The vast majority” of their products seems like a stretch. But setting that aside, many economists (including me) are skeptical of a “predatory pricing” argument. The idea that a firm would actually lose money for years to get rid of competitors in order to then raise prices later makes us skeptical. (At the very very least it would be extremely expensive - and then as soon as you raise prices and act like a monopolist you attract the attention of regulators!) Separate from the question of whether a firm would actually do it, if a firm were doing it, would it be bad for consumers during that time? Suppose Amazon is currently engaged in predatory pricing and is selling everything at a loss, below cost, but will in the future drive all of its competitors out of business and then raise prices... (note: I don’t think this is a plausible theory of Amazon’s behavior at all.) Why shouldn’t the regulator just take its time regulating? If everyone in the market is getting goods below cost, that seems like a win for consumers. If and when Amazon decides to act like a monopolist and raise prices later... regulate them! But if they want to lose money selling cheap stuff now, this seems like a win for consumers now so... let them! Predatory pricing arguments are not that well received in most of the economics profession, in part for these reasons.
rektide 5y ago
> As someone who doesn't know much about economics, I never assumed that a monopoly would be merely defined as a cost-based analysis of corporate products. That's new! Borkism! The terms of anti-trust were redefined in Reagan's time by Robert Bork, an appeals court judge & attorney general under Nixon (and failed Supreme Court nominee, thank the stars). Cory Doctorow had a bunch of threads on this shift on what anti-trust is. I think this modern re-definition is incredibly incredibly important, at the crux of what happened to let the competitiveness in the US collapse, to allow giant monopolies & this acquisition culture to form. I guess the main thread is [1]. There's also discussion on Klobuchar's trust-busting desires[2], and NY attempting some reform[3], and some other mentions, all of which mention Bork & this recent narrowing re-definition. The last starts off with a discussion of Kahn's Anti-trust Paradox, ha! This very much feels like a root cause, of how America became utterly ineffective at regulating anti-trust behavior & monopolies: limiting the definition of what it would consider to cost-based analysis of corporate products. Unbelievably limiting view, huge screw up. Wikipedia page on Robert Bork for some more general background: [4]. [1] https://pluralistic.net/2020/12/10/borked/ https://pluralistic.net/2020/12/10/borked/ [2] https://pluralistic.net/2021/02/06/calera/ https://pluralistic.net/2021/02/06/calera/ [3] https://doctorow.medium.com/new-york-to-revolutionize-antitrust-f1b5baa327b6 https://doctorow.medium.com/new-york-to-revolutionize-antitr... [4] https://en.wikipedia.org/wiki/Robert_Bork https://en.wikipedia.org/wiki/Robert_Bork
sgent 5y ago
Although they often intercept, her paper was not an economics paper, it was a legal treatise. I think the novel portion was that she used modern economic theory to create a legal framework that could be used for enforcement. That said, that and one other paper got her tenure (not just tenure track) at Columbia Law.

huitzitziltzin 5y ago

This is my field. I read the article some years ago and looked over parts of it again yesterday. I was and remain _extremely unimpressed_. I do not think the article had much of any influence on the thinking of economists on the issues it covers. I have never heard it discussed or mentioned in an economics seminar, nor is it taught. There are economists in industrial organization who think big tech firms need a different regulatory approach. This is fair. But this opinion is not generally informed by khan’s arguments. In my opinion, you can make the case for regulating tech firms most easily for Facebook (which acquired competitors WhatsApp and Instagram and probably shouldn’t have been allowed to). The big tech firms have also done things occasionally which are clearly anticompetitive. Google and Facebook had a (recently revealed) secret anticompetitive agreement about bidding on ads, for example. That was a clear antitrust violation. Likely Google’s payment to Apple to remain the default search engine on iOS is at least questionable. I say all of this to illustrate that I’m not a skeptic about regulating tech firms vis antitrust law. However, the firm where I think this is hardest is Amazon. I don’t see them as being too large or too dominant. As of 2019 Walmart did about 3 times as much retail business as Amazon, iirc. Amazon faces competition from Walmart, Target, and any firm who sells a product online. The cost of going to a competitor’s website is zero. If consumers are repeatedly buying from Amazon instead, that’s a sign that Amazon is doing something right. The claim is made here frequently that AWS is a monopoly. That is very hard to square with the existence of serious competitors like Microsoft and Google. To respond to one more of your points: if you achieve a near monopoly by offering lower prices we economists would say that is good! Quantities are high and prices are low. You are a better option than your competitors. Khan seems to think that this is somehow bad for consumers, perhaps bc “eventually” Amazon will raise prices. (This is not remotely plausible.) If you want a vastly, VASTLY better take on modern antitrust which includes good discussion of tech firms and dominant platforms, read “the antitrust paradigm” by jonathan baker.

akiselev 5y ago
> The big tech firms have also done things occasionally which are clearly anticompetitive. Google and Facebook had a (recently revealed) secret anticompetitive agreement about bidding on ads, for example. That was a clear antitrust violation. Likely Google’s payment to Apple to remain the default search engine on iOS is at least questionable. Why occasionally? The vast majority of their products at the very least seem like textbook cases of predatory pricing to this layman. Throw in all the other anticompetitive stuff and big tech starts to look like the Uber/Airbnb of the rule of law.
- huitzitziltzin 5y ago
  They occasionally do anticompetitive things IMO bc that’s what I’m aware of. There may be (likely are) other anticompetitive things that they do which I am not aware of bc they have not been discovered yet. “The vast majority” of their products seems like a stretch. But setting that aside, many economists (including me) are skeptical of a “predatory pricing” argument. The idea that a firm would actually lose money for years to get rid of competitors in order to then raise prices later makes us skeptical. (At the very very least it would be extremely expensive - and then as soon as you raise prices and act like a monopolist you attract the attention of regulators!) Separate from the question of whether a firm would actually do it, if a firm were doing it, would it be bad for consumers during that time? Suppose Amazon is currently engaged in predatory pricing and is selling everything at a loss, below cost, but will in the future drive all of its competitors out of business and then raise prices... (note: I don’t think this is a plausible theory of Amazon’s behavior at all.) Why shouldn’t the regulator just take its time regulating? If everyone in the market is getting goods below cost, that seems like a win for consumers. If and when Amazon decides to act like a monopolist and raise prices later... regulate them! But if they want to lose money selling cheap stuff now, this seems like a win for consumers now so... let them! Predatory pricing arguments are not that well received in most of the economics profession, in part for these reasons.

rektide 5y ago

> As someone who doesn't know much about economics, I never assumed that a monopoly would be merely defined as a cost-based analysis of corporate products. That's new! Borkism! The terms of anti-trust were redefined in Reagan's time by Robert Bork, an appeals court judge & attorney general under Nixon (and failed Supreme Court nominee, thank the stars). Cory Doctorow had a bunch of threads on this shift on what anti-trust is. I think this modern re-definition is incredibly incredibly important, at the crux of what happened to let the competitiveness in the US collapse, to allow giant monopolies & this acquisition culture to form. I guess the main thread is [1]. There's also discussion on Klobuchar's trust-busting desires[2], and NY attempting some reform[3], and some other mentions, all of which mention Bork & this recent narrowing re-definition. The last starts off with a discussion of Kahn's Anti-trust Paradox, ha! This very much feels like a root cause, of how America became utterly ineffective at regulating anti-trust behavior & monopolies: limiting the definition of what it would consider to cost-based analysis of corporate products. Unbelievably limiting view, huge screw up. Wikipedia page on Robert Bork for some more general background: [4]. [1] https://pluralistic.net/2020/12/10/borked/ https://pluralistic.net/2020/12/10/borked/ [2] https://pluralistic.net/2021/02/06/calera/ https://pluralistic.net/2021/02/06/calera/ [3] https://doctorow.medium.com/new-york-to-revolutionize-antitrust-f1b5baa327b6 https://doctorow.medium.com/new-york-to-revolutionize-antitr... [4] https://en.wikipedia.org/wiki/Robert_Bork https://en.wikipedia.org/wiki/Robert_Bork

sgent 5y ago

Although they often intercept, her paper was not an economics paper, it was a legal treatise. I think the novel portion was that she used modern economic theory to create a legal framework that could be used for enforcement. That said, that and one other paper got her tenure (not just tenure track) at Columbia Law.