Jose Luis Magana/AP Photo
Assistant Attorney General Jonathan Kanter, of the Antitrust Division, speaks during a news conference at Department of Justice headquarters in Washington, March 21, 2024.
One of the great achievements of the Biden administration has been to bring antitrust enforcement back from near-death, after four decades during which most economists and law professors who are supposedly expert in the field taught that antitrust was unnecessary and even perverse. During this period, with little or no antitrust enforcement, major industries became more highly concentrated and more abusive to both consumers and potential competitors. Market power was real, even if the experts denied it.
Three of the leaders in the Biden effort to smoke out and prosecute abusive economic concentration are Lina Khan, chair of the Federal Trade Commission; Rohit Chopra, who leads the Consumer Financial Protection Bureau; and Jonathan Kanter, head of the Antitrust Division of the Justice Department. All of them have had a big backstage assist from Sen. Elizabeth Warren (D-MA).
A couple of weeks ago, Assistant AG Kanter gave a landmark speech in which he pointed to the corrupted and corrupting effects on economic concentration of supposed economic experts, who are rewarded handsomely by their corporate clients for testifying against antitrust enforcement. The law and economics specialty offers a splendid career dwelling in the safe, orthodox precincts of an economics department or law school and then making a bundle on the side as a consultant. He said, in part:
Let me start by asking you what these three stories have in common:
- Story one—an international enforcer attended an event thinking they were receiving training from experts associated with the U.S. government. Later, they were shocked to learn the training was funded by companies the enforcer was scrutinizing, with topics and content geared toward encouraging non-intervention.
- Story two—an academic associated with an institute funded by several large technology firms signed an amicus brief opposing a country’s enforcement action. Later, without disclosing that fact, they gave a purportedly expert presentation at the OECD attacking that same enforcement action and advocating the OECD take a position favoring the institute’s funders.
- Story three—a Court of Appeals cited an economic study written by a professor paid by the defendants in support of the defendants’ litigation position. But the paper had no disclosure and so the court had no way to know it was citing advocacy, not merely academic expertise. That appellate decision has become binding precedent in some courts that impacts scores of unrelated cases.
The first and second examples involve George Mason University, which is funded by the Koch family and numerous tech companies. The third is about Joshua Wright, a former professor at George Mason, and the case involved an FTC lawsuit during the Trump administration against Qualcomm, a tech firm that paid him to advocate without disclosure. Wright, who for years was Google’s secret weapon in fighting off antitrust lawsuits and whom several women have accused of sexual harassment and misconduct, was the subject of an excellent three-part series at The Wall Street Journal on his serial conflicts of interest.
Extreme economic concentration, the emblematic economic trend of our era, should be a leading field of economic scholarly inquiry today. But mostly it isn’t. And to the extent that it is, the field is heavily corrupted. As Kanter said in his speech, “Economics teaches that incentives matter. And the inevitable incentive of that flow of money is to distort the academic dialogue and reshape expertise into advocacy.”
Academic consultants can make as much as $1,000 an hour as experts for companies trying to merge; one University of Chicago professor named Dennis Carlton has earned over $100 million from work like this. Corporate consulting is frequently not disclosed in academic or popular writing. Judges are taught through corporate-underwritten events, like one coming up next month at George Mason’s Law and Economics Center on blockchain and crypto, how to rule in cases involving corporate interests. “It is increasingly rare to encounter a truly neutral academic expert,” Kanter concluded.
The trick here is that corporations are able to cloak their advocacy in the form of “independent” validation with something that has an academic imprimatur. In reality, it’s all bought and paid for, but it sounds just enough like a third party for some people to be fooled.
Orthodox economics has long functioned as an apologist for raw capitalism and for what somebody called the ruling class.
But sometimes the connections are too obvious. In the antitrust trial being heard right now between the Justice Department and Google over its advertising technology subsidiaries, Daniel Crane, a University of Michigan professor who is a counsel for corporate law firm Paul, Weiss on antitrust matters, was blocked from the case because he had worked for Google’s rivals previously, and had too much insight into their practices that Google could exploit in the trial.
Orthodox economics has long functioned as an apologist for raw capitalism and for what somebody called the ruling class. If markets are efficient by definition, it makes no sense to meddle with them. The idea that markets are inefficient more often than not is ruled out of order by the profession’s core assumptions. This is what makes standard economics less of a discipline than a religion. For a mainstream economist, to question the premise of usually efficient markets is like a Catholic deciding to question the Holy Trinity.
The fact that a market economy would allow extreme concentration is uncomfortable for mainstream economists to acknowledge, because it defies the core conviction of the discipline—that markets are ordinarily self-correcting and thus mostly efficient. If a monopolist abused market power and excessively raised prices, wouldn’t someone else enter the market and offer competition? That’s what standard theory teaches. Standard theory doesn’t know from monopolists buying up or crushing potential rivals.
These practices can’t be fully captured in statistics or modeled in algebra, the idiom of mainstream economics. To grasp what is occurring, you have to get out of the office and talk to a lot of people off the record. That’s the work of lesser professions like journalists.
I have spent much of my professional life challenging these assumptions, in books and in innumerable articles. As I wrote in this Prospect piece, the good news is that heterodox economics is getting more of a respectful hearing nowadays. If you are very good, you can get tenure at a major economics department by studying the inequities and anomalies in the real world rather than by playing with models and manipulating algebra.
The Economic Policy Institute, founded in 1986, gets a good deal of the credit. Our colleague Harold Meyerson has just written this history of EPI and its increasing influence.
However, as academic economics has begun to open, the capitalist system has become more concentrated and more corrupt. Private equity keeps taking over more and more companies, not to improve them but to extract value. The hospital industry is becoming ever more concentrated, not to improve health care but to maximize market power. Government bureaucracies are deemed inefficient by orthodox economists, but the bigger curse today is impenetrable private bureaucracies.
Too few economists study these trends, and even fewer are serious about proposing remedies. As the Prospect covers all this, we find the patterns and details of what’s been occurring by doing our own original research and reporting, not by exploring economics journals.
