Something (Useful) for the FTC to Do

I took a class at George Mason University with economist Tyler Cowen on industrial organization (IO).1 My apologies to Dr. Cowen if I misstate anything he said,2 but he summed IO up like this: there are two schools of thinking within IO, the “Chicago” school and the “New-New IO” school.

The Chicago school argues that monopolies arise from government regulations that prevent potential competitors from entering an industry. This allows incumbent businesses to avoid competition and charge higher prices. The New-New IO school uses game theory models to show that monopolies can arise without government intervention.

At an anti-trust conference I attended last Friday, the argument of the pro-FTC panelists was basically that: “Yes, it is extremely difficult for the FTC to identify monopolistic practices. We may do more harm than help. But, we’re still going to do it anyway.” I suspect the FTC has a New-New IO focus but ignores the Chicago side. We know that government supports monopolistic practices via tariffs, price fixing, licensing, etc., so why not go cannibal on bad government practices if consumers are truly the FTC’s concern?

The FTC should sue the FCC over their broadband spectrum allocation and licensing policies. They should take on the florists and state government in Louisiana. The incumbent florists lobbied for a law that allows them to administer a “floral arrangement examination” to potential competitors.3 The FTC should take-up a Chicago school attitude: identify and eliminate barriers to entry. They can (and should, as long as they exist) do some definite good for consumers.

1 IO asks questions why some industries have large companies whereas others have small companies, whether or not monopolies exist in particular industries, etc.

2 Please note that my thesis on the FTC may or may not be that of Dr. Cowen’s.

3 For more details on this abomination click here, see p. 38.