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The WSJ reports that Carl Shapiro, deputy assistant attorney general for economics in the DOJ’s antitrust division, has been nominated by President Obama to his Council of Economic Advisers.  Also worth noting is that Phil Weiser, also a former deputy assistant attorney general in the antitrust division, is now senior advisor for technology and innovation at the National Economic Council.

Congratulations to both, and I’m delighted to have them out of the DOJ and in the White House where they can do less damage.  Kidding.  Actually, I think both will (and in Phil’s case, already do) offer much-needed and valuable input in the White House.

 

Filed under: announcements, antitrust, economics, politics, technology Tagged: carl shapiro, cea, doj, economists

David Leonhart points out the new Dale & Krueger study on the value of an elite undergraduate education.  His punchline:

A decade ago, two economists — Stacy Dale and Alan Krueger — published a research paper arguing that elite colleges did not seem to give most graduates an earnings boost. As you might expect, the paper received a ton of attention. Ms. Dale and Mr. Krueger have just finished a new version of the study — with vastly more and better data, covering people into their 40s and 50s, as well as looking at a set of more recent college graduates — and the new version comes to the same conclusion.

Indeed, check out the Dale & Krueger abstract:

When we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to college selectivity fall substantially and are generally indistinguishable from zero. There were notable exceptions for certain subgroups, [namley] for black and Hispanic students and for students who come from less-educated families.

So — college prestige doesn’t matter much.    Right?  Not so fast my friend…

The devil is in the details.  Or in this case, the regression tables.  And the real story is that college prestige matters quite a bit for men, but not women.  Robin Hanson is on the case (the study itself is in italics):

To find the truth, you have to study Table 4 carefully, and note footnote 13:

For both men and women, the coefficient was zero (and sometimes even negative) [in] the self-revelation model.¹³ …

[footnote:] 13 This lower return to college selectivity for women is consistent with other literature. Results from Hoekstra (2009), Black and Smith (2004) and Long (2008) all suggest that the effect of college selectivity on earnings is lower for women than for men.

Table 4 shows that attending a college with higher SAT scores clearly lowered the wages of women 17-26 years after starting college (in 1976) — a school with a 100-point higher average SAT score reduced earnings by about 6-7%!  The two estimates there are significant at ~0.01% level! (The other three, for other periods after starting college, are significant at the 5% level.)

One obvious explanation is that women at more elite colleges married richer classmate men, and so felt less need to earn money themselves. Why don’t the study’s authors want us to hear about that?

See also here and here.

Filed under: economics, Education, universities

From the WSJ:

The U.S. Supreme Court on Tuesday refused to take another look at its controversial 2007 antitrust ruling that allowed manufacturers to set retail prices for their products.  The court, without comment, rejected an appeal by the Texas boutique retailer that was on the losing end of the court’s 5-4 decision nearly four years ago, which was condemned by consumer advocates.

The ideologically divided ruling overturned nearly 100 years of legal precedent and held that manufacturers did not automatically violate federal antitrust law by imposing pricing restraints on retailers. Such restraints can bar stores from selling a manufacturer’s products at a discount.  The high court said in its 2007 ruling that pricing agreements should be judged individually to determine whether there are valid pro-competitive reasons for imposing the price restrictions.

The decision reverberated quickly as manufacturers in sectors like baby goods, consumer electronics, home furnishings and pet food blocked discounters.  Texas retailer Kay’s Kloset, which challenged the pricing policies of Brighton Inc., a maker of handbags and other accessories, said a lower court had taken the Supreme Court’s ruling too far, effectively rendering all vertical price-fixing policies legal.

The retailer enlisted the help of a noted Harvard law professor for its second effort at the Supreme Court.

Lawyers for Brighton said the lower courts faithfully applied the Supreme Court’s ruling. The company said its pricing agreements were pro-competitive because higher prices for Brighton goods encouraged retailers to invest more in marketing, displays and customer service.

This is consistent with our earlier analysis here, in which we observed that “I do not think that such a ruling threatens the ability of plaintiffs, in the appropriate case with appropriate evidence, to bring a rule of reason RPM case.  Further, there does not appear to be much for the Supreme Court to do here.”

Filed under: antitrust, economics, Supreme Court

The Federal Trade Commissioners have posted a letter to Congressmen John Mica and Nick Rahall, members of the House Transportation and Infrastructure Committee, “in response to legislative action by the Committee to transfer the historic FTC Building to the National Gallery of Art.”  I had not heard about any planned legislative action to move the FTC to the National Gallery of Art and thought this might be of interest to our readers.

I’ve copied the Commissioners’ letter below:

Dear Chairman Mica and Ranking Member Rahall:

As the bipartisan Commissioners of the Federal Trade Commission, we write to state respectfully our strong opposition to efforts to remove the FTC from the historic FTC Building to transfer it to the National Gallery of Art. Forcing the FTC out of its federally-owned headquarters would displace our agency from a building that it has continuously occupied since it was designed and built for us over 70 years ago. Since 1938, the FTC Building, located at 600 Pennsylvania, NW, in Washington, D.C., has served as the FTC’s headquarters, housing management, administrative, and adjudicative functions. The building is currently home to approximately 700 people who support the FTC’s missions of protecting American consumers and maintaining competition in the American marketplace.

More critically, a forced move of the FTC could impose additional costs on the American taxpayer from the need to replicate important functions of the FTC Building in a new building. As major examples, the FTC would have to build new courtrooms for conducting adjudications as well as replace its extensive information technology infrastructure, including infrastructure for tracking, investigating, and fighting online and offline fraud.

Yet another significant cost could be for securing more space for the federal government. This would include finding new space for a federal agency that might be displaced by the FTC’s move into a building that the other agency occupies or plans to occupy. And the taxpayers would still have to pay for the maintenance of the FTC Building. While we understand that the National Gallery’s existing buildings were paid for with private funds, monies are appropriated annually for the National Gallery’s operation and maintenance. Thus, even if the National Gallery were to use private funds to remodel the FTC Building for its own use, taxpayers apparently would be responsible for maintenance and operations of yet another National Gallery building (the FTC Building, which the legislation proposes to rename National Gallery of Art-North).

In addition, it is not clear to us the impact of the proposed legislation on historic preservation. The FTC Building is part of the Pennsylvania Avenue National Historic Site, which is registered under the National Historic Preservation Act of 1966. As such, the building’s exterior and countless features of its interior are protected by that Act and its procedures. This includes the building’s iconic man and horse statues, entitled “Man Controlling Trade.”

When laying the cornerstone for the FTC building in 1937, President Franklin Roosevelt said “[m]ay this permanent home of the Federal Trade Commission stand for all time as a symbol of the purpose of the Government to insist on a greater application of the Golden Rule to the conduct of corporations and business enterprises in the relationship to the body politic.” It is our hope that the building’s dedicated purpose can continue to be honored.

Thank you for your consideration of this matter.

More detail is available here.  Representative Mica was apparently not swayed by the pleas of the Commissioners, observing that “It would spoil the view for the five commissioners, and they are upset because they have one of the best views of the Capitol.”  The bill (HR 690) apparently was approved by the committee today by voice vote.

Here is the the House analysis purporting to support its claim of $540 in taxpayer savings from kicking the Commission out of 600 Pennsylvania in favor of the National Gallery (who would apparently raise $200 million for renovations).

Filed under: antitrust, federal trade commission

Dan Crane’s new book is now available from Oxford University Press (HT: Danny Sokol).  Dan has been a repeat visitor to TOTM, is a co-author, and his scholarship on is always insightful.  I suspect this book will become a standard reference in the growing antitrust institutions literature.  Here is the book description from the OUP website:

The Institutional Structure of Antitrust Enforcement , by Daniel A. Crane provides a comprehensive and succinct treatment of the history, structure, and behavior of the various U.S. institutions that enforce antitrust laws, such as the Department of Justice and the Federal Trade Commission. It addresses the relationship between corporate regulation and antitrust, the uniquely American approach of having two federal antitrust agencies, antitrust federalism, and the predominance of private enforcement over public enforcement. It also draws comparisons with the structure of institutional enforcement outside the United States in the European Union and in other parts of the world, and it considers the possibility of creating international antitrust institutions through the World Trade Organization or other treaty mechanisms. The book derives its topics from historical, economic, political, and theoretical perspectives.

Go buy it.

 

Filed under: antitrust, scholarship

There is an interesting story developing on antitrust enforcement and collaboration between hospitals and doctors encouraged by the new health care law.  The New York Times reports:

An influential Republican member of the Federal Trade Commission, J. Thomas Rosch, said that without “vigorous antitrust enforcement,” the new alliances of health care providers could reduce competition and increase costs to consumers.  Mr. Rosch set forth his concerns in private letters to the White House and the federal Medicare agency. The letters, obtained by The New York Times, reveal a struggle between the Justice Department and the commission over who should police the market.

The Rosch letter purportedly asserts that ““The creation and operation of accountable care organizations potentially conflict with the antitrust laws … . The Supreme Court long ago prohibited competing providers from jointly contracting to provide their services, except in specified circumstances.”

David Balto (Center for American Progress) describes the FTC position on collaboration between hospitals as “unreasonable skepticism.”   The Times also reports that the FTC and DOJ are trying to work out a joint policy statement on the issue:

Officials of the two agencies, which normally share responsibility for enforcing antitrust laws, are trying to devise a joint statement explaining how they will evaluate proposed collaborations by doctors and hospitals. The agencies said, in response to questions, that their goal was to have one consistent policy, but they refused to give details of their talks.

Apparently, the letter spurred this response from nine senators encouraging collaboration and shared jurisdiction between the agencies.

And while we’re on Obamacare, though on a completely unrelated note, MIT economist Jonathan Gruber will be releasing a comic book to explain the misunderstood virtues of the bill to the American public:

Gruber said he will illustrate how the president’s plan will lower health-care costs and end discriminatory insurance practices that make it much harder for sick people to get coverage.  “My family made me realize that there’s such a misunderstanding of the bill, and that it’s important to explain why we need this, and what it does,” he said. “I’ve found that when people understand it, they like it.”

That is all.

Filed under: antitrust, economics, health care reform debate, markets, regulation

One of the most fundamental issues in the ongoing debate concerning the costs and benefits of expanded FTC Section 5 enforcement is the extent to which one must be concerned with its collateral consequences.  A central claim of proponents of a broad interpretation of Section 5 coupled with its aggressive enforcement is that concerns with false positives are misplaced because plaintiffs do not have a private right of action, and thus collateral consequences associated with follow-on litigation will be muted.

Read the full piece here. 

As you may have heard, Columbia lawprof and holder of the dubious distinction of having originated the term and concept of Net Neutrality, Tim Wu, is headed to the FTC as a senior advisor.

Curiously, his guest stint runs for only about four and a half months.  As the WSJ reports:

Mr. Wu, 38, will start his new position on Feb. 14 in the FTC’s Office of Policy Planning, and will help the agency to develop policies that affect the Internet and the market for mobile communications and services. The FTC said Mr. Wu will work in the unit until July 31. Mr. Wu, who is taking a leave from Columbia, said that to work after that date he would have to request a further leave from the university.

Mr. Wu’s claim that the source of the date constraint is Columbia doesn’t pass the smell test.  Now, it is possible that what he says is literally true–and therefore intentionally misleading.  Perhaps he asked only for leave through the end of July and would indeed have to request further leave if he wanted it.  But the implication that Columbia would have trouble granting further leave–especially during the summer!–and thus the short tenure seems very fishy to me.

So what else could be going on, while we’re reading inscrutable tea leaves?  Well, for one thing, it could be that Wu has already signed on for some not-yet-public role at Columbia that he prefers not to imperil.  Maybe associate dean or something like that.

But I have another, completely unsupported speculation.  I think the author of The Master Switch (commented on by Josh and me here) and one of the most capable (as far as that goes) proponents of Internet regulation in the land is being brought in to the FTC to help the agency gin up a case against Google.

I think with Google-ITA seemingly approaching its denouement, the FTC knows or believes that Google is either planning to abandon the merger or else enter into an (insufficiently-restrictive for the FTC) settlement with the DOJ.  In either case, not a full-blown investigation and intervention into Google’s business.  So the FTC is preparing its own Section 5 (and Section 2, but who needs that piker when you have the real deal in Section 5?) (for previous TOTM takes on Section 5, see, e.g., here and here) case and has brought in Wu to help.  Given the switching back and forth between the DOJ and FTC in reviewing Google mergers, it could very well be (I haven’t kept close tabs on Google’s proposed acquisitions) that there’s even already another merger review in waiting at the FTC on which the agency is planning to build its case.

But the phase of the case requiring Wu’s full attention–the conceptual early phase–should be completed by the end of July, so no need to detain him further.

More concretely, I would point out that it says a lot about the agency’s mindset that it is bringing in the likes of Wu to help it with its ongoing forays into the regulation of Internet businesses.  By comparison, I would just point out that Chairman Majoras’ FTC brought in our own Josh Wright as the agency’s first Scholar in Residence.  Sends a very different signal, don’t you think?

Filed under: antitrust, federal trade commission, google, technology Tagged: Federal Trade Commission, google, Tim Wu

Former TOTM blog symposium participant Joshua Gans (visiting Microsoft Research) has a post at TAP on l’affair hiybbprqag, about which I blogged previously here.

Gans notes, as I did, that Microsoft is not engaged in wholesale copying of Google’s search results, even though doing so would be technologically feasible.  But Gans goes on to draw a normative conclusion:

Let’s start with “imitation,” “copying” and its stronger variants of “plagiarism” and “cheating.” Had Bing wanted to do this and directly map Google’s search results onto its own, it could have done it. It could have set up programs to enter terms in Google and skimmed off the results and then used them directly. And I think we can all agree that that is wrong. Why? Two reasons. First, if Google has invested to produce those results, if others can just hang off them and copy it, Google’s may not earn the return on its efforts it should do. Second, if Bing were doing this and representing itself as a different kind of search, then that misrepresentation would be misleading. Thus, imitation reduces Google’s reward for innovation while adding no value in terms of diversity.

His first reason why this would be wrong is . . . silly.  I mean, I don’t want to get into a moral debate, but since when is it wrong to engage in activity that “may” hamper another firm’s ability to earn the return on its effort that it “should” (whatever “should” means here)?  I always thought that was called “competition” and we encouraged it.  As I noted the other day, competition via imitation is an important part of Schumpeterian capitalism.  To claim that reducing another company’s profits via imitation is wrong, but doing so via innovation is good and noble, is to hang one’s hat on a distinction that does not really exist.

The second argument, that doing so would amount to misrepresentation, is possible, but I’m sure if Microsoft were actually just copying Google’s results their representations would look different than they do now and the problem would probably not exist, so this claim is speculative, at best.

Now, regardless, I doubt it would be profitable for Microsoft to copy Google wholesale, and this is basically just a red herring (as Gans understands–he goes on to discuss the more “innocuous” imitation at issue).  While I think Gans’ claims that it would be “wrong” are just hand waiving, I am confident it would be “wrong” from the point of view of Microsoft’s bottom line–or else they would already be doing it.  In this context, that would seem to be the only standard that matters, unless there were a legal basis for the claim.

On this score, Gans points us to Shane Greenstein (Kellogg).  Greenstein writes:

Let’s start with a weak standard, the law. Legally speaking, imitation is allowed so long as a firm does not violate laws governing patents, copyright, or trade secrets. Patents obviously do not apply to this situation, and neither does copyright  because Google does not get a copyright on a search result. It also does not appear as if Googles trade secrets were violated. So, generally speaking, it does not appear as if any law has been broken.

This is all well and good, but Greenstein goes on to engage in his own casual moralizing, and his comments are worth reproducing (imitating?) at some length:

The norms of rivalry

There is nothing wrong with one retailer walking through a rival’s shop and getting ideas for what to do. There is really nothing wrong with a designer of a piece of electronic equipment buying a rival’s product and studying it in order to get new ideas for a  better design. 

In the modern Internet, however, there is no longer any privacy for users. Providers want to know as much as they can, and generally the rich suppliers can learn quite a lot about user conduct and preferences.

That means that rivals can learn a great deal about how users conduct their business, even when they are at a rival’s site. It is as if one retailer had a camera in a rival’s store, or one designer could learn the names of the buyer’s of their rival’s products, and interview them right away.

In the offline world, such intimate familiarity with a rival’s users and their transactions would be uncomfortable. It would seem like an intrusion on the transaction between user and supplier. Why is it permissible in the online world? Why is there any confusion about this being an intrusion in the online world? Why isn’t Microsoft’s behavior seen — cut and dry — as an intrusion?

In other words, the transaction between supplier and user is between supplier and user, and nobody else should be able to observe it without permission of both supplier and user. The user alone does not have the right or ability to invite another party to observe all aspects of the transaction.

That is what bothers me about Bing’s behavior. There is nothing wrong with them observing users, but they are doing more than just that. They are observing their rival’s transaction with users. And learning from it. In other contexts that would not be allowed without explicit permission of both parties — both user and supplier.

Moreover, one party does not like it in this case, as they claim the transaction with users as something they have a right to govern and keep to themselves. There is some merit in that claim.

In most contexts it seems like the supplier’s wishes should be respected. Why not online? (emphasis mine)

Where on Earth do these moral standards come from?  In what way is it not “allowed” (whatever that means here) for a firm to observe and learn from a rival’s transactions with users?  I can see why the rival would prefer it to be otherwise, of course, but so what?  They would also prefer to eradicate their meddlesome rival entirely, if possible (hence Microsoft’s considerable engagement with antitrust authorities concerning Google’s business), but we hardly elevate such desires to the realm of the moral.

What I find most troublesome is the controlling, regulatory mindset implicit in these analyses.  Here’s Gans again:

Outright imitation of this type should be prohibited but what do we call some more innocuous types? Just look at how the look and feel of the iPhone has been adopted by some mobile software developers just as the consumer success of graphic based interfaces did in an earlier time. This certainly reduces Apple’s reward for its innovations but the hit on diversity is murkier because while some features are common, competitors have tried to differentiate themselves. So this is not imitation but it is something more common, leveraging without compensation and how you feel about it depends on just how much reward you think pioneers should receive.

It is usually politicians and not economists (other than politico-economists like Krugman) who think they have a handle on–and an obligation to do something about–things like “how much reward . . .pioneers should receive.”  I would have thought the obvious answer to the question would be either “the optimal amount, but good luck knowing what that is or expecting to find it in the real world,” or else, for the Second Best, “whatever the market gives them.”  The implication that there is some moral standard appreciable by human mortals, or even human economists, is a recipe for disaster.

Filed under: business, economics, google, intellectual property, markets, monopolization, politics, technology Tagged: Bing, business ethics, google, Internet search, Joshua Gans, microsoft, Shane Greenstein