What Does the Growth of Intangible Capital Mean for Competition Policy?
Executive Summary
Worried that competition between firms is lessening, many economists and policymakers have called for a return to the more aggressive competition policies of the 1960s and 1970s and for the breakup or nationalization of large business, such as tech platforms. We argue, on the contrary, that changes in inter-firm competition are significantly driven by the increasing importance of intangible capital: assets like R&D, brands, software, and organizational development. This has several implications:
- It implies that simply dialing up the intensity of competition policy is the wrong response to the growing gap between leaders and laggards; and
- It raises the importance of competition for consumers’ attention.
Finally, we argue that there is a different aspect of the word “competition” that is affected by the shift to intangible capital: competition between individuals. An intangible-rich economy will see an increase in wasteful signaling. Mitigating this rat race should be a policy priority for educators and governments.