GMU Econ alum Dominic Pino, writing eloquently at Law & Liberty, makes clear why most journalists refuse to see the unseen. Three slices:
Economics is about the unseen, in Frederic Bastiat’s famous framing. The unseen includes concepts such as opportunity cost and unintended consequences, and that’s the dimension in which economics adds value.
Journalists specialize in seeing things. Their job is to report, to observe, to notice. When they do that well, they add value. Because their professional training does not lend itself to grasping the unseen, they rarely do economics well.
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Ocean carriers, trucking companies, airlines, railroads, terminal operators, freight forwarders, manufacturers, suppliers, designers, marketers, investors, and customers are all independent from each other. They don’t cooperate to deliver goods because they’re being nice. They don’t do it because the government tells them to. They do it because it’s profitable, and it works because the price system allocates resources to make it possible.
Part of the reason goods consumption was able to increase during the pandemic was that the price of shipping containers soared. That might seem counterintuitive, but the higher price signaled to ocean carriers that more capacity was needed, and many additional firms entered the transpacific market on a temporary basis to provide it.
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Ironically, Bastiat was a journalist. But he was a rare one who understood political economy. “Not to know political economy is to allow oneself to be dazzled by the immediate effect of a phenomenon; to know political economy is to take into account the sum total of all effects, both immediate and future,” Bastiat wrote. Most journalists are dazzled by the immediate effects, which it is their job to see. That’s why they usually aren’t very good at economics.
Ms. Harris is apparently undaunted by economic illiteracy, telling a Monday rally in Pittsburgh that “U.S. Steel should remain American-owned and American-operated.”
A politician with the U.S. national interest in mind would celebrate the Nippon Steel deal, which would boost U.S. manufacturing. The Japanese firm has promised to spend $2.7 billion refurbishing the Pittsburgh steel maker’s aging plants. It has also agreed to honor U.S. Steel’s collective-bargaining agreements with the United Steelworkers.
The union has nonetheless lobbied the Administration to block the deal because it prefers a takeover by Cleveland-Cliffs, a union shop like U.S. Steel. The union wants to create a domestic cartel shielded from competition by the Trump-Biden 25% steel tariffs.
Cases like RealPage threaten to chill the beneficial use of pricing algorithms that allow firms to adjust more swiftly to changing market conditions by pricing more efficiently. The fact that a particular algorithmic software package is favored by many firms in an industry may merely indicate that the package is widely seen as superior. Disincentivizing individual reliance on a favored business tool undermines, rather than promotes, competition.
Here’s the abstract of a July 2024 paper by Carl Shapiro and Ali Yurukoglu: (HT Brian Albrecht)
Has the United States economy become less competitive in recent decades? One might think so based on a body of research that has rapidly become influential for antitrust policy. We explain that the empirical evidence relating to concentration trends, markup trends, and the effects of mergers does not actually show a widespread decline in competition. Nor does it provide a basis for dramatic changes in antitrust policy. To the contrary, in many respects the evidence indicates that the changes observed in a number of industries are likely to reflect competition in action. We highlight research that points to targeted interventions that can enable antitrust enforcement policy to better promote and protect competition. Throughout the paper, we identify open questions and opportunities for future research in the cross-industry evidence-at-scale paradigm, the industry-specific study paradigm, and their intersection.
