Brian Albrecht combines “theory and empirics around market dynamics.” Two slices:
In a recent post reflecting on Austrian economics, Bryan Caplan mentioned that around 2000, he “discovered that John Haltiwanger, a very mainstream economist, had a pile of empirical evidence vindicating the importance of Schumpeterian creative destruction” and wished more Austrians would engage with this empirical work. I couldn’t agree more because this empirical work helps us understand and measure the competitive process.
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Speaking of Schumpeter—while he’s often contrasted with Kirzner, the empirical work suggests their insights are complementary. Schumpeter emphasized creative destruction—the process by which more innovative firms drive out less productive ones. Kirzner focused more on arbitrage and the discovery of existing opportunities. However, in practice, both processes show up in the data as reallocation toward more productive firms. The measures capture parts of both mechanisms.
Do these dynamism measures capture everything about Kirznerian, let alone Schumpeterian, entrepreneurship? Of course not. But it gives us a systematic way to measure whether markets are working like Kirzner described—moving resources toward more productive uses through entrepreneurial discovery. That’s obviously not true of all economies, so we don’t have any a priori way of knowing which ones are doing a good job. The key connection I’d make between Haltiwanger and the Austrians is that successful entrepreneurial discovery should show up as systematic reallocation toward higher-productivity firms. If entrepreneurs are spotting and exploiting opportunities, we should see market share flowing to those who create more value from resources. The measures aren’t perfect, but they let us quantify whether markets are actually working as processes of discovery and reallocation rather than static equilibria.
If I can shamelessly self-promote some more, my own research tries to bridge the gap between the Austrians and Haltiwanger.
My work with Ryan Decker (a coauthor with Haltiwanger) looks at the relationship between measures of market power, like markups, that are often seen as a lack of competition and business dynamism at the industry level. Most people think market power is rising in the US and dynamism is falling. Both are bad signs for the state of competition. Rather than focus on aggregate trends, we dig into whether industries with rising markups see the kind of declining dynamism that signals reduced competition.
What we found challenges conventional wisdom about market power. Industries with the highest increases in markups saw the smallest decline in dynamism. The two measures of competition point in opposite directions.
But this is perfectly plausible through a Kirznerian lens: markups and profits can reflect successful entrepreneurial discovery rather than harmful market power. When firms find better ways to serve customers or lower costs, they can charge higher markups while growing market share. This is exactly the reallocation toward more productive firms that characterizes healthy market competition.
Peter Suderman writes insightfully about prices and people’s attitude toward them. A slice:
It’s not too hard to understand why people hate prices. Prices, left to do their work, are signals—about value, about rarity, about cost in time and resources, about sentimentality, about desirability, about the labyrinthine machinations of global supply and demand.
Prices, in other words, deliver information. And in many cases, the information they deliver is that you can’t have everything you want.
Politicians like Warren, meanwhile, are in the business of falsely promising that actually you can. Failing that, they are in the business of masking, manipulating, capping, controlling, and otherwise distorting prices in hopes of hiding the information that prices convey. Price controls and their ilk are a politician’s way of lying to you about what something is worth.
It’s not just Elizabeth Warren. As inflation surged, politicians from both parties, including presidential nominees Donald Trump and Kamala Harris, sought to cap or control prices for food, credit, medical care, labor, and more. Activists have concocted narratives about intensifying corporate greed, and academics have pushed sweeping price controls in response.
But climate change is merely an excuse to get others to pay for upgrading infrastructure that New York politicians have failed to maintain because they divert so much money to welfare payments and fat public-worker pay and benefits. Ms. Hochul is grasping for revenue now because GOP control of Washington will likely mean less federal largesse for states.
Wall Street Journal columnist Holman Jenkins ponders U.S.-China economic relations. A slice:
Lesson: Lurching into actions harmful to ourselves turns out to be another unforeseen China-related risk. A trillion-dollar cleanup job now lies ahead to deal with the Biden administration’s attempt to force EVs on Detroit, thanks partly to rent-seekers masquerading as China hawks.
I hope Donald Trump, whose rhetoric can be disconcerting, is paying attention. U.S. global leadership in technology is built on openness to the world—at least openness to like-minded, Western-oriented economies. Even so, when the decouplers are done, our interdependence with China will still be orders of magnitude greater than any with the Soviet Union and usefully so. Not least it gives us a window on how Mr. Xi’s increasingly totalitarian and apocalyptic geopolitical fantasies are playing among Chinese elites, plus a chance to counter them.
Sheldon Richman, thankfully, has not forgotten William Graham Sumner.
This union is a lot closer to a protection racket than to Joe Hill.
For starters, it already has 50,000 members getting paid to do just 25,000 jobs: Under past labor contracts that allowed for some innovation, fully half the dockworkers at the East and Gulf coast ports sit at home collecting “container royalties.”
And Harold Daggett — the union boss vowing to “cripple” the US economy if any more automation is allowed — lives in a luxe, 7,000-square foot mansion in tony Sparta, NJ; among the vehicles in his five-car garage is a Bentley convertible.
Consider: Union hostility to automation is holding back US ports, not one of which makes the world’s top 50.
Europe’s largest port, Rotterdam, is also one of the most automated, yet that’s in the Netherlands, social-democracy central — proving that major automation is compatible with worker dignity even in the fanatically pro-labor European Union.
