A November 18 federal trial court decision favoring Facebook is the first decisive win for a big tech digital platform in a suit brought by the federal government. District of Columbia Judge Jed Boasberg’s opinion striking down the Federal Trade Commission’s monopolization suit against Facebook appears sound and well-reasoned and will be hard to overturn on appeal.
The decision also may have broader implications for U.S. antitrust suits brought against high tech firms. It stresses how tech markets have changed significantly in recent years, making restrictive market definitions, such as the one put forth by the FTC here, hard to defend. Antitrust cases that retard innovation by focusing on narrow conditions at one point in time may miss the bigger economic picture.
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While market definition was key to the court’s ultimate holding, additional discussion by Judge Boasberg shed light on the fact that Facebook’s activities had generated substantial economic benefits.
Judge Boasberg found it “impossible to believe that consumers would prefer the versions of Instagram and Facebook that existed a decade ago to the versions that exist today,” implying that product improvements driven by competition have benefited consumers.
Indeed, economic research indicates that “digital goods” associated with platforms have brought forth enormous levels of new consumer welfare (the key goal of antitrust according to leading scholars and the Supreme Court). One estimate by leading scholars found that digital goods bestowed trillions of dollars in annual benefits to consumers.
The scale of the economic benefits of platform innovation for the American economy merit being highlighted. U.S. courts overseeing digital markets cases may be finally awakening to the fact that antitrust ignores beneficial changes in market conditions at its peril. Bringing costly antitrust suits that retard innovation is not MAGA. Federal antitrust enforcers may want to take note of this.
Also writing wisely about antitrust is Mark Jamison. A slice:
Antitrust enforcement in the United States too often fails to deliver what it promises. The Justice Department and Federal Trade Commission have won historic cases—the breakups of Standard Oil and AT&T, and most recently the ruling against Google’s search practices—but such victories rarely enable commerce or bring benefits for consumers. The reason is simple: Antitrust enforcers are fighting the wrong battles. They focus on the moments they can easily see, such as present and past market shares, rather than on how industries evolve. By the time regulators finish their legal battles, the technologies and markets have already moved on.
Mani Basharzad asks: “What is wrong with economics education?” Two slices:
How many times does an undergraduate economics student hear the name “Hayek” in his or her courses? The answer, in most programs, is close to zero.
This is surprising. Friedrich Hayek remains one of the most cited Nobel laureates in economics—second only to Kenneth Arrow in mentions and citations in Nobel lectures, according to research from King’s College London. His ideas on the knowledge problem and the economic calculation debate are fundamental to understanding the limits of central planning and the role of markets.
And yet, in most classrooms, Hayek’s name never appears. Why? Because economics education today is not primarily designed to train economists but to produce social engineers.
This point was made forcefully by another Nobel laureate, James Buchanan. In his 1964 presidential address to the Southern Economic Journal, Buchanan asked the deceptively simple question: “What should economists do?” His answer was not about what theories to teach but about how to teach. He argued that the modern economics curriculum had been captured by a vision of training future policymakers to manage society rather than cultivating economists as scientists who study spontaneous order and social processes.
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Students learn to solve equilibrium equations, calculate shifts in demand and supply, and memorize models of optimization. Rarely are they asked to reflect critically on whether these frameworks capture the world they are meant to describe.
As Austrian economist and professor at New York University Mario J. Rizzo recently noted in the Financial Times, “The students were given, mainly or only, problem-sets of a completely mathematical nature. […] There were no questions involving critical reflection on the ideas or frameworks taught.”
This approach instills in students the illusion that social problems can be solved by finding “optimal solutions.” In that worldview, markets are seen only in terms of failures—problems that supposedly require government correction—while genuine market solutions are ignored.
But such a mindset directly contradicts the wisdom of classical liberal economics. Thomas Sowell once remarked that, in the real world, “there are no solutions, only trade-offs.” Social life is not about perfection; it is about making choices under scarcity, uncertainty, and ignorance. The central task of economics is not to identify perfect outcomes but to understand how institutions help us cope with imperfection.
[DBx: Buchanan’s address was in 1963, although it was published in a 1964 number of the Southern Economic Journal. Also, at George Mason University, economics continues largely to be taught as Buchanan urged.]
GMU Econ alum Jeremy Horpedahl reports that today “one-third of US families earn over $150,000” – a reality that is not mainly due to the rise in two-income households. (HT Arnold Kling)
Andrew Langer counsels that we should fund air-traffic control during a shutdown, not privatize it (Letters, Nov. 12). Fair enough, but there’s another sensible option. Keeping ATC in the federal budget makes it vulnerable to shutdowns and political micromanagement, which has prevented the FAA from retiring aging technology and sensibly consolidating and modernizing its facilities. The model now providing depoliticized ATC in nearly 100 countries is an aviation public utility, funded entirely by system fees and charges. Only four of these are “private” in some sense; the vast majority are government utilities like our Tennessee Valley Authority. Its revenues come from its customers paying TVA for what they use—exactly as airlines and business jets do worldwide with ATC utilities.
According to the Congressional Budget Office, maintaining all Social Security and Medicare benefits by borrowing would add roughly $115 trillion to the deficit over the next thirty years. That’s $70 trillion in shortfalls and the rest in interest payments. On a real basis, using a 2% real discount rate, the present value of that $70 trillion is on the order of $40 trillion—greater than the current $38 trillion national debt. That is also the same amount by which income taxes would have to rise in order to avoid borrowing, and the same present value of the later, larger income taxes that would be needed to eventually repay added debt.
The danger, of course, is that Congress will borrow and then be unable or unwilling to repay such a massive amount of debt. A debt crisis will eventually erupt, leading to default or inflation. History has no shortage of examples of other countries unsustainable social spending causing debt collapses. It can happen here. And when people see that event coming, we will see a flight from Treasury debt and inflation in its anticipation.
