Did you know DOJ is suing Apple? You did? Okay.

Well, there's a lot of talk comparing the Apple antitrust case to Microsoft back in the day.

What were the effects of the Microsoft lawsuit? There's an important paper you should know 🧵 Thatchenkery & Katila (2023) ran a super interesting analysis on the actual effects of the Microsoft case.

They used a nifty empirical approach that could tell us a lot about what might go down with Apple.

Published paper:
WP: onlinelibrary.wiley.com/doi/abs/10.100…
mackinstitute.wharton.upenn.edu/wp-content/upl…

"[Neoliberalism] brought back fairies and all these pre-Enlightenment beliefs in the form of "magical markets" and "market forces." These are not things that exist in the real world."- Barry Lynn

As someone who writes Economic Forces, let me clarify 👇
1. If it wasn't clear when economists say economic forces, we don't think they are actual forces. It's an analogy, just like "power".

2. Are markets magical? I don't think I've used that term, but I could see it. Technology is magical, too, for many people. Again, an analogy.

FINAL MERGER GUIDELINES ARE HERE!

Quick thread on some of what has changed.

I'll keep editorializing til the end or another thread. Here's the press release.

First, can I say that my birthday is a very not cool day to drop this?
ftc.gov/news-events/ne…

In 1984, F.A. Hayek was asked who his favorite economist was. He named two.

The first was Nobel Prize winner George Stigler. The second, sadly, never got the recognition he deserved.

Here are 5 papers by the 🐐, Armen Alchian, and why you should read them today 👇 Most grad students today never hear the name Alchian. That's a shame!

He made foundational contributions to so many fields like property rights economics, the theory of the firm and monetary economics.

That's why he's the GOAT. economicforces.xyz/p/why-armen-al…

To no one's surprise, the Nobel Prize goes to Claudia Goldin

Here are 3 things from her to start your dive into her work: One of the things that makes it difficult to jump into Claudia's work is that there really isn't ONE paper. It's a body of work built over decades.

Contrast this with last year's prize, which was literally for one model of bank runs.

We've known @linakhanFTC wanted to rewrite US antitrust since she first took office. (Actually, since she was in law school). So far, she's struck out.

Today's new draft FTC/DOJ guidelines reveal her vision on mergers.

If taken seriously, they will set antitrust back decades 🧵 First, what are the merger guidelines?

The rule of law requires that people know beforehand whether something is legal or not. A speed-limit sign tells drivers the rules of the road. 🚦

The merger guidelines give a signal to businesses what the FTC/DOJ will challenge in court.

A Short Course on How To Understand Inflation

Economic Forces Edition 🧵 Lesson #1: Our intuitions are often faulty when thinking about inflation.

You cannot ask people why they are raising prices. People don't know. Don't overinterpret what CEOs say as evidence.

You need *economic theory* to make sense of cause and effect. economicforces.xyz/p/dont-ask-peo…

I didn't study econ in undergrad.

One Friday, I picked up Thomas Sowell’s Basic Economics. On Sunday, I told a friend that I was going to be an economist.

After reading Knowledge and Decisions, I was 💯% hooked.

Why You Should Read More Thomas Sowell
economicforces.xyz/p/why-you-shou… Basic Economics hammers home the central idea of economics: everything is about trade-offs because of constraints.

Knowledge and Decisions focuses on the "most severe constraints facing human beings in all societies and throughout history—inadequate knowledge"

I agree. Price controls would stop inflation faster.

Guess what? They're still a terrible idea for all the standard reasons: reduced supply, the deadweight loss from waiting in line, I mean, queuing.

The policy goal isn't to limit inflation by any means necessary. Tradeoffs! The Bank of England has only raised rates to 4.5%, which is lower than pre-financial crisis rates when we didn't have inflation.

Real interest rates are still negative. Let's not imagined they turned it up to 11.

The reason? The BofE, unlike the Guardian, recognizes tradeoffs.

Why are groceries expensive?

The NYT ran a piece that blames the failure to enforce the Robinson-Patman Act for rising food prices.

Anytime you see a piece connecting antitrust to inflation, you know it's going to be a stretch 🧵 Before we get to the RPA, the op-ed starts with "To understand why grocery prices are way up, we need to look past the headlines about inflation." I agree.

But we should look at some DATA, not just stories about 1 grocery store that would be bad for nearby people if it closed.

As a big fan of price discrimination (and not a fan of the Robinson-Patman Act), let me briefly explain why.

In short, our intuitions about the harms to consumers of price discrimination from the monopoly case don't extend to more firms washingtonpost.com/made-by-histor… Take a simple example.

Suppose there are three types of consumers. Those willing to pay a dollar for A's product (loyal to A), those willing to pay a dollar for B's (loyal to B), and those willing to purchase either (bargain shopper)

What does it mean to have a "theory of inflation," generally or for a specific episode?

Recent conversations have made clear there is a disconnect on this point. Quick 🧵 I don't want to get into semantic disputes, but a theory of inflation should be *causal*.

A causes inflation generally. B caused inflation here. At the heart of causation is the counterfactual. If X had been different, then Y would have been different.

Experimental variation.

Why would OpenAI's CEO call for more AI regulation?

But my AP history book told me regulation came from advocacy groups over the complaints of businesses!

I'm kidding, but it is always a good time to reteach supply and demand 🧵 There are two things to remember. First, prices are pinned down by marginal costs in the industry. Profits are determined by average costs.

Even if all firms are identical, if you can raise marginal costs more than average costs, you can increase industry-wide profits.

Economists are often personally crotchety.

But when we look out at the world, I’d say we’re generally optimistic.

It follows from our basic assumption that people respond to incentives. A quick🧵 Many non-economists see the world as fighting over a fixed pie but economists recognize people can respond by increasing the pie.

To take a simple example, if there is a hurricane and people need generators. The price of generators rises. That’s terrible!

Remember when Amazon bought Whole Foods in 2017?

Lina Khan warned the merger would expand Amazon's "fief." Yes. Amazon is a feudal lord in this worldview.

As the Khan crew gets ready to rewrite the merger guidelines, let's look back at their predictive powers in the past: Khan wasn't alone in her dire predictions about Amazon/Whole Foods.

Tim Wu called it a "super-monopoly." Apparently, Whole Foods had a grocery monopoly?? Barry Lynn said, "Amazon is monopolizing commerce in the United States."

Monopolizing commerce. All commerce. Full stop 🙄

Revolution is overused in science. Change is gradual, one death at a time.

But a few writers caused true revolutions in economics: the marginal revolution, Keynesian revolution.

50 years ago, a less well-known but equally important revolution took place in IO and antitrust 🧵 2013 marks the 50th anniversary of Harold Demsetz's paper "Industry Structure, Market Rivalry, and Public Policy." jstor.org/stable/724822

Demsetz pointed out the possibility of "concentration through competition." Concentration wasn't a sign of a lack of competition.

As an economist, I'm used to thinking about collusion or mergers.

Now the FTC wants to focus more on "unfair methods of competition." Unfair??? Oh boy. This sounds like a can of worms.

Luckily, @DanielJGilman1 and @geoffmanne have 2 new tl;drs (2 pages each) to help 🧵 First, what is the scope of prohibiting unfair methods of competition (UMC)?

We know it is meant to extend beyond the Sherman Act. But how much?

The Sherman Act is already ridiculously broad. Really, "every contract in restraint of trade" is illegal? 🤦
laweconcenter.org/resources/ftc-…

“Falling gas prices don’t lower inflation. Consumers have more money and they spend that which drives up inflation.”

That’s an argument I heard today on a podcast. It’s not true and highlights something economists focus on:

People respond in many ways to price changes. Imagine it’s short run and supply is fixed. In a world with only gas and food, the above would be true. Any money left over after gas prices drop goes back into food which equally bids up housing prices.

Any measured inflation is an artifact of how the bundle is calculate.

In today’s mailbag, @mattyglesias makes an excellent point:

Explaining economics at an intermediate undergrad level RAISES the average econ discourse.

I’d be extremely happy if the average discourse was a solid intro level. Hence our work at pricetheory.Substack.com I’d add that lots of PhD economists, while “above intermediate” on average, aren’t always above intermediate.

Relearning the basics can raise the floor of their discussion.

For example, the debate around inflation would benefit from more Econ 101 basics pricetheory.substack.com/p/is-inflation…

"The [Robinson-Patman Act] is highly technical and hasn’t been enforced by the FTC in decades."

One of these statements is true.

A 🧵, for non-lawyers from a non-lawyer, on the Robinson-Patman Act
wsj.com/articles/ftc-o… The false part: The RPA is not highly technical.

It bans price discrimination. That's it. It was an attempt at strengthening the Clayton Act's ban on price discrimination.

There are a few checkboxes about when applies; it must be across state lines. But that's not the issue.

Many people have a visceral reaction to non-competes. How can a former employer block a worker from a new job? That's not their choice.

Whatever the optimal policy is (I'd say something far short of a ban), we need to understand why non-competes exist.

A short thread:

https://twitter.com/FTC/status/1611015531921915908

A key feature of MANY (not all) labor markets is that each side needs to invest in the relationship.

That can generate a hold-up. The firm teaches the worker skills, and the worker leaves.

Anticipating this, firms don't invest 👎
pricetheory.substack.com/p/in-defense-o…