His podcast with Tyler Cowen is worth a listen for many reasons, but this was particularly in line with my own thinking:
COWEN: Regular economics: one hears increasingly these days that the higher concentration ratios in the American economy are an economically relevant fact. We all know those ratios are up somewhat.
But at the same time, consumers don’t, in an obvious way, seem to feel the burden of monopoly. If you look just at product choice and variety, productivity may be slow, the growth of manufacturing output appears to be quite steady. There’s not obviously a break in that series where all the monopolies restrict output.
We have all these different pieces of data: high-share values, high measured profits, very steady output behavior, a lot of product variety. How do you think about the issue of monopoly in the American economy right now? Is it significant or not?
SUMMERS: This is one where I’m not certain. On the one hand, Tyler, higher concentration ratios, higher profit — with lower investment — manifest in lower interest rates. More monopoly power fits the story. On the other hand, take a thing like Apple Pay. Apple Pay means that Apple, which is already the largest company in America, is even larger.
So you could say that’s more monopoly and more market power. Or you could say there’s a whole financial industry it’s now getting competed with from outside the financial industry, and so it’s making things more competitive.
Both those views have merit. I think the second may have more merit than the first. Some of the rhetoric one hears recently, which leaves you with the impression that we’re seeing an era of a lot of new Standard Oils, seems to me to be quite overdone, with respect to the facts as I understand them.
On the other hand, are there combinations of healthcare systems in cities where we go from having some real competition to there being one dominant provider and networks to consumers’ benefits.
COWEN: Clearly, there’s problems there.
SUMMERS: There’s almost certainly some problems there. Are there difficult issues when information is central, as it would be with a Facebook or a Google? Yes, there are difficult issues: privacy, reliance on information, networks.
But are those best thought of through the prism of antitrust and monopoly? I’m not at all sure that that is the best way to think about them. After all, in some sense, the products in those two examples are given away to consumers for free. One of the most important issues for economists to figure out over the next couple of years is how to think about these trends.
I think there are some selective grounds for concern. It’s much more likely that antitrust has been insufficiently tough than it is that it’s been too tough over the last decade. But I also think one needs to be careful about the fact that being a successful business will tend to cause you to have more profits. We usually think of that as a good thing, not a bad thing.
A few things I think Summers gets right: 1) lack of certainty; 2) attention to ways in which business may be getting more competitive; 3) separating the tech platforms out from the broader story.