Krugman/Reich in NYRB on Market Power and Antitrust

This links to an interesting review of Robert Reich’s new book, Saving Capitalism; For the Many, Not the Few, by NY Times commentator and Nobel Prize winning economist, Paul Krugman, The review appears in the NYRB.

I find both the review and the book noteworthy because they suggest a renewed emphasis on market power and antitrust enforcement by these influential economists and those who share their views – often considered left -leaning or at least “progressive”. Krugman references recent work on monopoly power by two important economists from the  Obama Administration: Jason Furman, chairman of the Council of Economic Advisors, and Peter Orszag, former head of Office of Management and Budget. Reich puts forward combating market power  and vigorous antitrust enforcement as policy prescriptions for helping to fix the stagnate incomes of workers and the concentration of wealth and power by the 1%. In my view, the fact that Krugman, Reich or Obama economists are looking to market power/antitrust represents an important turning point because in the recent past  they were more aligned with technocratic policy fixes rather than more “Smithian” economics (which abhors market power and supports  safety net; not the big business, Ayn Rand laissez faire  brand of Smith currently preached by right leaning pols). To be fair,  Krugman certainly is less technocratic in his approach to public policy than Reich, at least in his NYT columns.

Also noteworthy for antitrust practitioners is Krugman’s oblique criticism of the work of Chicago economist Kevin Murphy, who frequently appears as an expert for the defense in antitrust cases.  Krugman mentions that Murphy was a proponent of the view that modern technology, particularly information technology was behind the stagnation in wages experienced by worker’s without a college education and goes on to say, without knowing how ironic he was being that: “This view was never grounded in direct evidence that technology was the driving force behind wage changes; the technology factor was only inferred from its assumed effects. But it was expressed in a number of technical papers brandishing equations and data, and was codified in particular in a widely cited 1992 paper by …and Kevin M. Murphy…”

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