Arnold Kling  

Prosecute Rent-Seekers?

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Lynne Kiesling sketched an interesting idea for antitrust enforcement.

prosecutions based on the use of lobbying, regulation, and political relationships (i.e., rent seeking) to deter entry.

Economists traditionally have evaluated monopoly power using measures such as the Herfindahl index of concentration. Kiesling is suggesting that only industries with monopoly power will spend resources lobbying Washington to protect their positions, so that use of such resources can be used as an indicator.

For Discussion. What practical difficulties are there in using political expenditures as an indicator for antitrust enforcement?

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COMMENTS (11 to date)
Eric Krieg writes:

Interesting idea.

You know, before the government started prosecuting them for monopoly practices, Microsoft spent very little on lobbying.

This seems to be a counterexample to Lynne's thesis.

One part of my libertarian-ish brain likes the idea. However, another part thinks that it's anti-democratic.

Lawrance George Lux writes:

Corporations lobby for tax exemptions and exemptions from regulations. They have relatively litttle fear of anti-trust prosecutions, especially with an Ashcroft Justice Dept. It only sounds good. lgl

gerald garvey writes:

The concerns above illustrate the general weakness. Lobbying expenditures are aimed at influencing gov't, so you spend more when you think it'll have a bigger incremental effect. Not the same as the value of what you have already wrested from the state (ie, from your fellow citizens). The old margins vs totals problem.

Steve writes:

What about firms that are seeking to become monopolies or secure rents? The arugment seems to indicate only those firms that have substantial market power engage in these activities. It ignores the possibility that firms might use these activities to gain substantial market power.

Tom Dougherty writes:

I would be interested to know if there is any agreement on the definition of monopoly. I can think of three different definitions of monopoly. In addition, I wonder if there is any agreement on the definition of monopoly power. We can discuss this topic like we are all talking about the same thing, but are we?

Would anyone like to define the following?
1) Monopoly
2) Monopoly power

Lawrance George Lux writes:

I will attack these definitions in reverse order, and almost no one will agree with my definitions anyway, but they are for study.

Monopoly power is the ability to utilize forces other than Market forces to affect the Prices of Goods which the Monopoly produces. This is such a broad definition as to include Government lobbying, extensive Advertising, and Product listing saturations which hide Competitors' products.

A Monopoly, itself, is any power or ability to sell produced Product above the normal Supply Costs curve. lgl

Bernard Yomtov writes:

I find this pretty far-fetched, in part for the reasons others have cited. I might add that, even if it is true that,

"only industries with monopoly power will spend resources lobbying Washington to protect their positions"

it does not follow that all monopolies will "spend resources etc."

In other words, even if all lobbyists are monopolists (dubious but let it pass), that does not mean, as a matter of simple logic, that all monopolists are lobbyists.

Tom asks a good question:

>Would anyone like to define the following?
>1) Monopoly
>2) Monopoly power

The late George Stigler, Nobel Prize winner, defines them in the _Concise Encyclopedia of Economics:_

David Thomson writes:

I have a serious problem with the government taking these people to task. If nothing else, it often causes more trouble than it’s worth. The government vs. Microsoft is an excellent example. Wasn’t that just a huge waste of time? We would probably be far better off, if instead the emphasis was placed on public shaming. Have we lost the ability to shame somebody for gross misbehavior?

JK writes:

"What practical difficulties are there...?" Well #1, and for very good reasons, the constitution of the United States.

Also, the Herfindahl index is a staggeringly simplistic concept capable of impressing only those who don't have a clue what it means.

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