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Blog Post | September 9, 2022

The CEA's New Antitrust Guy: Should We Be Worried?

Anti-MonopolyEconomic PolicyExecutive BranchLarry Summers
The CEA's New Antitrust Guy: Should We Be Worried?

In the media’s horse race-style coverage of politics, it can be easy to lose sight of just how many people and processes are going on behind the scenes to actually implement policies and advise policy makers — particularly the President. But just like every good boxer has a team in their corner, every good policymaker is backed by a team of advisers, analysts, and subject matter experts. 

Two of the President’s key advisory boards on matters of economic policy are the Council of Economic Advisers (CEA) and the National Economic Council (NEC), both of which staff economists (and in the NEC’s case, other types of policy experts) to provide recommendations and analysis to the president. While the CEA is the older of the two, the NEC has the more powerful mandate. The NEC is designed to help coordinate policy and ensure that the administration’s actions are in line with the president’s broader economic agenda, while the CEA is, generally, purely advisory. Think of the NEC as the White House’s economic “war room,” where Cabinet Secretaries sit down and actually hash out who will handle what parts of the President’s agenda. Meanwhile, the CEA generates data and theories about the economy writ large to help inform broader thinking.

From his perch on the NEC, legal scholar Tim Wu played an influential role in integrating revived antitrust enforcement into the broader Biden agenda. Wu was one of a trio of scholars who neo-Brandeisians successfully installed the administration — immortalized (how else?) in the novelty coffee cup “Wu & Khan & Kanter.” Wu’s work included making antimonopoly thinking a component of other key economic policy areas, such as labor, trade, and inflation. President Biden’s antitrust enforcers have consistently been one of the highlights of the administration to date by standing up to major corporations after decades of conglomerates trampling on the public interest. Central to this reinvigorated antitrust agenda is an inherent skepticism of market concentration and concern about the organizational structure of the economy. In the neo-Brandeisian worldview, consolidation of power over industries and the economy is innately worrying because it removes consumers’ decision making power; when markets are competitive, consumers can “vote with their dollars”, as the saying goes, but when choice is limited, there is no inherent checkback against corporate power.

Politico, though, reported in early August that Wu would leave the NEC “in the coming months.” Wu responded by saying that he wasn’t leaving soon and that there remained “lots of work to do”, but did not explicitly refute Politico’s timeline. This also mirrors when reports of Gina McCarthy’s White House departure broke, followed by a statement that she was still hard at work and, a few months later, her departure.

Given all of this, and the fact that there is often high-level White House turnover following the midterms, Wu’s return to private life seems likely to be more a matter of when than if. Lina Khan and Jonathan Kanter, the other two-thirds of the anti-monopoly triumvirate, will remain at the Federal Trade Commission and Department of Justice respectively, so Biden’s antitrust agenda should not be inherently undermined. That said, there is some reason to worry. While Wu and the NEC have been key to facilitating the antitrust revival across the federal government, the CEA has generally been understood within Washington circles to be less supportive. In the weeks following the Wu news, the CEA hired an industrial organization (IO) economist Michael Sinkinson of Yale (IO focuses on how markets are structured and is the economic specialty most applicable to antitrust).

Sinkinson has done significant work around “common ownership hypothesis,” which argues that when investors control shares across multiple companies in the same industry, incentives shift towards companies’ de facto cartelization. In one paper (Common Ownership and Competition in the Ready-to-Eat Cereal Industry, published in Econometrica), Sinkinson and his coauthors argue that the evidence for common ownership causing harm is insufficient. In another (Common Ownership in America: 1980-2017, published in American Economic Journal: Microeconomics), they highlight historical evidence that pushes back on the hypothesis. Importantly, this is distinct from the overall neo-Brandisian critique, which Sinkinson has not explicitly rebutted. In fact, in another publication, Sinkinson and his coauthors are strongly opposed to Google’s monopoly. However, the cornerstone of neo-Brandeisian analysis is that the structure of markets is important to ensure that industry is not twisted against the public. In this view, a high concentration of power over entire industries is inherently concerning because it undermines the incentive to maintain a competitive advantage, thus weakening the democratic nature of the market.

To be blunt, the biggest issue with Sinkinson is that he is not Tim Wu. It is far more concerning if Sinkinson is the primary IO expert in the post-Wu White House than if he is just one more economist on the CEA. 

According to Marshall Steinbaum, Assistant Professor of Economics at the University of Utah, “This appointment signals that the CEA isn’t on board with the administration’s anti-monopoly agenda.” And that could be dangerous. While Khan and Kanter will still be in place, they can’t provide all of the antimonopoly advice that the President may need; they have enforcement to oversee. That leaves the NEC and the CEA as the coaches telling Biden when to pull punches and when to strike, as well as when to step into the ring in the first place. 

It is unclear how committed the NEC sans Wu will be to continuing anti-monopoly enforcement. Equally unclear is who at the NEC could and would fill the void left by his departure. As a result, the CEA – which has been rumored to be somewhat skeptical of this cornerstone of Biden’s agenda – hiring someone with specialization in the same subfield is enough to raise some eyebrows. If the CEA were to become the new go-to for advice on competition policy, there could be a reversion to policy more reminiscent of the Clinton and Obama years. While Sinkinson is not nearly the worst economist available (way better than a Larry Summers or Marc Goldwein), the embrace of someone whose work has been skeptical of market consolidation arguments is not encouraging.

Sinkinson may not be a harbinger of doom for corporate regulation; the NEC could hire someone more in line with Wu’s work and make this a moot point. Or the CEA may not be able to splinter Biden off from Khan and Kanter and thus allow hope that USDA, DOD, the SBA, DOT, and many other departments will continue their pivot from forty years of support for consolidation. Sinkinson may be more amenable to rigorous antitrust than his prior work suggests. However, just the optics of an internal White House advisory body bringing in someone who is out of line with one of the administration’s most successful (and most popular) initiatives ought to sound a couple of alarm bells.

Image Credit: Tim Wu @ Stanford Law School” by stanfordcis is licensed under CC BY-NC-SA 2.0.

Anti-MonopolyEconomic PolicyExecutive BranchLarry Summers

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