Don’t Do It

Eakinomics: Don’t Do It Three bills are advertised as the focus of Senate attention during the coming month: the Competition and Antitrust Law Enforcement Reform Act (CALERA) – a broad rewrite of U.S. antitrust law, the American Innovation and Choice Online Act – a bill to ban “self-preferencing” – and the Open App Markets Act – a bill to “open up” app stores.  The bills have some things in common. First, they abandon the consumer welfare standard, the principle that one should evaluate competition by looking at its impact on the welfare of consumers and instead rely on some ad hoc indicators. This is a huge error. The United States does better at providing high standards of satisfaction to its consumers than competitor countries because it allows innovation to produce high productivity growth and markets to allocate (and re-allocate) capital. These bills interfere with successful, productive innovations and hinder the allocation of capital. From the widest perspective, they are serious policy missteps. Second, they are also not focused on the policy issue of the day: inflation. Indeed, they mostly focus on the tech sector, and digital goods and services have been a low-inflation sector of the economy. It is an odd choice of focus for those controlling the Senate in the run-up to an election. Third, they individually do more harm than good. The Open App Markets Act would force, for example, Apple to allow any app into its store. Consumers make a choice to buy Apple products and, as a result, buying the apps available. I’ve detected no widespread consumer discontent with this choice (consumers could, after all, simply buy something else), in part because it comes with greater security and privacy. The bill would not improve competition; it would impair a feature consumers value. Similarly, the American Innovation and Choice Online Act would undercut services that millions of Americans have proven they are willing to pay for. Why do this? Finally, while all three are motivated by the notion that one has to “get” big tech companies, they would set damaging precedents for other sectors of the economy. The business community writ large should be nervous about any efforts of this type, even if they are ostensibly focused on tech for now. Policy errors matter, as Americans have learned through inflation generated in the past 18 months. The Senate should not risk committing one that is even larger and more durable.