Why Matthew Yglesias Is Skeptical Of Anti-Monopoly Policies

My problem with the YouTube is the product is too good. It's not like it's bad. I, in some ways, if we only just had one app, and we could, I don't know, just like regulate it or like make it be really bad, there haven't ads every four seconds and everyone hates it, that might be better for us. And so I just think that it's a little bit short-sighted to think of antitrust as the only tool in our toolkit. I'm Bethany McLean. Did you ever have a moment of doubt about capitalism and whether greed's a good idea? And I'm Lujas and Gales. We have socialism for the very rich, rugged individualism for the poor. And this is capitalism to a podcast about what is working in capitalism. First of all, tell me, is there some society you know that doesn't run on greed? And most importantly, what isn't? We ought to do better by the people that get left behind. I don't think we should have killed capital system in the process. We're going to debate cheap beer and big tech, seriously. But we're also asking a bigger question, one that matters for the future of capitalism and for the future of both political parties in the US. What actually improves life enough for most people? Fast enough to matter in a way that might win elections. There are two words that have become famous this year for political change, especially on the left. Abundance and affordability. And while they share not only the first letter, but a lot of aims, there's a growing debate about which one would deliver for most people. So I have to admit, I have trouble distinguishing between the two, but I asked Luigi for definitions. And he tells me that affordability is a demand side framework focused on alleviating the immediate cost of living crisis for voters through subsidies, price caps, and financial assistance, whereas abundance is a supply side progressive policy agenda that seeks to solve societal problems by aggressively deregulating and incentivizing the production of essential goods, such as housing, clean energy, and infrastructure. So Luigi, am I right to think that abundance and affordability are diametrically opposed in the sense that, or I mean not opposed necessarily, I guess you could do both at the same time. But how do you see them fitting together? First of all, as you know better than I do, in politics some slogan at a meaning, past the original meaning. And so I think these two words have taken a life of their own. In the essence, if I were to judge them without all the context, I would say that abundance emphasizes the total pie, while affordability emphasizes what fraction of the pie is left for people who can list afford it. Yeah, so abundance is more politically palatable because affordability seems to me to be redistribution, where abundance seems to me to be predestributions. Is that? No, no. I disagree. Actually, I see if you want to think about this policy as affordability, you could think in your terms just purely with distribution, but also could be predestribution. And what share the pie is given to the bottom 50% of the population. And how can we change the market system so that delivers better predestribution rather than post-distribution? The abundance agenda on purpose ignores this question. And the assumption that we can always redistribute exposed. I think that that is the assumption that all economists subscribe to for the last 30 years. I think a bunch of us stop subscribing to this because we realize it doesn't work. And if you are like me and Imperial economists, at some point, the evidence should make you change your mind. I think the abundance agenda is still stuck in this framework. OK, well, we're going to come back to that. But our listeners know we're also obsessed with antitrust. So we want to know if or how the anti-monopoly movement should play into, oh my goodness, that's a lot of alliteration, abundance, affordability, and anti-monopoly. Interesting. Our guest sits right in the crossfire of these ideas. He is Matthew Iglesias, co-founder of Vox, columnist at Bloomberg, an author of 1 billion Americans. A warning, if your sick of buzzword like affordability, he says more is coming. He wrote recently that Democrats of all stripes have qualessed around the idea of running on affordability. I expect every Democratic Senate candidate and every front-line House member to run on the stronger affordability message over the next 12 months, he wrote. And yes, pandemic campaign and one on this message. No wonder that Trump once called there for the ability crisis a democratic con job. Of course, Trump himself effectively ran on affordability when he ran, even though he just didn't have a buzzword for it at the time. But now that somebody else has appropriated the buzzword, he's calling it a con job fascinating. Anyway, in a perfect world, none of these ideas should be in conflict with each other. You could see how abundance could lead to affordability and antitrust regulation could play into both of them by helping to ensure competition. They're by driving prices down for consumers. But as with many beautiful ideas and lovely buzzwords under the surface, they're all sorts of conflicts. Or as Matt wrote recently, something that I've learned in my career as a disagreeable writer who loves to draw fussy distinctions is that effective practical politicians are really good at coming up with formulations that smooth over disagreements, and sidestep and convenient choices, at least until they're in office, right? Of course. Matt has written that perfect competition is a modeling exercise useful like a fiction's of playing, but not a word anyone leaves in. And he likes to tease that a dynamic innovative economy can add a little monopoly power as a treat. He's also quite controversially written in one sense, the numbers, therefore the big crisis, isn't real. So here to discuss, or just to argue with Luigi, about all of the trade-offs is Matt Eglaceus. So let's start with the beer gate debate on X. This all started because it was reported that one of Lena Cod's first moves on Mamdani's team could be to cap the price of beer at stadiums in New York. And you tweeted that a beer cap just shifts revenue into ticket prices and risks non-price rationing, smaller sizes, longer lines. Explain your arguments for us and your reaction to what happened next. So, you know, I like to go to game sometimes, take my son, concessions at the stadium, they cost a lot of money. This is like a good guy at the end of the bar, kind of populist complaint, like there ought to be a lot, you know, but I think if you understand economics, if you understand business, these are complimentary goods here. And so the ability to sort of gouge people on the beer is a reason to not want to have unsold seats in your stadium. So if you take away the sort of extortion at concession revenue there, you're going to have both higher demand for tickets. So, you know, some upward pressure on the pricing from that direction. And also less concern from the stadiums about the need to maximize attendance because the non-ticket revenue is not as lucrative as it was before. So you see some kind of shifting between it. This is politics. I don't really care if they cap the price of beer at Yankee Stadium. It's not a big deal. But we had a lot of people, Tim Wu and others, you know, influential people in what terms itself in anti-monopoly movement. I think being pretty slip shot about the analysis of the actual economics here. And that's something that worries me about the movement writ large. That there has been a move from, you know, a sort of observation that concentration levels were up in a lot of American industries. And that might be bad. That ideas like we need to do more post-merger review. We need to consider non-price impacts on consumers. Particularly because there's so much free stuff on the internet. There's like a lot of ideas that I as a journalist like really sympathized with. I thought this was interesting. But over the past five years or so, I've gotten concerned that you have a group of people who sort of camp model these scenarios out, can't really do the math, can't do the economics, and are taking us to a unrealistic place in terms of what we're talking about. And particularly as people get more and more concerned about the cost of living. And then a movement that sort of started out by saying, we need to consider a broader range of impacts beyond just consumer prices. Now wants to sort of pitch their ideas as a solution to inflation, high prices, et cetera. And a way that I think is pretty unsound. But Matthew, you sound like a Chicago economy circa 1970, where sort of market a perfectly competitive individual or perfectly rational. And under those assumption, I think that you are economic implications, that's absolutely correct. But one of my colleagues that Dick Thaley won a Nobel Prize for Behavioral Economics. And there are beautiful papers in behavioral economics showing that, for example, the overpricing of the Minibar is actually highly inefficient. And yes, if people are all fully rational, but at the end of the day, there is a distortion involved. Now, I don't particularly care about distortion and be here because I don't go to the stadium and I don't go and be here. So it's not the issue that really concerns me the most. But there are other situations. And I will move to other situations soon, where this is much more important. So I understand the criticism. But I would expect more criticism, like say, why are we focusing on behavioral things, rather than, oh, this is wrong economics, because this wrong economics is depending on the assumptions. Not so sure that when you talk about the Yankee Stadium, heavily subsidized by the government, by the way, that's to me is the most outrageous thing. heavily monopolized that you really want to use standard economics in that case. It's of course true that we've had advances in behavioral economics. There's more complexity than these kind of most simple models. But I think the simple models are a pretty good starting point for a lot of analysis, particularly of these relatively banal consumer goods and things like that that we're talking about. Now, if you want to say, look in the health care sector, we have big information asymmetries. And this is a really significant part of the economy. And so we want to be really careful here in terms of what we are doing and thinking about. That makes a lot of sense to me. But it's wrong to think that any deviation from the most basic model is going to support whatever random regulation, somebody happens to be coming up with here. I mean, I don't know. I feel like there's been a kind of shift into make stuff up as you go along and then just say, oh, you can't just have simplistic economics. And so you see some of the dangers of this in the way the Trump administration is using its discretionary merger authorities really just to politicize the whole government. I always recommend to people your old essay, Luigi, about Donald Trump. From long before he'd keep brand for president, and I think it sums it up very well that you have this figure who is very aligned with American business leaders, but has like a real hostility to markets and capitalism and rural-based economic governance. And I think it's problematic that we have people on the left who want to be challenging Trump, but are actually feeding into that same kind of dynamic rather than bolstering the rule of law or helping people to understand what's so problematic about Trump's approach to the government. We've had a bunch of people on this podcast who have talked critically about how economics basically economic thinking infiltrated every aspect of politics and society. But are we going too far in the other direction now? Or are we going too far in an incoherent direction? Maybe not even in a direction? We're losing sight of what was the problem of maybe too much infiltration, right? What are our strong normative concerns that we don't want to apply market-based thinking to versus things where we really do. Price controls are a thing that governments have done for a long, long time. Often for good reasons. My grandfather is an economist, but he worked in the Office of Price Administration during World War II. If you have a strong national objective, if you're in an emergency, you want to use price controls and rationing, I think, to organize society for certain purposes, because you're not trying to maximize consumer welfare in a basic economic sense. What are we talking about right now? Voters are grumpy because there was inflation three or four years ago, and it remains somewhat high. And that's fine. Politicians should be responsive to that. But the price of beer is not a national crisis that warrants a shift to price controls and administrative rationing, right? That the basic allocation of discretionary consumer purchases, that's what economics and markets are really, really good at. Markets work well when they are competitive. When they're not competitive, they don't work that well. And so moving from beer to something more important, up-level people, team boo was on our podcast recently. And he mentioned in one of the things that really turn him against the big platforms, it was discovering that Amazon makes $60 billion a year, basically extracting fees from his suppliers for preferential treatment in the ranking when you sort of rank the best products. So now you see a case in which you can argue, follow your analogy of the stadium. People, if you cut this extraction, they're going to compensate on other things and is going to be basically neutral. On the other hand, you can say, look, Amazon is not a competitive market. They are extracting this from their suppliers, which means that their suppliers need to increase the prices. So eventually, this number comes out of our pockets. We cannot really say that the market for Amazon services is really competitive because there are maybe one or two producers who can deliver with that level of efficiency. So where do you fall in that? If I were to come and say, you want to actually really reduce this extraction of suppliers by Amazon, we'll be in favor of against. I mean, two-sided markets are very complicated. And that's the same as this Amazon case, right? There's a lot of power in Amazon at this kind of intermediate layer between the consumer and the producer. What's good for the consumer might be what's good for the producer? It also might not. I think in the abstract, you can't know, right? And so I want to have people who are looking at these things in a rigorous way, producing credible research and analysis because I think it's a perfectly reasonable question. I mean, it can be the case that because of network effects, we're not going to have highly competitive markets in sort of internet intermediaries. And we need to think about how those two-sided markets are functioning. You don't want to have that work done by people who just have a sort of a knee-jerk hostility to large enterprises or who can't sort of reason through a pretty basic question about tickets and beer. So do you want that work done by sales economists who are paid by two-sided platforms? I don't know. Who should do it? Actually, you know that the theory of two-sided platforms that was cited in the American Express case by the Supreme Court was done by Nobel Prize Gen. Tirol on a grant by Visa. So now, of course, the math is fantastic. OK. And certainly better than what I can produce and probably what he would can produce. But does it make it right? When you say there is a presumption, if you are paid by Visa, there is a presumption you're going to find that Visa is efficient and not should not be destroyed. Human nature, I'm not saying that these people are dishonored, but this is human nature. Somebody asks you, how can I justify my business? You've got to find a good justification. I remember when I was arguing with my parents, I was always mad because my father, who was much more than my mother, was always finding a Russian justification about my mother decided. And the fact that he found the Russian justification doesn't mean was right. Because he was always defending my mother, no matter what he was, but it was very smart because my father was very smart. So I feel that a lot of economists in the same situation, they have mother answers, but they're not necessarily the right answer. Look, I mean, I agree. I didn't know that fact about Visa, but obviously, I mean, that undermines the credibility of the research. I still think it's true though, this is a hard question that does require smart people who are doing difficult math to try to argue it out because it's just not obvious to me. I mean, I don't know what do you think. You're smart guy. You've got to be a steward. No, it's not obvious to me either, but I wouldn't start with the assumption that they are going to be paid everything through prices. And because I don't see a obvious social benefit in the ranking, at the end, people are competing to go on a sliding scale. So there is not really a value added. It seems that this is purely extracted. So limiting this ability at the very minimum tried to limit and see the effects. It's a big chunk of what the valuation of Amazon is. Now, precisely because a big chunk, Amazon will fight tooth and nail to a strict. In fact, if your argument was correct, that they could compensate another dimension, they should be indifferent, right? So my proposal is, let's propose it, see the reaction of Amazon. If they say it's nothing, then maybe it's not a big deal. If they scream, then you know you're on the right track. Can we step back from Amazon for a little bit and just leave that rabbit hole alone unless we spend the whole rest of the podcast talking about Amazon? Can we step back just to this bigger picture idea that you and Tim will seem to have, you seem to have a little bit of a lot of disagreement with the entire antitrust approach from the Biden era. Are there simplistic rules we can follow? Does each case have to be looked at on a case-by-case basis? Or are there simple rules that we can follow? The consumer welfare standard should predominate. Something else should predominate. Are there any basics that we can go by to say this is when competition is working and this is when it isn't? To say something nice about the sort of Biden antitrust move, I think a totally valid point that Lena Conn made and brought forward was that the conduct remedies that the Justice Department had, you know, there was this view that we should do the minimal intervention. If there is a competition problem, we will like get Comcast to promise, not to preference its own channels, things like that. And I think they brought a very strong argument that this is really hard to make work, that there's a lot of regulatory capture and that if the merger is problematic, you should just not allow it. I think the original enthusiasm that a lot of people had to say we need to take a harder look at the role that these large technology companies are playing in our society has a lot behind it and explains a lot of the political juice. I do question the view that antitrust is the right lens to look at something like that. You know, I'm a parent, most parents who I know have a lot of questions about, you know, our kids and their screen time and short form videos and you know, what they're doing there, how that's changing things. The presence of TikTok as like a new competitor to YouTube and Facebook, that doesn't give me a lot of peace of mind about this because the worry isn't that, oh, the market isn't competitive enough and we're like not delivering enough short form brain rod videos to children. It's that like the product is bad, right? It would be like sitting around in 1990 and saying like, oh, the cigarette industry is too consolidated. When like, that's just not the issue. So, you know, I don't wanna have us thinking of this as the only sort of tool that we can level. I think in some ways that recapitulates the mistake of overly economics are firing, everything in society, right? Like these companies just have a lot of influence over our lives and over the way that things work. A related issue though with the platforms was, you know, so this is issue in New York City where they've essentially banned the construction of new hotels and they've also banned Airbnb. And so, you know, the hotel owners and the hotel workers union sort of got together and they put these worlds in place. Somebody on Twitter was like, how did hotels get so expensive? Somebody else was explaining what happened here and then Max Miller who was an advisor to Alvaro Badoya on the Federal Trade Commission. He says, no, like the real issue here is that the hotels are engaged in algorithmic price fixing. And so, we need an antitrust solution. I don't know about this algorithmic price fixing of hotels, guess or no. The fact of the matter is, they've created an artificial scarcity of hotel rooms in New York as a deliberate matter of public policy. That's really bad. That's like bad rent seeking. People who care about competition and competitive markets should be trying to make markets more competitive, not just kind of obsessively focused on the idea that technology is bad. This just happens to be a very old fashioned industry like hotel owning that has set itself up with a little regulatory cartel for no particularly good reason. It's, you know, classic, concentrated cost to fuse benefits or the other way around. I forget what I'm saying. You know, these are big, big problems in our society and a lot of anti-competitive rulemaking. In effect, is sheltering smaller players from competition. That's sort of a very common mode of rent seeking politics. And we need to be symmetrically watchful of these different kinds of problems. So, I agree 100% with you about the hotel and the B&B, but going back to your example of the cigarette producers, I think that's an interesting example because there is no doubt that cigarette kills you. And this, in my view, no doubt that having that industry more concentrated is more problematic because makes it more politically powerful. After all, the reason why we're so much advertising a sponsoring of art by Philip Morris is because they want to distract us with art from the fact that they killed people. And the fact that they were able to place, you know, that Justice Powell was a board member of Philip Morris and when he went to the Supreme Court, he had a robe with a symbol of Philip Morris and brought it in his robe. So, the fact that Philip Morris was able to place a very important figure while Louis Powell on the Supreme Court is because was very powerful and consolidated. Versus, for example, the wine sector that is much more fragmented is not an alcohol is very good for you either. But in that wine industry, the liquor is different, but the wine industry is so fragmented that they don't really have a lot of political power. But the beer industry, the liquor industry and the cigarette industry are very politically powerful because they are concentrated. So, I think the issue of power is relevant. Well, I mean, the issue of power is definitely relevant. But like, I don't think it's obvious that a more concentrated industry is going to be more politically powerful, right? So, for example, beer is taxed at a higher rate than wine in the United States, even though it's a more concentrated industry. That could just be a coincidence. It could be many, many things. But often, it's dispersed industries have a lot of power in Congress because, for example, car dealerships, right? There's like an owner in everybody's district and so they come and do it versus a big industry is concentrated in one or two places and it can be more vulnerable to regulation. And I think, you see in Europe, a lot of instances of sort of small business coalitions, exercising incredible amounts of political influence and sort of protecting themselves from regulation through this kind of means. In general, we see a more favorable regulatory treatment of smaller employers rather than large ones. They'll say, oh, you know, we can't comply with this parental leave regulation, which may be true. It's harder logistically when you're a small business, but you get it kind of a lighter touch. And you can create a lot of economic dysfunction by making it hard for people to get to big scale. Now, again, when it's a vice industry like tobacco, what is the outcome you actually want there is sort of an interesting question all to itself. But in general, I'm just not convinced that fragmentation reduces the political power of a given industry. You wrote this question, is antitrust a tool to protect consumers from higher prices or to defend small businesses against big ones? Is there an answer to that or is there, what should, if you had to summarize in one sentence, two sentences, what should the goal of antitrust be? Why does it exist at all? I think that protecting consumers is a good value. I think if you want to say, we also want to protect workers, you know, that sort of makes sense to say that the consumer focus is maybe too narrow. But I don't like the view of antitrust as a tool to protect small businesses against competition from sort of bigger corporate entities. I mean, I run a small business myself, a subscription newsletter. I think it would be great if somehow you could like stop the New York Times or CNN or large scale enterprises from plowing me under in the name of preserving a lack of competition. But I don't think that that's really a sound model. And I think a lot of the productivity advantage that the United States has achieved vis-a-vis Europe over the years comes from the fact that we are friendlier to scale and that we actually have less of these kind of informally operated family businesses where you're handing the reins over to your nephew and things like that. And we have more professionalized management. I think Luigi's written on this, yeah? I mean, this is part of your diagnosis of the Italian economy, right? Is that it's this kind of excessively fragmented from family-oriented firms? So if I look at the United States, we have some big problems as a country. Our life expectancy is lagging quite a bit from what you would like to see from a developed country. I'm really interested in ideas about things like that. But in the pure economic terms, right? Like our GDP growth has been really quite good. So I would be, just have some baseline skepticism about the idea that we need a big change of the economic regulation model, as opposed to saying, we have a very high child poverty rate and we'd like maybe need to give parents more money or we have all these people dying in car crashes and we need to make our roads safer. Those seem like the big problems to me, whereas some of the anti-trust stuff, particularly the small business protectionism, seems to me like trying to replicate the less successful aspects of a Western European social model. Now, you're working on substock and actually you're one of the big players substock. But let's imagine you're a small player and let's imagine a substock charges a very different price for the same identical service to the large players and to the small players with a much smaller price to the large players to the small player. Would you think that's fair? Do you think that this is an intervening? This is not like defending small produce. Actually, it is defending small producers, but these defending small producers against some price discrimination. Do you see a role of the government or not? Well, I'm the large producer, so I feel that they should be giving me, I mean, they charge a flat 10% rate no matter how big you get. And I don't, I want to bargain for a better deal, but they are holding for their own reasons to not doing it. You know, I think that this is a field in which there is pretty free entry and I think that we should let the businesses set up their pricing scheme the way that they want. I think you should set a high evidentiary bar before you decide substack is a platform that has achieved so much dominance, so much insulation from competition that they need to be subject to sort of regulation about their internal business month. But do you agree that once they become very big, like they have 90% of the market, then you're wanting to be in this situation. Yeah, I mean, there's definitely, you know, there's definitely a level of scale. I mean, I think with the big tech platforms, right? With Google, Facebook, Amazon, you were dealing with, I think, very clear network effect economics that make it very, very challenging to contest their role in the marketplace. And that you saw even really big, really sophisticated player like Microsoft could not enter the search market successfully, right? Because, you know, Google says, well, our product wins because it's the best, which is true, but one of the reasons it's the best is they have the most users, right? So we have like a problem there. And I think there's a clear case for sort of a regulatory scrutiny there. I still want to see that as a fairly high bar rather than running around and saying, well, everybody who's participating in some kind of a platform market, like we got it, we got to hit with the regulatory hammer here. No, the fun thing of talking to you is that I can nerd out a bit because you nerd out as well. You wrote a piece on your substock blog about Philippa Guillaume's view of innovation and what the stand is relates to competition. And so you reported a famous U-shaped curve that shows that the peak amount of innovation does not take place at perfect competition, but just take place a little bit before. But the funny thing is that that peak takes place at a measure that corresponds to only 5% of markup. So if you remember, it's one minus the learn in index and so it's 95% at the level. So that corresponds to 5% of markup, which is a very low markup. So you can take that and actually say, we should really push competition much, much more if you want innovation because what are the businesses with a 5% markup? They view certainly all the big tags that have a markup, which is way, way above that. So if you take literally that paper, you should be much more your favorite of being aggressive with antitrust. Yeah, I mean, I think that that's right. You see this trade off in the intellectual property space a lot, right? Like in some sense, you would have a more competitive market if you had no copyright at all. Or if there was no patenting at all. But I think traditionally governments have felt, but you don't actually want sort of infinite level of competition in the product market there. You want to create some kind of level of market monopoly pricing power so that people go innovate, things like that. As you say, there are not that many markets in the real world that exhibit some kind of, textbook frictionless competition. I think the Aguian paper can make us feel a little bit better about that fact. Like it's okay that real world markets have frictions that aspects of monopoly power exist and things like that. The question for the technology sphere, right, is how do we know about how competitive these markets are? These companies are gigantic, they are operating in different kinds of ways, what sorts of remedies actually are pro-competitive. We also do see a lot of innovation coming out of those companies, right? I mean, if I was to look at the American economy or the world economy and say like, where are we really not seeing innovation? I'm not sure that it's like the computer companies that are failing to innovate. We've seen negative productivity in the construction sector over the past couple of generations. That seems like something that deserves more attention. We're seeing a real lack of innovation in those kind of spheres. But I mixed feelings about the big tech companies. You were opposed to the FTC's case against meta as part of your mixed feelings about big tech companies. How does that a good vehicle for exploring your mixed feelings? Yeah, I mean, the Medicaid is a great one. I remember back in 20, whenever it was, I was at slate, I think, around when you were starting, they're too. So Facebook bought Instagram. They paid a billion dollars for it. If you could go back in time and block that merger, I think that might have made sense on some level. You fast forward to the present day. This is where I was talking about cigarettes. I'm not sure that what worries me about Facebook or Instagram is that they're not competing with each other. That we're not seeing enough innovation in like infinite scroll vertical video, that it's not compulsive enough, that Americans don't have enough random apps to keep them busy on their phones. I would love to see some kind of regulation in this space. I mean, there's been a move like get these phones out of schools. Like that seems good. Paul Romer had this idea of like a progressive tax and digital ad revenue to just kind of like limit that business model as a whole. That makes some kind of sense to me. If you broke up Facebook and Instagram, so that we now have like two different apps on our phone, like who's problem does that solve? Like what does that accomplish for us as a society? That's my mixed feelings about that. I don't think you need to break them up. I think allowing interoperability and the portability of your social graphs or can you leave them, you leave with your friends? That will create real competition. And when you have real competition, then people will compete offering you business where they protect your data more. In fact, the Ionis Facebook competed against my space saying we are the one protective of privacy. I'm working out to remember this. And now there was no fenders. Why? Because they are monopoly. So the way you charge monopoly rents is not only through prices. You turn monopoly rents through deterioration of quality and clearly protection of the privacy is a big, big issue. I think it is true that incorporating non-price aspects of the customer experience into this discussion is relevant and important. Again, I don't know. Maybe you disagree. I just don't buy that this question of privacy is like the main concern with these tech companies and their apps. You know, like I have a concern that they are like melting the world's collective brains and destabilizing society. Not that. That sounds more serious. I'm sorry. Yeah. They do have one and the same. The reason why they can melt your brain is because they have all your data and they target on your weaknesses so that you know that you are tempted by a particular thing is a particular time. And they give it to you. They know that you get distressed and they sell it to you. Think about women with problems about weight. And you know the story about Facebook, right? That at some point Facebook want to say, we don't do that. And some of the people promoting the advertisers, I don't know. This is a secret source. You cannot say to our advertisers that we cannot target women when they start to have problems with their image. Be on that side in this, actually. I think he might be convincing me. I'm gonna see his not convincing you because the reality is even if you had five different platforms, they still might have that information from you. And I agree that the pranicious aspect of this is the bigger issue. And you are at least getting me to find out that. So Tommy, because when now it's right, you've got, you know, so you've got Facebook's apps. You've got TikTok. You've got YouTube, right? That's the replayers. That's, you know, not that many in the scheme of things, but it's more than zero. I don't use all three of them. But my problem with the YouTube is I sometimes am like, eh, I'm gonna check this out. And the next thing I know, I'm like, where did those 90 minutes go, right? The product is too good, right? It's not like, it's bad. I, in some ways, if we only just had one app, right? And we could, I don't know, just like regulate it or like make it be really bad. They're having ads every four seconds and everyone hates it. That might be better for us, right? And so I just think that it's a little bit short-sighted to think of antitrust as the only tool in our toolkit. If you go back, you know, 100 years, right? Early media regulation. We have in the Telecommunications Act, you know, it says we have some market concentration regulations that are about these kind of things. But we also have like content regulations, right? Like you can't put like profanity on network television in the middle of the day. The television networks have an obligation to do news programming, right? And other kinds of things like that, because we're saying television is becoming an important part of our society. It's an important part of people's lives. It has consequences outside the economic domain. And we need to try to come up with a regulatory framework that we are happy with and that is giving us lives that meet our normative objectives as a society. And to me, like, that's the issue with social media, not the welfare economics of competition. So all of this debate is also part of this larger conversation about abundance or affordability. And I actually wanted to start with a pretty basic question for you about that. What's the difference between abundance and affordability? I don't totally know what affordability, I mean, I don't want to sound like an idiot. I know what affordability is, that's a word. But it's caught on as a catch phrase. And as a literal-minded person, I sometimes wonder. It's like, well, we can have inflation-adjusted median income, right? Is that what affordability is? I don't know. You know, I think the idea of abundance was simply trying to reorient progressive-minded people in the United States back toward the idea that economic growth is actually quite important, that distributional concerns matter, but they're not the only thing that matters out there. And then in particular, in a lot of fields of life, where we are having problems like housing affordability, that we have a lot of regulatory induced scar cities that people need to look at there. You know, affordability, I think it's like a broader concept. You can make childcare more affordable with subsidies, at least for the people who get the subsidies. And that can be good, if you have sort of valuable social goods there. It's also just, you know, the voters elected Donald Trump on the basis of a promise to bring prices down, which I think people who know their macroeconomics understand was probably not a realistic promise, but it's a promise that he made, and now he's in political trouble over it, and it's just kind of fair game for his opponents to complain. Can I try my distinction? I think that that happens, and it seems that you are going that direction, as well as mostly a focus about the total pie, basically ignoring distribution, while affordability is really an issue about distribution, maybe ignoring the total pie, but more and emphasis about the distribution. Because when you were saying the United States that did very well, there is no doubt that in growth of GDP per capita on average was really good. If you look at the distributional effect, I'm also sure they're really good. If you look at quality of life, for a lot of Europeans versus the majority of European versus the majority of Americans, I'm not so sure the majority of Americans are better off, because unfortunately in GDP, the lowest end to GDP, we don't get that much of utility, at least the right utility out of them. We get a lot of things that are not really in the utility that get into GDP, and we have distributional issue. There is a big chunk of the population in the United States that did not see an increase in real-estand-uniliving for decades. So I think that that's a problem, might you? I think what we want to talk about growth and distribution, that's just a much clearer conversation, than a conversation about abundance and affordability. And so that's maybe helpful. US versus Europe, I mean, I'm pretty sure, at the median, the incomes in the United States are higher than in Europe, and that the gap is growing. I think that at the bottom end of the distribution, is where we have the big problem in the United States. So this is a very harsh country to be a poor person in, in part for income health security reasons, also in part because public safety, low-income Americans are subjected to quality of life issues that are much more severe than the ones that you have in Europe. These are big, important concerns. I mean, this is stuff that I've worried about my whole career. I do think though the housing conversation is a piece where sort of a pure distributional lens kind of runs out of gas, right? Because you have a musical chairs problem, with homes in New York or California, Washington, D.C., lots of other places. If there's only so many houses to go around, somebody is gonna be left out. You can address that through a market, in which case it's poor people who are left out, you can address it with a social housing model, in which case it's people who lose the lottery who are left out, but ultimately you need to have more physical homes in the places where people want to live, or there's not gonna be a possible fair way to distribute it. I want to lurch back to this notion of abundance, and one of the things that jumped out at me, and I listened to you debate with Orrin Cass, whether it really is just neoliberalism, really packaged. And even if it isn't, or there might be ways we wanna say it isn't, how do we keep it from becoming that? Given that some, the impetus of those in power is going to be, and our country is ruled by those who have an interest in keeping the status quo, is going to be to lessen the more redistribution elements of abundance and make it into something like neoliberalism. So what should we look at to see that it's progressing in the right way, or progressing in the way we would like to are there certain touchstones you can look at? In neoliberalism, that's something people love to. I know, I know it's another one of those words that nobody knows what they mean when they say it. And so, you know, say whatever it's like, here's two words and nobody's sure what they mean, and how do they relate to each other? You know, I'm not quite sure. I mean, what I was trying to say to Cass back there is that we don't want to just have the economic regime of the 1980s forever and ever and ever, that if you look at the problems that people in the abundant school have been very focused on, a lot of which relate to housing, to the capacity of the energy system, to deliver more electricity to people, to large scale transportation projects, a lot of the problems that we see in that sphere stem from the 1980s regulatory regime, that there was a big move in the United States toward devolution of regulatory authority to local governments. And in certain things that were very interesting to the Ronald Reagan business coalition, going down to a smaller scale incentivizes a lighter regulatory touch, right? Because the jurisdictions are competing essentially against each other, you know, to attract capital flows and investment. But in other kinds of areas, this sort of hyper-localism just makes it hard to get physical infrastructure built, right? And that's been a very bad model for the United States. It's created a lot of sort of problems. We also have this big legacy in the United States, coming back to the 1970s of creating very extensive rights of members of the public to sue the state, right? And to say, before you, you know, do up, before you want to put a bike lane in, you have to do an environmental review process that can take years and years and years. And then anybody who doesn't want the bike lane can go back and say, ah, but you didn't consider the possibility that, you know, somebody on a bicycle might fall down and then you can prevail in court on something like that. Is it neoliberalism or not neoliberalism to say, well, we want to have like fewer litigation attack services? I don't know, right? But that's the goal, right? Is to move back from some of these posts 1980 concepts of sort of proceduralism and localism. And, you know, it could be neoliberal or not, depending on what you like. So the last question from me, you've talked a lot about the importance of diagnosing the problem correctly. You've also been skeptical that there really is an affordability crisis that it's just as you said, basically, angered inflation. So then, even though Democrats, you wrote that you think Democrats should definitively talk obsessively about their ideas for promoting affordability, but aren't they perhaps just falling into the same trap that Trump fell into by misdiagnosing the problem and therefore hammering away at something that is actually not the problem and therefore will allude a solution? I mean, it's a very tricky problem, right? I mean, because if, you know, midterms are coming up, it's Congress, you can just say anything and have no responsibility. But if you win an election in 2028, based on promising people that nominal prices will fall, you're gonna be the exact same problem that Trump was. Now, I think Luigi's suggestion that we should think about affordability as really just an economic distribution question is maybe more productive because Democrats do have a lot of ideas that would speak to that, right? I mean, there are proposals on the tax side and there's proposals on the spending side that could help at least people in the bottom half of the income distribution increase their level of material consumption, right? That's affordability, I guess, potentially in a good way and that would be productive. But I think in a way, I mean, that's a very traditional Democratic Party agenda. If you go back, I mean, to Democrats before Joe Biden, right? Barack Obama, Bill Clinton, Lyndon Johnson, Franklin Roosevelt, the thing that they all have in common is an idea that well, we should have progressive taxation and we should have more government subsidization, particularly of social goods related to health and education. So like, that's a great agenda and if we can call that affordability and that connects with people, like, that would be amazing. I do think that people should be careful that they're not just promising a general fall on the price level because abundance is not going to achieve that antitrust regulation is not going to achieve that. A catastrophic depression could achieve that, but that's not going to make people happier. And, you know, this is unfortunately something that us in the journalism community have to try to explain to the public because it's not well understood. If you're enjoying the discussions, Luigi and I are having on this show, there's another University of Chicago podcast network show. You should also check out. It's called Not Another Politics Podcast. Not another politics podcast provides a fresh perspective on the biggest political stories. It's not told through opinions and anecdotes, but rather through rigorous scholarship, massive data sets, and a deep knowledge of theory. So if you want to understand the political science behind the political headlines, then listen to Not Another Politics Podcast, part of the University of Chicago podcast network. Okay, so Luigi, we got started on this debate about affordability and abundance. And you mentioned when we started talking about it, that economists had come to the view that abundance doesn't work or that what were you getting at when we talked about this at the beginning? So I was getting at the fact that the fundamental approach of economies for many, many years, neoclassical economists is to say, we maximize the size of the pie, and then we'll eat the politician divide the pie. Because by construction, a larger pie affords at least in principle, everybody to be better off. This is the only thing we can say as economists, because we don't want to take size on which side that you are and we will do that. So we only focus on the total, and we ignore the distribution of issues. Okay, and this is where the convergence between the right wing economists, the left wing economists, and the big sort of period that goes basically from Ronald Reagan to Donald Trump, there was a consensus at the center of the political spectrum. So that yeah, Larry Summers and Glenn Haber were fighting on the marginal tax rates, but were all agreeing on this framework. And abundance continues on this framework. Well, I think a bunch of economists, and I consider myself in this group, started to question and say, wait a minute, should we ignore the distribution? Because we're waiting for 40 years, the distribution is not taking place. In fact, if anything is the other way around, so is it good enough? So as one way of summarizing the abundance debate or the abundance theory, just to say, we already know that the trickle down theory of economics doesn't work. I think that again, if you care about the total pie, abundance is great. And to be honest, I think that they chose, and it were very smart and true. And then they chose an argument like housing, which is fantastic on the outside. However, let me be a little bit conspiratorial here and say, this is the only sector of the economy in which the rents of the distortion does not accrue to a large company but to a distributed public. So in that sense, it's an easy target to take on because you're not challenging any kind of really entrenched power in our world. OK, yeah, that is a conspiracy theory. But as we have said several times recently on this podcast, a broken conspiracy theory is right twice a day, or even a broken conspiracy theory is right. And I do like a good conspiracy theory. OK, so did Matt's discussion of anti-trust and big tech convince you at all? It convinced me a little bit, more than a little bit, actually. I'm worried because it convinced me not at all. In a sense, I think that it was absolutely right in saying that competition is not the only remedy for anti-trust. OK, sorry. Competition is not the only remedy for big tech. So we agree on that and he's right on that. However, whenever we touch anti-trust, oh, no, no, but we need to do something else. And it sounds, I'm sorry to say, it sounds identical to many of my colleagues who are basically consulting for the big tech industry. So they're clearly defending the big tech industry. In which they're, oh, we recognize that big tech is screwed up in many, many dimension. And we welcome any other intervention, the one we have nothing to do with. But when it comes to anti-trust, absolutely not. Yeah. And it seems a bit like I don't know. It's kind of a distracting form of the issue. Yeah, I understand that. And I think I would argue and rather than, but in other words, I think his point broadly taken is right, which doesn't mean that we don't need an amore engaged anti-trust effort too. So he did make me think about this question that I know it's my naive simplistic brain. But we were talking about Adam Smith the other day. And through the benevolence of the butcher and the baker, and there is this idea that capitalism, the market, will incentivize the production of a product that is good for everybody that therefore makes money. And that if it's not good for people, then it won't make money. And I realize it's naive of me to think that specifically with big tech, given that we have all sorts of things that are bad for us that have made money over time from OPM back in the day that brought down the Chinese empire effectively to cigarettes, to alcohol. But still, it does seem to me something profoundly broken that these things that we recognize as being so bad for us can nonetheless have grown to be such a major part of our lives. No, that's absolutely true. And at the Stigler Center, we organize a report on digital platforms. We recognize the fact that competition will not solve all the problems of digital platforms. There is no doubt about that. However, it solves some. And in my view, is also making them a little bit less powerful politically, because I think he's right that businesses with a lot of voters can be powerful, even if they're not concentrated. But keeping the number of voters constant, the more concentrated the more you add the incentives to lobby and the more you have the money to lobby. And so there is a natural spiling effect between concentration and political influence. I was actually, I didn't want to be able to point, but Sisi is using economics 101 to push some of the argument. This is coming straight from Matsu, Olsen, 1964. And economics 101. So I think that the fact that he's not willing to recognize this is a bit problematic to me. I want to come back to that, but I did want to say that I'm not sure his example of car dealers was necessarily the right one, given that yes, car dealers are incredibly fragmented, but they all want the same thing. And so they're fragmented, but they're not fragmented in the sense of wanting different outcomes. They're very unified in what they want. So it is both a very fragmented industry and a very politically powerful one, but the fragmentation is superficial rather than real. So anyway, on that note, but why is this Econ 101 explained to me that? Oh, it's very simple because if it's a fragmented industry, and I spend some money to lobby, this money benefits everybody in the industry. So I'm very reluctant to invest in lobby because everybody has free rights. But take the extreme in which I own 100% of the industry that every dollar of lobbying, the benefits are good to me 100%. And so I'm more incentivated to lobby. It's as simple as that. Then there is an argument that is not economics 101, but I think it's an important argument is, imagine there are some honest congressman and women, not all congressman and women are in the pocket of industry. And they're trying to figure out what is good for the country. They're not expert in every possible fail. So imagine there is a audition on social media. If you have a lot of different kinds of social media, they're going to present different side of the argument. And as Mark Congressperson can figure out among the values story, what is the right thing to do? On the other hand, if there is only one player in the industry, they present one vision. And unless you are an expert, you have nothing to say against it. And I remember realizing this when I started the lobbying of the financial industry, back in 2003, you know, there was a bankruptcy reform act of 2003. And there was Chuck Grassley, because Chuck Grassley was there before we were born. And he's not clearly a radical leftist. And he said that he felt steamrolled by the banking industry like never before. And why? Because they all came in with one position paper and they steamrolled the entire legislative agenda. Why did this happen in 2003 and not in 1978? I think when there was a previous reform? Because in the meantime, there was a massive consolidation in the banking industry. And so the banking industry found it very easy to have one position paper and one together. And they basically steamrolled Congress without them even realizing what was happening. Capitalism is a podcast from the University of Chicago Podcast Network and the Steegler Center in collaboration with the Chicago Booth Review. The show is produced by me, Matt Hodeb, and Leah C. Zreen, with production assistance for Udsof Gandhi, Matt Lucky, Sebastian Berka, Andy Shee, and Brooke Fox. Don't forget to subscribe and leave a review wherever you get your podcasts. And if you'd like to take our conversation further, also check out promarket.org, a publication of the Steegler Center, and subscribe to our newsletter. Sign up at Chicago Booth.edu slash Steegler to discover exciting new content, events, and events.