Sunday, October 29, 2017

Is Industry Concentration a "Negative"?

Is it reasonable to defend monopolies or oligopolies? For instance: Do they restrict output? Tyler Cowen recently highlighted a paper which asks, "Has industry concentration increased price and restricted output?" While the authors did observe higher prices,  Cowen notes:
In other words, the output restrictions are not there.
Indeed, some of the more recent industry concentrations are successful because they've created platforms which are available to entire populations. Nevertheless, we do have output restrictions in the economy which are a major factor in economic stagnation. So what is going on, if arbitrary output limits are not showing up in these statistics?

Another way to frame the problem: Is industry concentration largely responsible, for the marketplace negatives of the present? Even though tradable sector activity doesn't restrict output as does non tradable sector activity, why haven't the output restrictions of the latter proven more evident?

Industry concentration isn't even necessary, for many sectors to utilize technology and maintain output as a relative constant, regardless of whether more output would prove beneficial. Yet actual restrictions in housing options and time/knowledge based product are not yet accounted for - given the fact neither of these sectors are keeping pace with population growth.

Perhaps the more important industry negatives, are the concentrations of marketplace power which effectively block economic access. In these instances, marketplace power often accrues to individuals in ways that shape entire marketplace outcomes. The more decisive marketplace negatives take place in arbitrary non tradable sector product definitions, which frequently exclude both lower income levels, and those without college degrees, from full participation in the economy.

Hidden in this shifting economic framework, are the ways in which local small firms particularly benefit, from the restrictive effects of regulatory requirements for product quality. Given this reality, the more pressing concern may not be so much about industry concentration, as industry control over product delineation. One can only hope that industry concentration doesn't catch all the blame, while the real limiting marketplace factors are still hiding in plain sight.

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