Truth on the Market

Speaking about his new book in a ProMarket interview, David Dayen inadvertently captures what is perhaps the essential disconnect between antitrust reformers (populists, neo-Brandeisians, hipsters, whatever you may call them) and those of us who are more comfortable with the antitrust status quo (whatever you may call us). He says: “The antitrust doctrine that we’ve seen over the last 40 years simply does not match the lived experience of people.”

Narratives of Consumer Experience of Markets

This emphasis on “lived experience” runs through Dayen’s antitrust perspective. Citing to Hal Singer’s review of the book, the interview notes that “the heart of Dayen’s book is the personal accounts of ordinary Americans—airline passengers, hospital patients, farmers, and small business owners—attempting to achieve a slice of the American dream and facing insurmountable barriers in the form of unaccountable private monopolies.” As Singer notes in his review, “Dayen’s personalized storytelling, free of any stodgy regression analysis, is more likely to move policymakers” than are traditional economic arguments.

Dayen’s focus on individual narratives — of the consumer’s lived experience — is fundamentally different than the traditional antitrust economist’s perspective on competition and the market. It is worth exploring the differences between the two. The basic argument that I make below is that Dayen is right but also that he misunderstands the purpose of competition in a capitalist economy. A robustly competitive market is a brutal rat race that places each individual on an accelerating treadmill. There is no satiation or satisfaction for the individual consumer in these markets. But it is this very lack of satisfaction, this endless thirst for more, that makes competitive markets so powerful, and ultimately beneficial, for consumers. 

This is the fundamental challenge and paradox of capitalism. Satisfaction requires perspective that most consumers often don’t feel, and that many consumers never will feel. It requires the ability to step off that treadmill occasionally and to look how far society and individual welfare has come, even if individually one feels like they have not moved at all. It requires recognizing that the alternative to an uncomfortable flight to visit family isn’t a comfortable one, but an unaffordable one; that the alternative to low cost, processed foods, isn’t abundant higher-quality food but greater poverty for those who already can least afford food; that the alternative to a startup being beholden to Google’s and Amazon’s terms of service isn’t a market in which they have boundless access to these platforms’ infrastructures, but one in which each startup needs to entirely engineer its own infrastructure. In all of these cases, the fundamental tradeoff is between having something that is less perfect than an imagined ideal of it, and not having it at all. 

What Dayen refers to as consumers’ “lived experience” is really their “perceived experience.” This is important to how markets work. Competition is driven by consumers’ perception that things could be better (and by entrepreneurs’ perception that they can make it so). This perception is what keeps us on the treadmill. Consumers don’t look to their past generations and say “wow, by nearly every measure my life can be better than theirs with less effort!” They focus on what they don’t have yet, on the seemingly better lives of their contemporaries.

This description of markets may sound grotesquely dehumanizing. To the extent that it really is, this is because we live in a world of scarcity. There will always be tradeoffs and in a literally real way no consumer will ever have everything that she needs, let alone that she wants. 

On the flip side, this is what drives markets to make consumers better off. Consumers’ wants drive producers’ factories and innovators’ minds. There is no supply curve without a demand curve. And consumers are able to satisfy their own needs by becoming producers who work to satisfy the wants and needs of others. 

A Fair Question: Are Markets Worth It?

Dayen’s perspective on this description of markets, shared with his fellow reform-minded anti-antitrust crusaders, is that the typical consumers’ perceived experience of the market demonstrates that markets don’t work — that they have been captured by monopolists seeking to extract every ounce of revenue from each individual consumer. But this is not a story of monopolies. It is more plainly the story of markets. What Dayen identifies as a problem with the markets really is just the markets working as they are supposed to.

If this is just how markets work, it is fair to ask whether they are worth it. Importantly, those of us who answer “yes” need not be blind to or dismissive of concerns such as Dayen’s — to the concerns of the typical consumer. Economists have long recognized that capitalist markets are about allocative efficiency, not distributive efficiency — about making society as a whole as wealthy as possible but not about making sure that that wealth is fairly distributed. 

The antitrust reform movement is driven by advocates who long for a world in which everyone is poorer but feels more equal, as opposed to what they perceive as a world in which a few monopolists are extremely wealthy and everyone else feels poor. Their perception of this as the but-for world is not unreasonable, but it is also not accurate. The better world is the one with thriving, prosperous, markets,in which consumers broadly feel that they share in this prosperity. It may be the case that such a world has some oligopolies and even monopolies — that is what economic efficiency sometimes looks like. 

But those firms’ prosperity need not be adverse to consumers’ experience of the market. The challenging question is how we achieve this outcome. But that is a question of politics and macroeconomic policy, and of corporate social policy. It is a question of national identity, whether consumers’ perception of the economic treadmill can pivot from one of perceived futility to one of recognizing their lived contributions to society. It is one that antitrust law as it exists today contributes to answering, but not one that antitrust law on its own can ever answer.

On the other hand, were we to follow the populists’ lead and turn antitrust into a remedy for the perceived maladies of the market, we would risk the engine that improves consumers’ actual lived experience. The alternative to an antitrust driven by economic analysis and that errs on the side of not disrupting markets in favor of perceived injuries is an antitrust in which markets are beholden to the whims of politicians and enforcement officials. This is a world in which litigation is used by politicians to make it appear they are delivering on impossible promises, in which litigation is used to displace blame for politicians’ policy failures, in which litigation is used to distract from socio-political events entirely unrelated to the market. 

Concerns such as Dayen’s are timeless and not unreasonable. But the reflexive action is not the answer to such concerns. Rather, the response always must be to ask “opposed to what?” What is the but-for world? Here, Dayen and his peers suffer both Type I and Type II errors. They misdiagnose antitrust and non-competitive markets as the cause of their perceived problems. And they are overly confident in their proposed solutions to those problems, not recognizing the real harms that their proposed politicization of antitrust and markets poses.