Creative destruction

How Antitrust Regulation Hinders Innovation and Competition

Few economic concepts elicit such strong reactions as that of monopoly, and the policy intended to address it—antitrust regulations (called competition policy in the European Union). Yet, both supporters and opponents of antitrust regulations agree on one fundamental point—that effective competition is vital to the American economy and the welfare of its citizens. However, they differ in how the law should encourage this. There are essentially three schools of thought regarding antitrust policy:

  1. Interventionist. Regulators should use the law proactively to break up companies that are abusing their market power and restore a competitive market. The size of a company is a good guide as to when this should be done.
  2. Consumer welfare. Abuse of market power is rare and dominant market positions can be achieved through delivering improvements in consumer welfare. Therefore, antitrust laws should be used not to break up companies that have grown big through successful competition, but to address instances of collusion, price fixing, or other anti-competitive behavior.
  3. Free market. Antitrust law is unnecessary. Market processes routinely undermine monopolies—and attempts to create monopolies. Laws against “unfair competition” prevent property owners from experimenting with joint ventures and other innovations that can improve consumer welfare.

Until recently, there was a sharp partisan divide between these schools, which can be roughly described as liberal, conservative, and libertarian, respectively. Traditionally in practice, this meant that antitrust conservatives would more often side with the libertarian camp, while leaving some room for cooperation with the liberal faction. However, the recent rise of “big tech” has led some conservatives to turn to the most interventionist approach with a zeal that threatens innovation in America’s world-leading technology industry.

The interventionist approach suffers from the same problems classical liberal economists have long identified with government interventions in markets.

First, there is the “knowledge problem”—how do regulators know better than the market what the best market structure is?

Then there are what are known as public choice considerations—regulators might exercise their powers to promote their own preferred policy positions. The very existence of those powers will lead to intense lobbying by regulated entities—both those seeking regulatory relief and those who benefit from entry barriers that limit competition from potential new entrants in a market.

The consumer welfare approach also has problems. Retaining antitrust law as an option that may be used against entrepreneurs carries the same threat to innovation posed by the interventionist approach. For instance, politicians with an animus against certain companies may pressure regulators into opposing mergers involving those companies. Regulators assessing unfair competition will not be immune from the knowledge problem and public choice effects. Entrepreneurs, eager to avoid provoking antitrust enforcement actions, will be dissuaded from pursuing innovations that might run afoul of the law.

The third approach, abolishing antitrust law, is extremely controversial. There is a widespread belief, among policy makers, the media, and the public, that without the threat of antitrust law, companies will disregard customer preferences, extract excessive profits, and kill off competitors. Yet there is no such thing as a dominant market position unless it is guaranteed by government. AOL, Borders, Blockbuster, Sears, Kodak, and many other firms once considered dominant in their markets have fallen as the result of competition, without any antitrust action.

This process of creative destruction, succinctly described by the economist Joseph Schumpeter, is a major driver of the kind of innovation that helps raise living standards. It will surely continue unless, ironically, antitrust regulators gain too much power. Were that to happen, large firms will be tempted to reach accommodations with a government that restricts their activities in exchange for not being broken up. Those accommodations will usually include protections and guarantees that act as entry barriers against potential innovative challengers. The result will be less competition, fewer innovations, and lower consumer welfare.

Creative destruction is the best answer to dominant market positions. Rather than use antitrust law aggressively, those who wish to see big companies fall quickly should instead work to end antitrust law. As for other barriers to creative destruction—for instance, financial regulations that make launching an initial public offering of stock prohibitively costly—increased competition can be achieved through deregulation in those other areas.

 

Presented by Romano Pisciotti

BMW contro Google

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Alphabet è il ramo di BMW che si occupa dei servizi di mobilità aziendale.

BMW Logo BMW contro Google Romano Pisciotti
BMW Logo

Quando lunedì Google ha annunciato la nascita di Alphabet, la mega società che riorganizza la galassia di Mountain View per privilegiare lo sviluppo di nuovi progetti, lo ha fatto con un sito ufficiale un po’ insolito: il portale dell’azienda non è Alphabet.com ma abc.xyz. Questo perché Alphabet.com appartiene a BMW, che non ha la minima intenzione di vendere il dominio a Big G. Anzi, l’azienda tedesca non ha apprezzato l’uso di un marchio identico al suo.

Pisciotti Romano, commento: a google sarebbe bastato usare un motore di ricerca per scoprirlo !!!!

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Cpt. Romano Pisciotti

 

China devalues yuan currency to three-year low

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China’s central bank has devalued the national currency, the yuan, to its lowest rate against the US dollar in almost three years.

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yuan

 

The lender said the move was a “one-off depreciation” of 1.9% in a move to make the exchange rate more market-oriented.

 

Romano Pisciotti surfing web

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Le Sentenze della Corte Europea dei diritti dell’uomo

la Corte Europea dei Diritti dell’Uomo si è pronunciata su ben 13 vicende giudiziarie che cittadini europei, e non, hanno sottoposto al suo sindacato. L’oggetto è, per tutte, il medesimo: violazioni dei diritti umani sanciti e protetti dalla Convenzione Europea dei Diritti dell’uomo. Gli stati coinvolti e giudicati sono: Francia, Grecia, Azerbaijan, Belgio, Croazia, Russia ed Ucraina; tutti sono risultati colpevoli, a vario titolo, di quelle violazioni e molti dovranno risarcire i danni arrecati alle vittime.

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Corte Europea

Interim measures ed estradizione: come la Corte previene la violazione dei diritti umani
La giustizia che si può ottenere a Strasburgo non brilla di speditezza. Basta guardare le date in cui sono stati proposti i ricorsi di oggi (ve ne sono ben due del 2004!) per capire che ha ragione chi dice che la Corte Europea “è vittima del proprio successo“. Troppo ricorsi per un giudice che dovrebbe intervenire soltanto a quelle violazioni sfuggite dal controllo dei singoli paesi. Gli Stati controllano poco e male, e così i ricorsi fioccano in gran numero, intasando il giudice europeo e rendendo decennali i tempi di una causa. Non a caso le nuove tendenza di riforma del sistema convenzionale, che vengano dagli stati (il Protocollo XV ridurrà il termine entro il quale proporre ricorso da 6 a 4 mesi) o dalla stessa corte (le sentenze pilota danno respiro alla corte, mentre gli stati risolvono disfunzioni strutturali), sono nel senso di ridurre la mole del contenzioso..
Ma accanto a quel binario, rallentato e appesantito, ve n’è un altro, molto più spedito: la Corte Europea dei Diritti dell’Uomo può concedere in tempi brevissimi Interim measures a favore del ricorrente per evitare e prevenire le violazioni dei diritti umani. Come le comuni misure cautelari, anche queste interim measures sono concesse non al termine bensì all’inizio di un processo, e servono non a fare giustizia (come la sentenza che accerta le responsabilità degli stati e dispone l’equa riparazione) bensì per prevenire una imminente ingiustizia.

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Romano Pisciotti: stop alle estradizioni

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Stop extraditions

Google unveils surprise restructuring under Alphabet

Google has unveiled a surprise restructuring, creating a new parent company called Alphabet Inc.

 

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google

 

Under the rebranding, Google will retain its best-known businesses, such as search, apps, YouTube and Android.
Some of the newer entities, such as the investment and research divisions, the “smart-home” unit Nest, and the drone arm will be run under Alphabet.
Google founder Larry Page said it would create a simpler structure for what had become a diverse group of businesses.
“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google,” he said in the blogpost.”Our company is operating well today, but we think we can make it cleaner and more accountable,” he said. “The whole point is that Alphabet companies should have independence and develop their own brands.”
Mr Page will become chief executive of Alphabet, with senior vice president Sundar Pichai becoming CEO of Google.
Mr Page’s fellow Google co-founder Sergey Brin will become president of Alphabet, and Eric Schmidt, the current Google chairman, will be executive chairman of the holding company.
What’s in a name?
Google’s new chief financial officer, Ruth Porat, will hold the same title for both Google and Alphabet.
BGC Partners’ investment analyst Colin Gillis said the new structure should give investors greater clarity on strategy and how much Google was spending on new products.

 

Pisciotti Romano

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Romano Pisciotti, 2015
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