That's the topic of These Professors Make More Than a Thousand Bucks an Hour Peddling Mega-Mergers, a ProPublica piece by Jesse Eisinger and Justin Elliott. The sub-title of the piece summarizes its thesis: "The economists are leveraging their academic prestige with secret reports justifying corporate concentration. Their predictions are often wrong and consumers pay the price." Here are some excerpts:
Economists who specialize in antitrust … reshaped their field through scholarly work showing that mergers create efficiencies of scale that benefit consumers. … Corporate lawyers hire them from Compass Lexecon and half a dozen other firms to sway the government by documenting that a merger won’t be “anti-competitive”: in other words, that it won’t raise retail prices, stifle innovation, or restrict product offerings. Their optimistic forecasts, though, often turn out to be wrong, and the mergers they champion may be hurting the economy. * * * American industry is more highly concentrated than at any time since the gilded age. Need a pharmacy? Americans have two main choices. A plane ticket? Four major airlines. They have four choices to buy cell phone service. Soon one company will sell more than a quarter of the quaffs of beer around the world. * * * While the impact of this wave of mergers is much debated, prominent economists such as Lawrence Summers and Joseph Stiglitz suggest that it is one important reason why, even as corporate profits hit records, economic growth is slow, wages are stagnant, business formation is halting, and productivity is lagging. “Only the monopoly-power story can convincingly account” for high business profits and low corporate investment, Summers wrote earlier this year. * * * During the campaign, Trump didn’t signal what his broader approach to mergers would be. But the early signs are that his administration will weaken antitrust enforcement and strengthen the hand of economists. He selected Joshua Wright, an economist and professor at George Mason’s Antonin Scalia Law School, to lead his transition on antitrust matters. Wright, himself a former consultant for Boston-based Charles River Associates, regularly celebrates mergers in speeches and articles and has supported increasing the influence of economists in assessing monopoly power. “Mergers between competitors do not often lead to market power but do often generate significant benefits for consumers,” he wrote in The New York Times this week.
