Category Archives: Public Choice

Antitrust Triangulation

Sometimes it’s useful to introduce useless bills. The Prohibiting Anti-Competitive Mergers Act , sponsored by Sen. Elizabeth Warren (D-MA) and Rep. Mondaire Jones (D-NY), is a case in point. It bans mergers larger than $5 billion, not indexed for inflation. It has a near-zero chance of passing, and top antitrust hawks like Sen. Amy Klobuchar (D-MN) and Rep. David Cicilline (D-RI) did not cosponsor it. And yet, this doomed bill can be politically useful. The reason lies in an old political strategy called triangulation, made famous by former President Bill Clinton.

Triangulation is a rhetorical technique that can make yourself appear moderate, even if you aren’t. For nearly every policy position, it’s possible to point to other proposals to both your right and your left, and paint those as radical. Your proposal will always be the middle point of that triangle. That relative center position makes a position look moderate, even if in absolute terms, it isn’t.

The Warren-Jones merger bill’s usefulness is that it can serve as that left flank to Klobuchar and Cicilline’s own antirust bill, the American Innovation and Choice Online Act (AICOA, S. 2992). On the right flank, populist Republicans are in full culture-warrior mode against Big Tech, adding their special mix of tragedy and comedy to the drama. Together, they make the radical AICOA appear moderate in comparison. It’s classic triangulation.

Don’t fall for the trap. Sen. Klobuchar and the bill’s other sponsors seem to know their bill is ideologically loaded. That may be one reason why they never held a formal committee hearing for it. Instead, they held a markup session behind closed doors. Even there, many of the “yes” votes came with reservations about voting for the final bill when it reaches the Senate floor.

One reason for such reservations is that AICOA’s ban on self-preferencing by online sellers would create countless aggravations for consumers. If voters find out who is responsible, there will likely be significant backlash. As my colleague Jessica Melugin pointed out recently:

Consider just a few possible consequences: Amazon would not be able to offer free-shipping services on certain items; Google would not be able to display its map at the top of search results for local businesses; Facebook would be prevented from showing you a friend’s Instagram story at the top of your news feed; and Apple’s App Store wouldn’t suggest the apps that might be the best fit for users. Microsoft would even be swept up by the bill’s prohibitions, too, by no longer being allowed to integrate LinkedIn contact info with Microsoft Office 365.

For context, self-preferencing has been standard practice in physical retail for decades. Costco’s Kirkland brand is the most famous example. Walmart and Target have their own house brands, as does nearly every grocery store chain. Self-preferencing has helped those companies’ markets remain competitive and innovative. Doing the same thing, but online, is no different. Klobuchar and her cosponsors’ legislation does not change that.Just because AICOA appears moderate in comparison to the Warren-Jones merger bill on the left and the culture warriors on the populist right, that doesn’t mean it is actually moderate. Whatever its relative position, an absolutely bad idea is an absolutely bad idea.

Amazon Antitrust Lawsuit Dismissed

Last year, District of Columbia Attorney General Karl Racine filed an antitrust lawsuit against Amazon over its third-party seller program. On Friday, a judge dismissed it. When it was first filed, my colleague Jessica Melugin and I argued that the lawsuit stood on shaky legal ground and would harm consumers if it succeeded.

One reason for the case’s weakness is the amount of competition that Amazon faces in convincing third-party sellers to use its platform:

Other retailers such as Walmart now have their own third-party seller programs that compete with Amazon’s. This is on top of existing online options small sellers can use, such as eBay, Etsy, and Shopify, as well as numerous niche markets, such as Reverb for musical equipment and Newegg for computer products.

Every other state attorney general in the country must have agreed with us, because none of them joined Racine’s lawsuit. That fact that it was a solo act was itself telling about the case’s prospects, as I told Law360.

Despite the dismissal, this isn’t over yet. Reuters reports that Racine’s office is “considering its legal options.” Amazon will likely face other antitrust cases at both the state and federal level. These too will have a tough time in court, but a mix of political ambition and populist ideology means that regulators will likely continue to try.

There are two common legal tests for determining if a company is harming consumers. Can it: a) raise prices or b) restrict supply? Amazon is capable of neither, in part because it commands just 9.2 percent of the total retail market (both brick-and-mortar and online), compared to 9.5 percent for Walmart.

Even in the narrower online commerce market definition, where estimates of Amazon’s market share mostly range from 40 to 50 percent, Walmart and Target are both beefing up their online presence. Most traditional grocery stores now offer online ordering, pickup, and delivery. Smaller local shops are can offer online ordering and delivery through Instacart, Uber, and other platforms. And many producers give customers the option of foregoing retailers altogether by selling direct.

In order to argue that Amazon has a monopoly of any kind, prosecutors would almost certainly have to commit the relevant market fallacy. This is a language game, played by defining a company’s market so narrowly that it appears more dominant on paper than it is in real life. Any market is a monopoly if you define it narrowly enough; the challenge is doing it with a straight face. That is why the original Facebook antitrust complaint was dismissed, and why the revised complaint will also have a tough time in court.

Another tactic is to try to change the rules of the game, as five-year olds often do when they get frustrated. The American Innovation and Choice Online Act, for example, would end the need for prosecutors to define relevant markets at all. There is also a larger push from conservative and progressive populists to end the consumer welfare standard, which holds that big isn’t automatically bad; big must behave badly before it can be punished. If populists get their way, they could win cases in which the defendants have not harmed anyone.

Attorney General Racine’s legal defeat was expected; the only surprise was that it took so long. But this was a minor skirmish in a much larger battle that goes far beyond the big tech bogeymen of the moment.

For more about what is at stake, see Wayne Crews’s and my paper, “The Case against Antitrust Law.”

Antitrust Is Political

Antitrust regulation is just as politicized as other forms of regulation. Arizona attorney general Mark Brnovich’s just-announced investigation into investors whose politics he doesn’t like is just the latest example, as I point out in a letter that ran in yesterday’s Wall Street Journal:

Arizona Attorney General Mark Brnovich has opened an antitrust investigation into investment funds centered around environmental, social and governance (ESG) goals. He argues that they are financing a coordinated political agenda (“ESG May Be an Antitrust Violation,” op-ed, March 7). First Amendment concerns and the heavy legal lift of proving collusion aside, this investigation is wrongheaded for two reasons.

First, two wrongs don’t make a right. Mr. Brnovich is right that many ESG funds are politicized. But the remedy is not antitrust enforcement, which itself is politicized—not to mention slow, ineffective, and prone to regulatory capture.

Second, it is unwise to give new ideas to the Federal Trade Commission’s Lina Khan, Sens. Josh Hawley and Amy Klobuchar, and others looking to expand antitrust regulation. Antitrust mission creep has already crept too far.

Ryan Young

Competitive Enterprise Institute


The letter is here. Brnovich’s original column is here.

One Way to Block Reforms: Capture the Lawyers

From p. 23 of Richard McGregor’s 2010 book The Party: The Secret World of China’s Communist Rulers:

“About one-third, or 45,000, of the 150,000 registered lawyers in China as of May 2009, were party members. Nearly all law firms, about 95 percent, had party committees, which assessed lawyers’ pay not just according to their legal work, but to their party loyalty as well. Far from being a weakness, the Party considers its penetration of the legal system to be a core strength.”

Economists often write of regulatory capture, in which regulated industries capture the agencies that regulate them, and use that relationship to feather their each other’s nests. It turns out this can also happen in the opposite direction, and governments can capture industries.

In the News: The America COMPETES Act

I’m quoted, though inaccurately, in a Voice of America article on the America COMPETES Act:

Ryan Young, a senior fellow with the Competitive Enterprise Institute, told VOA that efforts by Congress to mimic China by trying to manipulate the U.S. economy are “misguided” at best, and at worst destructive.

“This falls into what I think of as the ‘But they do it, too,’ argument,” Young said. While it is indisputable that the Chinese government creates all sorts of advantages for certain sectors within its economy, he said, it doesn’t follow that the answer is for the U.S. to do the same.

Despite government support, large Chinese tech firms are burdened with substantial debt, operational inefficiencies and political meddling, he said.

Further, Young noted that the semiconductor industry, which the legislative efforts target above all else, has already taken steps to bring some of its production into U.S. territory, with chip giant Intel expanding a $50 billion complex of chip manufacturing facilities in Arizona.

I should have been more clear in explaining to the reporter that subsidies are harmful, even in China. Subsidized companies grow soft and dependent, and tend to operate with politics in mind, rather than customers or investors. The result is waste, corruption, and white elephants, along with slower innovation. The more subsidies in an economy, the less competitive it becomes, especially in the long run. Congress should not copy China’s mistakes.

The whole article is here.

No Due Date Book Club Notes: James Buchanan, Week 2

I recently joined Liberty Fund’s No Due Date economics book club, where over the next year, participants will read one book per month selected by GMU economics professor Peter Boettke. Pete will also lead group discussions and provide other resources. January’s selection is the first volume of James Buchanan’s collected works, The Logical Foundations of Constitutional Liberty, which collects many of his better-known papers from throughout his career. Buchanan was one of the cofounders of public choice theory, and won the 1986 economics Nobel.

This post, the second of three, collects my notes from those readings. I’m posting them here mostly for my benefit, so I can easily find them during the discussions, and can refer back to them later if I cite them in the future. Readers new to Buchanan or curious about the major themes of his work might benefit from skimming these notes, though I highly recommend reading the primary source. I may or may not do this for future months’ readings, depending on how useful it is.

Note that I copied and pasted these notes unedited from a Word document I kept open while reading. These notes do not always distinguish between as-is descriptions of Buchanan’s arguments, and my opinions and original thoughts about them. Reader beware.


“Individual Choice in Voting and the Market” (Journal of Political Economy, 1954), pp. 75-88.

-Buchanan builds a model of individuals making decisions. They just happen to be voting decisions. For simplification, it’s a direct democracy model without representatives.

-In markets, consumers get what they want. This is not guaranteed in voting markets. There is uncertainty. This affects voter behavior.

-People might vote to signal values, knowing it might not cost them personally. Hence the people who vote for Prohibition, then visit their bootlegger.

-Mises: people bear less personal responsibility for their voting choices than their market choices. So their political choices are more corruptible than their market choices.

-p. 81: “Choice implies that alternatives are mutually conflicting; otherwise, all would be chosen, which is equivalent to saying that none would be chosen.”

-Market choices are unbundled, and less mutually exclusive than political choices, which are take-it-or-leave-it bundles. P. 82: “As a result of this difference, individual choice in the market can be more articulate than in the voting booth.”

-Market decisions are among actual alternatives; political decisions are among potential choices. If the voter loses, they don’t get their preferred choice. Even if they do, there is no guarantee the political process will operationalize it. (he doesn’t seem to make this last point, but would likely agree with it.)

-Market “voters” can be overruled in the sense that, say, their favorite store ot product will go out of business if they don’t get enough “co-voters.”

-All of these differences would remain true under complete economic equality. Objections that “one dollar, one vote” in the marketplace is unfair is not an objection to the points Buchanan is actually making.

-Market choices are not more rational than political choices. The individuals making them are the same. Their differences are in incentives and institutions, not in rationality.

-Section VII, on when to use ballot box instead of the market, is a bit muddled. Institution-level changes gain their legitimacy through the ballot box. Political choices should be made when private choices harm the goals of a majority, or when they are obviously inferior—and it is worth the tradeoffs in choice and liberty to use political means. I would add in something about transaction costs.

-A language problem: current language does not differentiate between market freedom and market power. This semantic point leads to a lot of avoidable confusion.

“Social Choice, Democracy, and Free Markets” (Southern Economics Journal, 1954), pp. 89-102.

-Reaction to Kenneth Arrow’s Possibility Theorem’s philosophical implications. His major argument is that cyclical majorities, which are a product of the intransitive democratic preferences that Arrow’s theorem predicts, provide a bulwark against the tyranny of the majority, and allow for ongoing policy experimentation, rather than setting the initial, “rational” result in stone.

-This highlight’s Buchanan’s subjectivism. He isn’t terribly concerned with this or that policy. He is concerned with the larger system-level processes. Normatively, he seeks to avoid tyranny and stasis, and that’s about it.

-This rests in turn on the core Buchanan theme of methodological individualism. Societies don’t reason or have preferences, individuals do.

-Arrow misuses the word “process,” which has caused confusion in both Arrow and his debaters.

-Buchanan argues that Arrow’s theorem applies to how a welfare function is derived—but not the decision-making process that reacts to that function.

-That doesn’t matter for voting behavior, but it does for market behavior, according to Buchanan. Arrow’s theorem is useful for analyzing voting, but not for markets.

-Methodological individualism: the concept of “social rationality” is incoherent. Societies do not reason, individuals do.

-Interesting side point from Buchanan: utilitarians are individualists, and are therefore philosophically inconsistent whenever they leave the individual and speak of social utility. I add that interpersonal utility comparisons are also impossible.

-Because individuals are rational and the concept of rationality does not apply to societies, we can observe intransitive “preferences” and cyclical majorities in democracies. Also, these inconsistencies can be useful as a check on power and on tyrannies of the majority.

-Cyclical majorities also allow for ongoing experimentation with new policies. The status quo is never set in stone.

-Buchanan invokes near-unanimity as a benchmark of true collective choice, prefiguring The Calculus of Consent, which would appear eight years later.

-Market decisions to tend to obey the transitive property, since they are made solely at the individual level. They are not public choices. Buchanan does allow that this is true only to the extent that an individual’s preferences are, in fact, transitive. Anyone who has spent time with a small child knows that real-life human preferences are not always transitive.

“The Pure Theory of Government Finance: A Suggested Approach” (Journal of Political Economy, 1949), pp. 119-132.

-Buchanan contrasts individualist and collectivist (organismic) approaches to costs and benefits of taxes and spending.

-It was standard practice at the time to count only the costs of government, and not the benefits. Buchanan argues that both matter, and benefits should be counted as well. Later in his career, he would have taken this in a more explicitly public choice direction—the implications for concentrated benefits and diffused costs are obvious. Here, he hints at it, but doesn’t go very far in that direction of analysis.

-One problem with the collectivist/organismic approach is that it thinks in aggregates, rather than in terms of separate individuals. Since interpersonal utility comparisons are impossible, so are accurate societal cost-benefit calculations.

-A price theory point Buchanan does not make: the technical difficulties of separating individual costs is “expensive” in terms of effort and complexity for economists. This is why they choose the “cheaper” option of thinking in aggregates. While rational from a price theory standpoint, this leads to unrealistic analysis.

-Buchanan argues that the aggregate cost of the state should equal its aggregate benefits, in which seems a fairly straightforward Marshallian calculation at the margin. He is agnostic about how those costs and benefits are distributed. That’s for the political process to decide.

-This article clearly reflects his recent study of Italian political economists. He quotes several.

-One of them raises a good point: if political benefits were to be equally spread out, a capita tax would be fair. Since that is not what most people want the state to do, that is why government costs are not equally distributed, nor its benefits.

-The “fiscal residuum” is the difference between a government’s costs and benefits. These will vary from person to person. The goal is for it to equal zero for society as a whole (Buchanan ignores transaction costs and political waste here, but for this simple model’s purposes, that is fine). A progressive tax and benefit system would have a negative residuum for rich individuals, and a positive residuum for poor individuals.

-(Not Buchanan’s point) In practice, democracies often have positive residuums for the middle class, which has the largest number of voters, and negative residuums for the rich and poor. This is for public choice reasons—politicians know want to maximize votes more than they want to maximize any distributional fairness norms they may have.

“Positive Economics, Welfare Economics, and Political Economy” (Journal of Law and Economics, 1959), pp. 191-209.

-Economic theory was developed by utilitarians, and the discipline has been taken over by positivists. Even Milton Friedman is a positivist. This is where Paretian welfare economics comes from. Most economists are not content to describe what is; part of their job is advising policymakers on what should be. Buchanan doesn’t like this.

-Clever insight about Pareto optimality: it avoids the cardinal no-no of interpersonal utility comparisons. Individuals make their own decisions about what makes them better off and worse off, so no interpersonal comparisons are needed. Kaldor and Hicks took Pareto’s approach and developed the new welfare economics.

-A newer development in welfare economics, headlined by Paul Samuelson and others, rejects Kaldor and Hicks. Samuelson, et al rely on a “social welfare function,” and thus commit the non-no of interpersonal utility comparisons.

-Welfare economists, especially of the Samuelsonian variety, assume omniscience of the observer or policymaker. Buchanan says this is unrealistic, and should not guide policymaking. It gives too much power to policymakers to make decisions on others’ behalf.

-Revealed preferences as fatal to the omniscience assumption: We don’t know other people’s preferences until they reveal them through their actions.

-An economist should not decide upon changes, because he has no way to know society’s preferences; the very concept is incoherent. Instead, an economist should present a menu of changes, upon which individuals can decide on, either individually or through the political process.

-This is another example of Buchanan’s subjectivity. His ideological priors are liberal in the sense that he cares about individual consent. But he’s neutral about which policies individuals consent to.

-A rough analogy to Buchanan’s job description for economists is as medical diagnosticians. The patient has a problem, the economist uses their tools to diagnose it and prescribe possible remedies. But ultimately the patient chooses what action to take—though in this case through political consensus, not individual choice.

-Compensation for externalities, such as pollution: Buchanan sees payment for externalities not as an ethical concern for policymakers, but as necessary for an an honest prices system, so individuals can make their own accurate decisions about Pareto-optimal changes. His subjectivity shows up again.

-A political economist’s job is to suggest possible gains from trade, not to impose them against people’s wills—the economist doesn’t know people’s preference functions, and could make non-Pareto-optimal mistakes.

-Good question on p. 203: “Unless the relevant choices are to be made by some entity other than individuals themselves, why is there any need to construct a “social” value scale?”

-Buchanan exposes the vulnerabilities of his own argument—this is the mark of a good scholar. His argument depends on people being reasonable; this is not always true. His argument depends on a contract theory of the state; many people object to this. And no large group of people will be unaminous in decisionmaking, which is the ideal. Some “relative unanimity” benchmark short of that will have to do in real-world political systems, such as a majority vote, a 2/3 majority, or whatever rule people decide on. Buchanan is agnostic on which relative unanimity rule is best.

-If a policy doesn’t gain unanimous consent, is it Pareto optimal? Tough question. Real-world societies will nearly always have to settle for something short of that ideal.

-Which also makes a society progressively more vulnerable to tyrannies of the majority, the closer the adoption rule moves to a 50-percent-plus-one majority.

-A bit of game theory: economists must think at least one move ahead. Don’t recommend what people want right now, recommend what people will want after a proposal goes through the political process.

No Due Date Book Club Notes: James Buchanan, Week 1

I recently joined Liberty Fund’s No Due Date economics book club, where over the next year, participants will read one book per month selected by GMU economics professor Peter Boettke. Pete will also lead group discussions and provide other resources. January’s selection is the first volume of James Buchanan’s collected works, The Logical Foundations of Constitutional Liberty, which collects many of his better-known papers from throughout his career. Buchanan was one of the cofounders of public choice theory, and won the 1986 economics Nobel.

This post, and the following two, collect my notes from those readings. I’m posting them here mostly for my benefit, so I can easily find them during the discussions, and can refer back to them later if I cite them in the future. Readers new to Buchanan or curious about the major themes of his work might benefit from skimming these notes, though I highly recommend reading the primary source. I may or may not do this for future months’ readings, depending on how useful it is.

Note that I copied and pasted these notes unedited from a Word document I kept open while reading. These notes do not always distinguish between as-is descriptions of Buchanan’s arguments, and my opinions and original thoughts about them. Reader beware.

January – James Buchanan, The Logical Foundations of Constitutional Liberty: Collected Works, Vol. 1


“What Should Economists Do?” (Southern Economics Journal, 1964), pp. 28-42.

-They should seek understanding of Smith’s propensity to truck, barter, and exchange.

-They should do catallactics, not oikonomia

-Methodological individualism. Societies don’t have ends in mind, individuals do.

-Lionel Robbins and Max U. as adversaries.

-Don’t posit things as problems; that implies a solution—and a solver, usually the economist or some politician. The real world is far more complicated than that.

-Subtle point, but important: A Max U. robot doesn’t really make choices among alternatives. It follows a pre-determined program.

-“Symbiotics” is Buchanan’s preferred term for economics, even over catallactics. It captures the inherently social nature of what economists study. It is a social science. There is no economics or symbiotics in studying Robinson Crusoe until Friday joins him.

-Another subtle point from Frank Knight: in perfect competition, there is no competition, and no trade as we understand the terms.

-Equilibrium through the perfect competition lens is harmful to understanding. When equilibrium does happen it’s an emergent process. Both of those words matter. Nobody designs it, and the process never ends. Something can always change.

-Markets are institutions and processes, not Max U.s achieving societal goals.

-Politics is also exchange. Economists should study it that way.

-Market exchanges are between equals; political exchanges are between superiors and subordinates.

-Public choice, properly done, is not normative. He expects pushback on this point.

“Politics without Romance” (Lecture, Institute for Advanced Studies, Vienna, Austria, 1979), pp. 45-59.

-Don’t fall for the Nirvana approach. Compare realistic alternatives when looking at institutional arrangements.

-Public choice is supposed to be positive, not normative. First figure out what is, which does not vary from person to person, before proceeding to the should part, which does vary from person to person.

-Pre-constitutional political exchange precedes market exchange.

-Political exchange affects the whole public; hence the name “public choice.” Market exchange affects only the individuals involved (ignoring externalities, which Buchanan does not mention).

-Tension: where does legitimacy come from? Buchanan says it comes from contracts, not rights. But contracts themselves depend on consent. A tension in his thought?

-A “productive state” can emerge to provide public goods by solving transaction cost problems, at least to some extent.

-Cyclical majorities tend to happen in democracies under certain rules. Arrow was on to something, though he tended to ignore institutions.

-Duncan Black and the median voter theorem also have explanatory power in how political exchange works.

-Most people are multi-issue voters, which makes modeling all but impossible, and can result in cyclical majorities.

-Good analogy: people vote on the temperature they want. Then we see if the heating and cooing system is capable of delivering it.

-In a representative democracy, representatives’ incentives are not the same as their voters’ incentives.

-Marginalism does not exist in political goods. They are all-or-nothing bundles. Marginalism does exist in market goods. Consumers can choose a little more or less of each product as they choose.

-Public choice is for something, not just against the romantic view of politics. It is for enabling human cooperation, and avoiding the Hobbesian trap. It sees institutional design as the method that can accomplish this as best people are able.

“Keynesian Follies” (Book chapter contributed to a Nobel conference volume, The Legacy of Keynes, 1987), pp. 164-178.

-Keynes was an artist, not a scientist. His goal was to change the perception og his economist peers. This was one reason he changed his mind so often.

-The depth of Keynesian follies are from Keynes’ followers more than the man himself.

-Keynes was aware of the importance of institutions; less so his followers. Keynes built a model to get people to think that monetary policy mattered less than fiscal policy. The trouble began when this was taken as scientific, rather than a goading to move scholarship in a certain direction.

-Keynes was responsible for people to concentrate on employment as a policy objective, and therefore neglect monetary and market institutions.

-Thought: Is Buchanan getting the arrow of causality wrong? And I have my doubts that people were ever as institution-minded as Buchanan seems to argue.

-Buchanan argues for a full employment impossibility theorem, taught by Henry Simons and C.O. Hardy. Closed market economies have three possible characteristics, of which only two are simultaneously possible at a time: 1) full employment, 2) stable money, and 3) noncompetitive labor markets.

-Keynes’ theory was of its time, but didn’t work in the 1940s and later. Possible implication (would Buchanan go there?) Institutions, if not timeless, are at least more long-term oriented.

-Monetary policy has much stronger effects than fiscal policy. Why then, Buchanan asks, are most Keynesians (asidE from Lerner) focused instead on fiscal policy? One possibility is an ideological preference for a larger public sector.

-Keynesians should have known that fiscal fine-tuning (surplus during booms, deficits during busts) is impossible for public choice reasons. Politicians don’t work that way.

-Keynes the artist of 1936 intended to persuade people to take extraordinary policy actions during extraordinary times, when the normal political rules didn’t necessarily apply. The Keynes of a more stable era would likely have given different advice, but his disciples didn’t seem to realize that.

-Buchanan closes by asking if many Keynesian follies could have been avoided by widespread use of a commodity standard. My answer is maybe, but would the tradeoffs have been worth it?

Sen. Klobuchar’s Half-Baked Antitrust Bill

famous scene in the 1990s comedy movie Half Baked has a young Jon Stewart musing about how different everyday activities can be while one is high on cannabis. “I love Al Pacino, man. You ever see Scent of a Woman?” “Yup,” his dealer says. “You ever seen Scent of a Woman—ON WEED? That’s the way to see it, man!” Stewart continues: “You ever see the back of a $20 bill, man?” “No, I don’t know you,” says the now-wary dealer. “You ever see the back of a $20 bill—ON WEED?! There’s some weird shit in there, man!”

This scene may well have inspired Sen. Amy Klobuchar’s (D-MN) new antitrust bill, the American Innovation and Choice Online Act. The Senate version, to be introduced next week, joins an already-introduced House version (H.R. 3816), which would ban online retailers from giving preferential treatment to their private brand products.

Sure, you buy store brand products all the time at the grocery store and from Costco, but have you ever bought store brand products—ONLINE?! The distinction between in-person commerce and online commerce is silly. It’s 2021. Nearly every business, big or small, has at least some online presence, and they have for a while.

Sellers sell and buyers buy. Whether in person, by phone, by mail, or online, all are just different means to the same end. People tend to use whichever method has the lowest transaction costs to get together and make transactions. That’s it. The rest is details, like the man in the bushes on the back of Jon Stewart’s $20 bill, who may or may not have a gun.

Klobuchar and her eight Senate cosponsors have an average age of 66, so most of them may not get even my own dated cultural reference to Half Baked. In fact, the only two sponsors under age 60 are Josh Hawley (R-MO), 41, and Cory Booker (D-NJ), 52. No wonder nearly every congressional hearing on tech issues has at least one “series of tubes” or “Senator, we run ads” moment. Whatever one’s feelings about the tech industry, one should think carefully before giving politicians the power to regulate what they do not understand.

For more tech-savvy members, maybe they are grasping at straws for reasons to regulate companies they dislike, and this was the best they could find.

Whatever the case, the online-offline distinction does not matter for consumers, and it gets blurrier every year. Amazon is opening more brick-and-mortar stores, while Walmart and Target are expanding their online offerings. Sen. Klobuchar’s bill would freeze in time a false dichotomy, and cause consumer harm right in the middle of a difficult economic recovery.

How would the bill work in practice? It would not ban online companies from selling their private brand products, but it would ban them from giving their own products special treatment. Google, for example, would probably not be able to show Google Maps in its search engine, or at least not as a leading search result, which could lead to a lot of frustrated drivers. Amazon’s Prime program might go away entirely. At the very least, Amazon’s house brands would become harder to find and might not qualify for free shipping. There would be plenty of consumer aggravation, and no consumer benefits.

Meanwhile, house brands at physical stores would remain untouched. For decades, store brands such as Costco’s Kirkland have benefited from discounted prices, preferential marketing, and prominent shelf space. Those markets have remained highly competitive, but now that this same business practice is happening online, it is somehow different?

Nobody has yet offered a convincing explanation of why that is the case, let alone why commerce at a physical store is fundamentally different from commerce on a website or app, and therefore should be regulated differently.

The American Innovation and Choice Online Act is clearly not about consumer protection. For progressives, it allows them to express an ideological distaste for big businesses and pursue antitrust-unrelated issues like income inequality. For conservatives, it gives them a way to express their culture war grievances against tech companies—which is about as antitrust-unrelated as it gets.

The bill is also a golden opportunity for rent-seekers. For traditional retailers, it is a way for government to hobble their competitors. That might not be what antitrust advocates intend, but that is how antitrust works in in the real world. The American Innovation and Choice Online Act is only the latest instance of a long tradition of regulatory capture in antitrust policy.

For antitrust policy ideas that are more than half-baked, see CEI’s dedicated antitrust website and Wayne Crews’ and my paper “The Case against Antitrust Law.”

IRS Licensing of Tax Preparers Is Ripe for Abuse

Roughly a quarter of all jobs in America now require some sort of occupational license. Sixty years ago, it was about one job in 20. Should tax preparers join the list? The Taxpayer Protection and Preparer Proficiency Act of 2021 (H.R. 4184), introduced by Rep. Jimmy Panetta (D-CA), is the latest legislative attempt to do so. CEI signed onto a coalition letter this week, led by the Institute for Justice, opposing the idea.

The bill is being marketed as a consumer protection measure that would ensure that taxpayers are guaranteed quality service by a knowledgeable tax preparer. In practice, it would harm both consumers and small tax preparers. Like many occupational licensing requirements, licensing of tax preparers is economic protectionism. It would favor big accounting firms over small preparers, while raising consumer prices. The IRS’ ability to approve and deny licenses would give it an additional tool to threaten tax preparers and abuse taxpayers. And it would potentially open black markets for unaccountable “ghost preparers” who work outside the system.

First, the rent-seeking argument. H&R Block and other big firms can afford the time and expense it would take to get their employees licensed. But thousands of individual tax preparers who work part-time to help make ends meet, cannot. They would go out of business, and their customers would have no choice but to turn to the big firms. Actions speak louder than words.

Second, the power to grant licenses is also the power to take them away. If the IRS believes that a tax preparer advocates a little too hard for her clients and saves them too much money, it can put that preparer out of business. Under the bill, the IRS only needs to show in a hearing—which it convenes, for which it sets the procedures, and where the participating personnel are on its payroll—that a preparer is “incompetent” or “disreputable.” These terms are defined so vaguely under 31 U.S. Code § 330 that the IRS can use them almost any way it wishes. Penalties include fines to the preparer and her client, censure, and loss of license.

Third, licensing requirements would open up black markets for “ghost preparers.” Licensing is not free, and businesses pass their increased costs on to consumers. That means people can get cheaper tax preparation services by going to unlicensed “ghost preparers” who do not sign their name onto clients’ returns. While this might save some money, it also lets ghost preparers escape liability for mistakes. That is the opposite of consumer protection.

At the very least, Rep. Panetta should withdraw his bill. But the best long-term reform would be to treat the root of the problem: a 70,000-page tax code that is too complicated for most people to navigate without professional help. The Tax Foundation estimated in 2016 that federal tax compliance alone costs 8.9 billion hours of paperwork and $409 billion. This does not include state and local tax compliance. Those figures have likely gone up in the last five years. There are better uses for those resources, especially during a tough economic recovery.

A simpler tax code would address most of the IRS’ complaints about tax avoidance and save taxpayers time, money, and hassle—and do so in a revenue-neutral way. Big accounting firms, their lobbyists, and their political allies’ losses would be more than offset by the gains to nearly everyone else.

The coalition letter is here. Back in 2010, Caleb O. Brown and I wrote in Investor’s Business Daily about a similar proposal that ultimately failed.

John Stuart Mill on Lawyers

The exorbitantly-paid profession of lawyers, so far as their work is not created by defects in the law, of their own contriving, are required and supported principally by the dishonesty of mankind.

-John Stuart Mill, Principles of Political Economy, Book 1, chapter VII.5, p. 110.