Pay College Athletes

No March Madness tournament would be complete without at least one school being caught paying its players in violation of NCAA rules. This year, the Memphis Tigers allegedly did the honors. In a piece syndicated by Inside Sources, I argue that the NCAA should allow colleges to pay their players for three main reasons:

The first is fairness. College players are unpaid laborers who generate millions of dollars for others.

The second is that big-time college sports are, in fact, a business. There is nothing amateur about the NCAA’s $1.15 billion in revenue, its marketing deals, college coaches’ and athletic directors’ salaries, or the amount of time many athletes put in to compete at a high level.

The third reason is practical: Black markets exist. Some star college players will always be paid, no matter what the NCAA says. It should be above the table so schools and the NCAA can keep a better eye on it.

Read the whole thing here.

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.

Inflation and the Biden Budget

It is good that the Biden administration is beginning to take inflation seriously. However, there isn’t much that the president and Congress can do about it. Inflation has to do with the money supply, which is the Federal Reserve’s territory. The Biden administration’s tranche of trillion-dollar deficit spending bills will likely contribute a percentage point or so to the inflation rate for the next several years. That is small potatoes compared to the Fed’s runaway money creation, which is responsible for most of the rest of today’s 7.9 percent inflation rate. At least as far as inflation goes, those bills have not been catastrophic. But they have made the Fed’s job more difficult.

Congress and President Biden can make the Fed’s job easier by undoing some of that spending and restraining themselves going forward. President Biden’s proposed budget would not do that.

Its headline item, a 20 percent minimum income tax on the very wealthiest of taxpayers, would likely have no detectable effect on inflation. It would have a small impact on the deficit, while not addressing overspending, which is the deficit’s root cause. Its negative impact on investment would harm economic growth. This would actually increase inflation, though in this case the effect would likely be too small to be detectable.

There is one area where the Biden administration can have some positive effect on inflation. Economic growth is deflationary, an underappreciated fact. The money supply is currently growing faster than economic output—that’s inflation by definition. The goal is to have them grow at the same rate.

There are two ways to do this. One is to slow money supply growth to get it closer to economic output growth, which the Fed is starting to do. The other is to grow the economy faster, so it better matches that fast-growing money supply. Both sides of the equation matter.

Fed policy remains the most powerful inflation-fighting instrument; fiscal policy from the elected branches doesn’t even come close. But economic growth can help fight inflation, too—besides being good for its own sake.

Congress and the Biden administration should loosen never-needed occupational licenses, trade barriers, energy restrictions, financial regulations, permits, and excessive paperwork. The resulting increase in growth would help to ease inflation. It would not be an inflation cure-all. But an extra percentage point or two of growth would make the Fed’s job easier at the margin. More importantly, more growth would save and improve lives.

This Week in Ridiculous Regulations

Ukraine continues to hold out against Putin’s unprovoked invasion. Supreme Court nominee Ketanji Jackson Brown had her Senate hearings. Meanwhile, agencies issued new regulations ranging from yogurt definitions to urinal energy use.

On to the data:

  • Agencies issued 52 final regulations last week, after 69 the previous week.
  • That’s the equivalent of a new regulation every three hours and four minutes.
  • With 737 final regulations so far in 2022, agencies are on pace to issue 3,177 final regulations this year.
  • For comparison, there were 3,257 new final regulations in 2021, President Biden’s first year, and 3,218 in 2020, President Trump’s final year.
  • Agencies issued 66 proposed regulations in the Federal Register last week, after 30 the previous week.
  • With 514 proposed regulations so far in 2022, agencies are on pace to issue 2,116 proposed regulations this year.
  • For comparison, there were 2,094 new proposed regulations in 2021 and 2,102 in 2020.
  • Agencies published 454 notices last week, after 413 notices the previous week.
  • With 5,178 notices so far in 2022, agencies are on pace to issue 22,319 notices this year.
  • For comparison, there were 20,018 notices in 2021. 2020’s total was 22,480.
  • Last week, 1,300 new pages were added to the Federal Register, after 1,693 pages the previous week.
  • The average Federal Register issue in 2022 contains 296 pages.
  • With 17,137 pages so far, the 2022 Federal Register is on pace for 73,879 pages.
  • For comparison, the 2021 Federal Register totals 74,352 pages, and 2020’s is 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are three such rules so far in 2021, none from the last week.
  • This is on pace for 13 economically significant regulations in 2022.
  • For comparison, there were 26 economically significant rules in 2021 and five in 2020.
  • The total cost of 2022’s economically significant regulations so far is $187 million. However, this figure is incomplete. Only one of the three such rules issued this year gives the required cost estimates.
  • For comparison, the running cost tally for 2021’s economically significant rules ranges from $13.54 billion to $19.36 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • There are 54 new regulations meeting the broader definition of “significant” so far in 2022. This is on pace for 233 significant rules for the year.
  • For comparison, there were 387 such new regulations in 2021, and 79 in 2020.
  • So far in 2022, 212 new regulations affect small businesses, on pace for 939. Nineteen of them are significant, on pace for 82.
  • For comparison, there were 912 rules in 2021 affecting small businesses, with 101 of them classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

National Security Rent-Seeking

I am currently re-reading Milton and Rose Friedman’s 1980 book Free to Choose for an economics book club in which I participate. On page 47 is a passage about national security-rationalized corporate welfare that asks the economist’s favorite question: how does this proposal compare to other realistic options?

“Yet in all its pleas for subsidies on national security grounds, the steel industry has never presented cost estimates for alternative ways of providing national security. Until they do, we can be sure the national security argument is a rationalization of industry self-interest, not a valid reason for the subsidies.”

Economics can get highly technical, which is why some people find it intimidating. They shouldn’t. Good economic analysis is often as simple as asking the right questions. Anyone can do it, and more people should give it a try.

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.”

This Week in Ridiculous Regulations

The March Madness college basketball tournament began, continuing this month’s theme. Ukrainians continued to fight valiantly against Putin’s army, while ordinary Russian people are showing signs of dissent. The Fed raised the federal funds rate, and indicated it will likely raise rates throughout the year as a way to fight inflation. Meanwhile, agencies issued new regulations ranging from updating fax numbers to suspicious activity requirements.

On to the data:

  • Agencies issued 69 final regulations last week, after 66 the previous week.
  • That’s the equivalent of a new regulation every two hours and 26 minutes.
  • With 685 final regulations so far in 2022, agencies are on pace to issue 3,231 final regulations this year.
  • For comparison, there were 3,257 new final regulations in 2021, President Biden’s first year, and 3,218 in 2020, President Trump’s final year.
  • Agencies issued 30 proposed regulations in the Federal Register last week, after 35 the previous week.
  • With 448 proposed regulations so far in 2022, agencies are on pace to issue 2,113 proposed regulations this year.
  • For comparison, there were 2,094 new proposed regulations in 2021, and 2,102 in 2020.
  • Agencies published 413 notices last week, after 504 notices the previous week.
  • With 4,724 notices so far in 2022, agencies are on pace to issue 22,283 notices this year.
  • For comparison, there were 20,018 notices in 2021. 2020’s total was 22,480.
  • Last week, 1,693 new pages were added to the Federal Register, after 1,585 pages the previous week.
  • The average Federal Register issue in 2022 contains 299 pages.
  • With 15,837 pages so far, the 2022 Federal Register is on pace for 74,703 pages.
  • For comparison, the 2021 Federal Register totals 74,352 pages, and 2020’s is 87,352 pages. The all-time record adjusted page count (subtracting skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. There are three such rules so far in 2021, none from the last week.
  • This is on pace for 14 economically significant regulations in 2022.
  • For comparison, there were 26 economically significant rules in 2021, and five in 2020.
  • The total cost of 2022’s economically significant regulations so far is $187 million. However, only one of the three such rules issued this year gives the required cost estimates, so that figure is incomplete.
  • For comparison, the running cost tally for 2021’s economically significant rules ranges from $13.54 billion to $19.36 billion. The 2020 figure ranges from net savings of between $2.04 billion and $5.69 billion, mostly from estimated savings on federal spending. The exact numbers depend on discount rates and other assumptions.
  • There are 51 new regulations meeting the broader definition of “significant” so far in 2022. This is on pace for 241 significant rules for the year.
  • For comparison, there were 387 such new regulations in 2021, and 79 in 2020.
  • So far in 2022, 199 new regulations affect small businesses, on pace for 939. Eighteen of them are significant, on pace for 83.
  • For comparison, there were 912 rules in 2021 affecting small businesses, with 101 of them classified as significant. 2020’s totals were 668 rules affecting small businesses, 26 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

New Anti-Merger Bill Not Indexed for Inflation

Yesterday, I wrote about four problems with Sen. Elizabeth Warren (D-MA) and Rep. Mondaire Jones (D-NY)’s new antitrust bill, the Prohibiting Anti-Competitive Mergers Act. There is a fifth problem: Its $5 billion threshold for automatically rejecting mergers is not indexed for inflation.

That is important. If inflation continues at its current 7.9 percent annual rate, the $5 billion threshold would fall to $4.6 billion in current dollars after just one year. Even if inflation gets back under control relatively quickly, this “bracket creep” effect would, after a few years, increasingly affect mergers outside of Sen. Warren and Rep. James’ big tech targets. Maybe this is by design, and maybe it isn’t. Either way, it’s bad policy.

Mission creep is a serious problem in antitrust policy, as I also pointed out earlier this week in a letter to a conservative state attorney general who wants to use antitrust enforcement to punish progressive political advocacy. Antitrust policy is supposed to be about competition.

The neo-Brandeisian movement that inspired the Warren-Jones bill also wants to expand antitrust regulation. Its advocates see it as a way to address economic inequality, democracy, and climate change, among other competition-unrelated issues.

This new bill, advertised at targeting big tech companies, would, after a few years of even moderate inflation, make that kind of mission creep inevitable. It would affect industries with low levels of market concentration and little to do with today’s tech bugbears. And it would have a chilling effect across the economy on new innovations and new ways to find lower prices for consumers.

New Antitrust Merger Bill Is Fatally Flawed

There is yet another antitrust bill in Congress. The Prohibiting Anticompetitive Mergers Act, sponsored by Sen. Elizabeth Warren (D-MA) and Rep. Mondaire Jones (D-NY), seeks to prevent big tech mergers larger than $5 billion. While companies could appeal this automatic denial in court, they would have to prove the Federal Trade Commission, the Justice Department, or both acted in an “arbitrary and capricious” manner in denying a merger. That is an uphill climb that stacks the deck against companies, and may dissuade many from even trying.

Additionally, it would empower regulators to retroactively undo completed mergers if they result in the merged entity having a market share over 50 percent at some point in the future.

There are several problems with the bill. First, it might not stay on the books for long if it passes, because the U.S. Constitution prohibits ex post facto laws. Unwinding past mergers that were legal at the time they were approved almost certainly qualifies as ex post facto, and courts are unlikely to look favorably on any unwinding attempts if they are met with legal challenges.

Second, the 50 percent market share threshold for enforcement is arbitrary. Fifty percent of which market? Regulators are free to define that as narrowly as they choose. As I’ve noted before, any market can be a monopoly if you define it narrowly enough. The relevant market fallacy is already too common in antitrust. This bill would be an open invitation for regulators to abuse it even further. This is another area where regulators frequently run into trouble in court.

Third, good policy is predictable and stable. The Prohibiting Anticompetitive Mergers Act would be neither. Companies and investors need to be able to plan ahead to bring new innovations or pursue new ways to lower prices. If they try something only to have it undone by regulators after the fact, why even bother? This chilling effect is one of antitrust policy’s most significant costs, and it is often unseen.

Fourth, not everything is an antitrust issue. There is a reason so many startups seek to be acquired by big tech companies: overly burdensome financial regulations. The Sarbanes-Oxley and Dodd-Frank laws make it difficult for growing companies to raise capital on their own or go public. It is often easier for a startup to sell out to a bigger company that already has those resources in-house. If Sen. Warren and Rep. Jones want fewer big tech acquisitions, they should make financial regulations more reasonable, so smaller firms can get the capital they need while staying independent.

Those are just the start of the Prohibiting Anticompetitive Mergers Act’s problems. It is unlikely to pass, since Sen. Amy Klobuchar (D-MN) and Rep. David Cicilline (D-RI), two of Congress’ most powerful antitrust voices, conspicuously declined to support it. Even if it is more of a statement bill than a serious proposal, it is still important to nip it in the bud. There are better ways to make the economy more competitive.

In Order to Counter Inflation, Federal Reserve Should End Bond Buying Spree

This press release was originally posted at cei.org.

The Federal Reserve announced today it would raise benchmark interest rates by a quarter percentage point with the aim of counteracting the effects of inflation.

CEI Senior Fellow Ryan Young said:

“Inflation happens when the money supply grows faster than real economic output. The wider the gap, the higher the inflation rate. The Fed has by far the most control over the money supply, so fighting inflation is on its shoulders far more than on Congress or President Biden’s.

“The Fed should have started acting months ago to stem inflation. And it needs to take more action than raising the federal funds rate by a quarter of a percentage point. Its massive bond buying program is finally due to wind down this month, which has directly added several trillion dollars to the money supply. This has had more impact than its interest rate policy, which affects the money supply only indirectly.

“The Fed can ease fears of further inflation by credibly committing not to embark on another bond-buying spree, and continuing to raise the federal funds rate throughout the year. Inflation expectations play a role in how companies set their prices, so easing these fears by itself can help keep prices in check. Congress and President Biden can also help fight inflation by spending less. This would make life easier for both the Fed and taxpayers.”

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