In Brief
The Issue
There’s no question that most American industries have become more concentrated. Economists are trying to understand whether this is necessarily a bad thing for competition.
The Evidence
The short answer: It’s complicated. Innovation superstars like Google have created winner-take-most markets largely by exploiting network effects, not through predatory behavior. However, research from the wider economy (including the tech sector) uncovers classic signs of unhealthy concentration: rising profits, weak investment, and low business dynamism.
Recommendations
The government’s approach to antitrust violations is due for an overhaul. And regulators need to pay more attention to protecting economic vitality and consumer well-being—and less to industry lobbyists.
Despite their undeniable popularity, Apple, Amazon, Google, and Facebook are drawing increasing scrutiny from economists, legal scholars, politicians, and policy wonks, who accuse these firms of using their size and strength to crush potential competitors. (Their clout caught the attention of European regulators long ago.) The tech giants pose unique challenges, but they also represent just one piece of a broader story: a troubling phenomenon of too little competition throughout the U.S. economy.
