Craig Pirrong shows that Robert Reich’s, Joe Stiglitz and Larry Summers’s claim that rising oligopolistic industry concentrations are responsible for growing income inequality is farfetched. He writes “….The numbers just don’t work out. In 2015, after-tax corporate income represented only about 10 percent of US national income. Market power rents represented only a fraction of those corporate profits. Market power rents that could be affected by more rigorous antitrust enforcement represented only a fraction–and likely a small fraction–of total corporate profits. If we are talking about 1 percent of US income the distribution of which could be affected by antitrust enforcement, I would be amazed. I wouldn’t be surprised if its an order of magnitude less than that….In sum, if you want to ameliorate inequality, I would put antitrust on the bottom of your list. It’s not where the money is because the kind of market power that antitrust could even conceivably address accounts for a small portion of profits, which in turn account for a modest percentage of national income. Market power changes in many profitable industries have almost certainly been driven by major technological changes, and antitrust could reduce them only by gutting the efficiency gains produced by these changes….”
I make the same argument in my upcoming book,“The Upside of Inequality: How Good Intentions Undermines the Middle Class.”