Robert J. Samuelson’s Oct. 22 op-ed, “Competition RIP?,” dismissed concerns that the economy is becoming less competitive. That was no doubt news to the Federal Trade Commission, which is holding hearings to address that question.
Mr. Samuelson cited stable consumer prices and the airline and other industries to suggest that competition in our economy is fine. But the consumer price index does not tell us whether excess market power is raising prices higher than they should be. And anybody who has flown coach and experienced deteriorating service and increasing fees might question airlines as a model of vigorous competition. Moreover, the serious ills of market power go far beyond higher prices and include lower wages, worse quality and less innovation.
The evidence raises serious concerns. According to estimates, the ability of firms to sell their goods and services at prices well above their costs is increasing.
Corporate profits are at historically high levels. Studies have found that consolidation in specific industries, including hospitals, health insurance and, yes, airlines, has reduced competition. The ability of employers to hold wages below competitive levels, known as monopsony power, appears to be far more prevalent than previously thought. There are disagreements about these issues and potential solutions. Fortunately, the FTC is concerned enough to find answers.
Michael Kades, Washington
The writer is director of markets and competition policy for the Washington Center for Equitable Growth.