A Simple Solution to Monopolies

Source: Corporate Finance Institute

I know, I know. There’s so such thing as a free lunch. Nevertheless, I’ve been thinking about algorithmic antitrust regulation, which is just a fancy way of saying rules based regulation.

See if you think about it, antitrust law is very specific, and by that I mean political. Monopolies, ranging from AT&T to Microsoft, are broken up periodically when it is politically profitable to do so. When really, it should be general!

Some have called for today’s tech giants to be broken up. There are lots of different proposals, and many are contradictory. The ultimate problem is that these calls require more government intervention than is necessary or optimal.

For example, some have proposed breaking up Facebook and Instagram, Google and Youtube, Amazon and AWS, and others. While this seems like a clean way of cutting the pie, it involves extreme complexity. Imagine trying to write in mathematical terms why Google and Youtube should be broken up but Tesla and Solar City shouldn’t be.

Ultimately, I conclude that the solution is progressive taxation of bigger companies. An increasing marginal tax rate, not for individuals, but for companies. This would minimize the rent seeking behavior involved in current antitrust regulation.

But of course no one will support what the majority would benefit from due to special interests and political cowardice. Implement a progressive tax that increases with market concentration metrics. Get rid of the rest of antitrust regulation. Let the market do its magic.



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