July 13, 2016
Eduardo Porter argued in his column that part of the story of growing inequality is a failure of competition policy. The argument is that increased concentration in a number of industries has led to rents being shared by high earning employees in the largest firms. Porter cites research from Jason Furman, the current head of the Council of Economic Advisers, and Peter Orszag, the former chief of the Office of Management and Budget, which support this view.
While Porter mentions a number of firms that might fit this story, he neglected to mention Uber. Uber is striking in that it appears to be trying to form a monopoly by using its political power (it hired David Plouffe, President Obama’s chief political adviser, as a lobbyist) to maintain an unsettled regulatory structure in the industry. While Uber is prepared to act in defiance of existing regulations, and then use its power to prevent legal sanctions, smaller competitors are likely to be less comfortable operating in defiance of the law. While a clear set of regulations would help to level the playing field, Uber is working hard to prevent modernized regulations from coming into effect.
This is exactly the sort of situation that leads to concentration of wealth (Uber’s stock now has a market value of $68 billion), without generating efficiency gains for the economy. It is a good illustration of the problem noted in Porter’s column.
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