How Bad Antitrust Enforcers Kill People | Hacker News Reader

How Bad Antitrust Enforcers Kill People

mattstoller.substack.com

92 points0xd3adbeef30 comments

I thought this was going to be overzealous Feds put useful business out of business, reducing supply, but it's actually underzealous Feds fail to block merger, which ended up reducing supply.

I have to imagine there is a substantial amount of regulatory capture that makes it incredibly difficult for an upstart to sell into this space.

It's medical equipment + all sorts of special deals with hospitals/ doctors= almost impossible.

Also hamstrung Feds must negotiate contracts with both hands tied behind their backs, hence the inability of the government to send the already-approved designs and schematics along to another company for manufacture.

I think the monopoly that the FDA has on approving medical equipment and tests has had far more of an impact than any commercial concerns.

This should be one of the big takeaways from Covid-19, but I sadly think that it won't be because people don't fully understand the waste and danger of the way the FDA does things.

Also, their drug regulations don't take into consideration rational decision theory and instead are overly focused on traditional hypothesis testing.

Also, I'd suggest reading the following about how bad regulation kills people: http://www.josiahzayner.com/2020/04/all-my-friends-are-dying...

that's nonsense. It's like saying the monopoly of the FBI in enforcing federal law is a public safety issue.

It's not nonsense. A couple years back, the FDA had a press release where they admitted they killed 1 million people.

They had finally cleared a heart attack prevention drug for sale in the US that had already been legal and approved and prescribed in the EU for 10 years prior. In the press release, the FDA said that as a result of their benevolent approval, the drug would save 100,000 people a year.

Wasn't there a drug that all of Europe said was super safe, but the FDA held out on for years, and it ended up causing terrible birth defects?

It's easy to say that a group is unnecessarily cautious/reckless until that cautiousness/recklessness saves lives or kills people. Hindsight 20/20 and all.

There are two kinds of errors an FDA type agency can make:

A: Approve a drug that turns out to be a "cure worse than the disease", and shouldn't have been approved.

B: Not approve a drug that would have cured many sick and/or saved a lot of lives.

You can never fully know beforehand which error a decision will have. So the FDA will always gamble a bit in their decisions.

And here is the gigantic problem:

With a type A error, patients taking the new drug dies, there is an uproar in the media, the agency takes a big beating, and careers are ruined.

With a type B error, a lot of people who could have been saved dies. But that is no change from before, no one notices, and the careers of FDA officials are unharmed.

Given these incentives, it is not surprising that the FDA overwhelmingly errs on the side of type B errors. It's hard to compute, but the number of lost lives from this is probably in the millions since the 60s.

In type A, people have a choice. They could be informed there is a risk. In type b, they have no choice.

And who provides the neutral informed accessible information? and there's the rub with modern society. No one could possibly be expected to be an expert in every field and sub field.

Drugs are prescribed by a doctor, who should be an expert in this exact field.

And you hear all the time about getting test you don't need and all kinds of other conflicts of interest.

And clearly the FDA has a bias on not making a decision that could be wrong. They lose nothing by delaying, and lose a lot by approving the wrong drug. So what happens, everything takes longer, drives up costs, and delays treatment -- they have no incentive to deal with the problems they create.

That was Thalidomide and it was legal in the US.

At any rate my point wasn't that the FDA only makes bad decisions.

My point was that it has a monopoly on approving new medicines and therepeutics, and it is not at all clear that this monopoly is a net good or net bad. (And it's impossible to measure because we can't tell how thing would have played out for things that never happened)

The sentences look similar. But that doesn't mean the underlying reality is equivalent.

If there aren't checks and balances, then what do you expect?

Legislation and regulatory oversight oversight. Everyone answers to someone.

But if everyone answers to everyone, eventually no one answers to anyone because everyone was held up by someone else who was waiting for someone else.

I like that this writer seems to have some awareness of the utter impotence of antitrust enforcement in the US. But in his Wired article, Matt Stoller writes:

> The coronavirus relief bill, however, is an explicit takeover of Main Street-level activity by the state. It’s hard to wrap your mind around the ideological change that has taken place. Before this disease, Democrats were deeply skeptical of power grabs by the Trump administration. Today, Democrats are angry the President isn’t more aggressively commandeering private corporations and forcing them to make medical supplies. Think about what it means in a capitalist society for the government to take over the means of production. Now think about what it means for Democrats to demand that Trump seize more executive authority. Both of those things just happened.

This is so wildly ignorant of socialism and the law at hand that I wonder if American journalists should forever be banned from writing about the subject. The law itself includes something like $500 billion in forgivable business loans, some of which is earmarked for specific industries. The government isn't taking over anything — it's just handing mountains of cash to corporations which were too irresponsible to plan for a rainy day. It doesn't give the government direct control over these corporations in the way taking an ownership stake would.

We're not living in a command economy any more than we were in 2008. It's just the government socializing the losses of irresponsible corporations in the wake of gross mismanagement of the crisis by the Trump administration. Incompetence is expensive.

Matt Stoller's analyses are usually a mixed bag for me. I generally agree with him that the US needs a focused Industrial Policy but analyses like this one seem relatively weak.

A few things that I feel should be addressed but weren't:

1) If Newport had this huge deal (40,000 ventilators * $3,000 price = $120M), why would Covidien not continue it? What about this would have been against their interest? It seems like if it's both better AND cheaper, they would dominate the market globally. Unless Newport had a novel invention under patent for a few years, presumably competitors could have also done this. Even if they were concerned with significantly decreased margins at the $3k price tag, why not try an $8k price tag using the same, better machine and still steal the global market? It's hard for me to understand why Newport was this advanced but Covidien just destroyed their product and this isn't even questioned in the article. I don't think these are unreasonable questions.

2) Matt talks about a monopoly on purchasing. There's actually a standard term for this, "monopsony". I would love to see Matt write about how unions end up with monopsony power selling their labor and how bad that is. I don't expect it any time soon. That said, he does make interesting points on how monopsony works against producers. The weird contradiction here, though, is that this drives down producer surplus and profit of the exact same big businesses that Matt is usually upset about having too high of producer surplus/profit. This seems to me a bit to be arguing against his general purpose.

3) "The contracting officers in government should have mandated as a part of the contract that Newport Medical give the government all its research and proprietary information on the product, and put in safeguards to ensure that the product would be delivered." I totally agree with the latter half of this statement, ensuring the delivery of the product is a must. However, the first part that Newport hand over its research and proprietary information on the product seems like a huge governmental overreach. What can justify this? Now, it may be that the government funded this research directly (ie a grant or loan to specifically develop the product). If this were the case, then I understand that. However, it seems, according to the article, that the US government was simply contracting to procure the new ventilators. Demanding a company hand over their entire IP portfolio as a part of purchasing their product at market prices seems ridiculous to me. What's to stop the government from then taking that IP to another producer and getting them to produce it for them. That producer has way better margins what with not having to do anywhere near the same load of R&D. Not, that said, I may be misunderstanding this particular case.

4) Matt repeatedly calls the merger illegal. He does a bit of describing his theories for why it should've been found illegal but until a court or someone with the oversight authority makes this determination, this is opinion.

I'm not an MBA or Business expert, but I think the answer to #1 is probably the same answer to the question "why are big businesses often less innovative and nimble than small ones?" Common answers to this question are not-invented-here syndrome, legacy costs, risk aversion, regulatory capture, etc.

On #2, I think we can agree that unions do often end up with a monopsony on labor, and that can be bad. Generally, the best things unions have done over the years have been the things that have generalized to the entire labor force, not just union members, so there's that. That said, there is competition between unions for some locals, so a monopsony is not necessarily the end state. For example, there are state employees represented by dedicated state employee unions, and other state employees represented by the Teamsters, despite no connection to the teamster's traditional members in the transportation industries.

Thought monopsony was something like walmart which try to drive down prices on suppliers. Unions seem to me to be more like cartels. Using their power to drive up prices on labor for it's members.

So in my younger days I was a full blooded libertarian especially economically, I was 100% against all government regulation. "You don't want lead in your meat, well then you do your research and stop buying meat with lead in it", I took positions that were pretty extreme by most standards, and I would stay I am probably still a little more out there than most people when it comes to opposing government regulation.

My reason for this was rooted in a deep and abiding belief in the supreme importance of individual liberty, "the government should only stop me from doing something that directly hurts somebody otherwise all government power leads to tyranny in one form or another at the end of the day" was the train of my thoughts at the time. I extended this to the economy because I viewed the government regulating business as a violation of my right to conduct my business however I want, "I own the business, I own the assets, it is my money that has been used to build up this business and some useless paper pushing bureaucrat can go shove it all for telling me how to run my business, its my property to use how I want." and I still hold to that to a large extent.

However recently I have been reflecting on the situation of powerful corporations recently, especially monopolies (which are more often aided and abated by government involvement than kept in check) and I think that I have discovered a fallacy in my thinking. I agree to live in a society and enjoy the benefits of a society in exchange for choosing to surrender my ability to exercise all possible freedoms I have. Implicit in this agreement however is that if I choose to violate the principles of this agreement by harming someone else for example, I will then be held accountable for that action and whatever comes from it.

With corporations that is not the case, when a corporation violates someone's enjoyment of life, liberty, or property there is no real accountability on anyone. There is no one to actually take the fall, they may be fined, but there is no one that is directly accountable, not the CEO, no the Board, the closest thing to an accountable group is the shareholders, which really just means random people's 401ks held under the trust of one of the three big money managers.

Ultimately it all comes back to the idea that a corporation has personhood, should a corporation be given personhood, and as extension the same liberties as a person if they do not also share the same accountability. We could say if a corporation breaks the rules that results in someones death then we "kill" the corporation by forcing it into bankruptcy, but that ends up punishing hundreds of innocent people that had nothing to do with the fact that Bill the VP of Product line X, who bribed regulators to sign off on shampoo that causes cancer.

I would welcome some pushback or opinions though on that train of thought, it just seems to me as long as no one faces significant personal risk, there should be no one allowed to exercise the same rights as an individual.

You've now rediscovered one of the primary controversies around the concept of the Limited Liability Corporation. Though they were more focused around financial debt/consequences at the time, people were also perturbed at the possibility that the corporation could be found to have done wrong, and seemingly no one would be able to held to account.

The way this is worked around today, is that a second criminal case has to be brought against individuals in the corporation. The corporation has no right against self-incrimination; and the ideaisthere should be enough evidence capable of being raked up to hold people accountable.

Corporate legal counsel are "held hostage" in the sense that if it is found they refused to comply with legal requests, they can be disbarred, but that doesn't mean that companies won't go out of the way to not record things or surreptitiously lose evidence.

At the end of the day, the super power of the corporation is that when it dies no one else goes along with it. On the other hand though, it does take extreme vigilance and will to pierce the corporate veil to prove wrongdoing.

It's a tough nut to crack satisfyingly to be sure.

What do you mean, "were"? This is still the major problem of corporations, that the let criminal conspiracies limit their liability.

I've gone through a similar sort of journey recently myself. I was pretty strongly libertarian, but I've discovered I'm actually vehemently anti-authoritarian, which is why libertarian as the foil to the authoritarian Republicans and Democrats appeals to me.

What I've come to realize, though, is that if the Libertarians got their way, we would just be ceding the authority to corporations instead of government. The problem we're facing now is that corporations and the wealthy are already so powerful, our government can't force the corporations to do anything they don't want to, and our vote is manipulated so we can't elect a government that can.

My ideal, would be a strong government that represents the interests of the People and defends them from the Elite and powerful. Related to this, its job would be to defend the Free Market from the Capitalists. (Where the "Free Market" is an unobtainable ideal where everybody has perfect information and nobody is coerced, while the "Capitalists" do everything in their power to hide information and coerce the players to their own unequal benefit.) I have no idea how we get there, though, since the more power given to the government to regulate the market makes it a better target to be subverted by the powerful players. Nevermind the fact that the current government is completely bought and paid for by the same corporations, and the People are manipulated by them into arguing over small tribal differences instead of focusing attention on their real enemy.

So, I'll continue voting Libertarian, or any other alternative, and die a little inside each time at how little my choice actually matters.

> My ideal, would be a strong government that represents the interests of the People and defends them from the Elite and powerful. Related to this, its job would be to defend the Free Market from the Capitalists. (Where the "Free Market" is an unobtainable ideal where everybody has perfect information and nobody is coerced, while the "Capitalists" do everything in their power to hide information and coerce the players to their own unequal benefit.)

This is largely the position of the Classical Liberal, which used to be a big part of the Republican party, but that has been discarded in favor of big business and religious conservatism: https://en.wikipedia.org/wiki/Classical_liberalism

_The Economist_ magazine in the UK is probably the most widely-known promulgator of the classical liberal position today.

I think where I differ from the Classical Liberal is that I would support a "welfare state", but in the form of a Basic Income or Reverse Income Tax rather than anything being subsidized. I believe that by providing a living wage by default would eliminate a lot of the authority that corporations would have over the lowest-paid employees. The wait staff and fry cooks and janitors would be much less tolerant of abusive working conditions if they didn't fear for missing that income. Additionally, I suspect it would allow the many middle managers and aggressive marketers to pursue other interests, like music or art, and leave the rest of us alone to do our jobs. I don't care if they stay home and smoke pot and play video games all day, as long as they stay out of the way.

I'm just not sure how to avoid the feedback loop, since now labor will cost so much more, so everything will cost more, so the cost of living goes up, so we have to increase the amount of basic income to compensate. I also don't know how to prevent things like, for example, slumlords setting the cost of rent to exactly 40% of the BI amount, or whatever the maximum allowed would be. It seems to me that BI can't merely be a supplement, or even set to "Poverty Level", it has to be something larger, and basically put all businesses that target the poor out of business.

Reply on news.ycombinator.com