Delta president Glen Hauenstein told investors in July that AI-based pricing is currently used on about 3 percent of its domestic network, and that the company aimed to expand AI pricing to 20 percent of its network by the end of the year. This is bad news for flyers, and given the particular way Delta is accessing the technology, is particularly bad for competition.

Airlines have been using “dynamic pricing” for decades, which entails setting fares based on common (as opposed to individualized) factors like demand, timing, real-time supply, and pricing by competitors. A spokesperson for Delta insists the new technology is merely “streamlining” its dynamic pricing model. 

Personalized pricing, made possible via surveillance and AI, is distinct from dynamic pricing, in that the former allows a firm to condition pricing on the circumstances of the customer. Hence, two people shopping for airfares at the same time might see different prices based on things like travel purpose (business or leisure), income estimates, browsing behavior, ticket purchase history, website used, or type of device used.

To implement the new technology, Delta is working with Fetcherr, an Israeli-based GenAI pricing startup whose clients include other airlines like Virgin Atlantic and WestJet, to power the pricing changes. Alas, the three carriers share overlapping routes. From London, Virgin Atlantic flies to several U.S. destinations, including Atlanta, Boston, Miami, Las Vegas, Los Angeles, New York, Orlando, and Washington D.C. Delta also operates flights from London to many of those same U.S. cities, including Atlanta, Boston, Los Angeles, and New York. WestJet has expanded its network into the United States, including to such destinations as Anchorage, Atlanta Minneapolis, Raleigh, and Salt Lake City. (Some of these routes are in partnership with Delta.) Economists and antitrust authorities recognize that there could be anticompetitive effects if common pricing algorithms lead to collusion. Check out the DOJ’s antitrust case against RealPage, in which landlords are alleged to have to turned over their pricing decisions to a common algorithm (RealPage).

During the company’s second-quarter earnings, Delta CEO Ed Bastian noted “While we’re still in the test phase, results are encouraging.” Hauenstein called the AI a “super analyst” and results have been “amazingly favorable unit revenues.” These boasts, aimed at investors as opposed to consumers, mean that AI-based pricing is raising profits—else the results would be ambiguous or discouraging. And those extra profits are likely coming off the backs of consumers. And as we will soon see, rising unit revenues means that AI-based pricing is not leading to price reductions on average, contra the predictions of price-discrimination defenders.

Price Discrimination Is Bad for Consumers, Even When Implemented Unilaterally

Economic textbooks are filled with passages claiming that the welfare effects of price discrimination are ambiguous. It’s worth revisiting the key assumption that permits such an innocuous characterization—namely, an increase in output. As we will see shortly, this assumption isn’t easily satisfied in the airline industry.

Consumer welfare or “surplus” is recognized as the area underneath the demand curve bounded from below by the price. For a particular customer, surplus is the difference between her willingness to pay (WTP) and the price. Importantly, when it comes to first-degree price discrimination—charging each consumer her WTP—all consumer surplus is transferred to the producer, meaning consumers receive no benefit from the transaction beyond the good itself.

Let’s start with the basics. The figure below shows what happens when a firm facing a downward-sloping demand—an indicator of market power—is constrained to charging a single, uniform price to all comers. The profit-maximizing uniform price, P*, is found at the intersection of the marginal revenue and marginal cost curve, and then looking up to the demand curve to find the corresponding price.

Even at the profit-maximizing uniform price, P*, the firm with market power leaves some consumer surplus on the table, equal to the area of the triangle, ABP*. This failure to extract all consumer surplus motivates many anticompetitive restraints that we observe in the real world, such as bundled loyalty discounts. Another way to extract that surplus is, if possible, to charge each consumer along the demand curve between A and B her WTP. And that’s where AI-based personalized pricing comes in. Consumers along that portion of the demand curve are clearly worse off relative to a uniform pricing standard. The only consumer who is indifferent between the two regimes is the one whose WTP is just equal to P*, situated at point B of the demand curve.

Defenders of price discrimination are quick to point out that the price-discriminating firm can reduce its price, relative to P*, to customers on the demand curve from B to C, bringing fresh consumers into the market (who were previously priced out at P*) and expanding output. After all, they claim, there is incremental profit to be had there, equal to the difference between the WTP (of admittedly low-value consumers) and the firm’s marginal cost. There are at least two practical problems, however, with this theoretical argument as applied to airlines.

First, this argument presumes that airline capacity can be easily expanded. But an airline can only enhance output in a handful of costly ways. An airline can add more planes, which are not cheap, or more seats per plane, decreasing the quality of the experience for all passengers. An airline could also add more flights per day, but this too is costly because the airline must secure permissions from the airport at the gates.

Second, as noted above, the customers between B and C along the demand curve are the low-valuation types, who are not coveted by legacy carriers like Delta or United. These low-valuation and budget-conscious customers tend to fly (if at all) on the low-cost carriers and ultra-low-cost carriers like Southwest and Spirit, respectively. Serving these customers, as opposed to extracting greater surplus from high-valuation customers, is likely less attractive to Delta, especially if doing so would compromise the quality of existing customers (through, for example, cramming more seats on a plane), or would put downward pressure on prices of other items that are sold on a uniform basis (e.g., in-flight WiFi or alcoholic drinks).

Even if you don’t accept these practical arguments, it bears repeating once more that under first-degree price discrimination, there is no consumer surplus, even at the expanded output. So expanded output here is nothing to cheer about, unless you are an investor in the airlines or work as an airline lobbyist or consultant. And if there’s any doubt on the price effects from AI-based pricing, recall the boast from Delta’s executive—unit revenues are rising, which can’t happen if Delta is using the technology to drop prices on average to customers.

Price Discrimination Is Even Worse for Consumers When Implemented Jointly with Rivals

If this weren’t bad enough, there’s a knock-on effect from AI-based personalized pricing, especially if the technology vendor is also supplying the same pricing assistance to Delta’s rivals. Recall that Delta uses a pricing consultant that is also advising airlines with overlapping routes with Delta. In that case, the common pricing algorithm can facilitate collusion that would other not be possible. We can return to our figure to see how collusion can make consumers even worse off relative to discriminatory pricing.

Relative the original demand curve (Demand 1), the demand when prices are set via a common pricing algorithm (Demand 2) is less elastic, meaning that an increase in price does not generate as large a reduction in quantity. In lay terms, the demand is steeper. This rotation of the demand curve, made possible by weakening an outside substitute via collusion, causes the uniform profit maximizing price to rise above P* to P**. And this higher price opens the possibility of additional surplus extraction via price discrimination, equal to the area DAE, for the highest-value customers.

Where We Do Go from Here?

At this point, we have two different policy choices. The first is to pursue an antitrust case against Delta and Fetcherr. The problem with antitrust—and I make this argument against my own economic interests as an antitrust economist—is that such a case against Delta would not be resolved for years. The DOJ’s case against RealPage was filed nearly a year ago (August 2024), and we’ve seen little progress. In complex litigation, the defendants need time to produce voluminous data and records in response to subpoenas, the plaintiffs’ economists will have to understand those data and build econometric models that will be subjected to massive scrutiny by even more economists, there will be hearings, motions for summary judgment and to exclude testimony, and then a trial.

The second intervention is to ban, via regulation at either the city or federal level, the use of common pricing algorithms for airlines or more broadly. Similar bans have been imposed by cities against RealPage and Airbnb, which also has been accused of employing a common algorithm (and the subject of a forthcoming piece). Senators Ruben Gallego of Arizona,  Mark Warner of Virginia, and Richard Blumenthal of Connecticut sent a letter to Delta on July 22 correctly asserting the harms from Delta’s AI-based pricing, which will “likely mean fare price increases up to each individual consumer’s personal ‘pain point’ at a time when American families are already struggling with rising costs.” A senate hearing could be in order. But Delta won’t back off from this approach unless and until it perceives the threat of regulation to be credible.

Of the two options, I prefer the latter. With luck, Congress will too!

Back in February, Rob Manfred, the commissioner of Major League Baseball (MLB), sang a tune that is truly a classic in the history of labor relations in baseball. According to ESPN, Manfred noted that fans are sending emails expressing concern over the sport’s lack of a salary cap, purportedly spurred by an offseason spending spree by the Los Angeles Dodgers, a team that has won its division eleven times in twelve years. Manfred insisted that:

This is an issue that we need to be vigilant on. We need to pay attention to it and need to determine whether there are things that can be done to allay those kinds of concerns and make sure we have a competitive and healthy game going forward.

The NBA adopted a cap on payrolls (i.e., a salary cap) in 1983. Soon after, caps were instituted in the NFL, NHL, and WNBA. Despite the consistent efforts of baseball owners in the last years of the 20th century, MLB players have consistently resisted the establishment of any cap on payroll.

Back in the 20th century, this conflict over salary controls led to a number of player strikes and owner lockouts. The last of these labor disputes began during the 1994 season. This strike led to the cancellation of the 1994 World Series and the postponement of the start of the 1995 season. Despite inflicting these losses, the strike didn’t lead to any cap on team payrolls.

For the most part, calls for a cap seem to have subsided in the 21st century. But in 2024, the Los Angeles Dodgers, with a payroll of $265.9 million, won the World Series. In the offseason, the Dodgers added about $65 million more to their payroll, and now lead all of baseball in spending on players (in 2024, they ranked third). Because some seem to think that spending and wins are highly correlated in baseball, it might have appeared to some that the Dodgers were trying to buy another title. And apparently this led some fans to email Rob Manfred.

We don’t know how many e-mails Manfred actually got calling for a salary cap. We do know that it is a myth that baseball teams can buy championships in baseball. Back in 2006, we devoted an entire chapter in The Wages of Wins to the question “Can You Buy the Fan’s Love?” The chapter details all the reasons we thought baseball teams can’t simply buy wins and championships. For now, I’ll simply repeat the observation that from 1988 to 2006, only 18.1% of the variation in a team’s winning percentage could be explained by that team’s relative payroll (i.e. team payroll divided by average payroll that season). That leaves roughly 82% of the variation in winning percentage to be explained by factors other than what teams spent on players. In simple words, teams cannot simply buy wins!

This analysis was repeated from 2011 to 2024. Across these 14 seasons, only 13% of the variation of winning percentage could be explained by relative payroll.

So if spending can’t fully explain wins, can it explain championships? Turns out buying a title is even harder. From 2011 to 2024, none of the ten teams with the highest relative payroll even made it to the World Series. Yes, the highest spending teams in baseball didn’t even get a chance to lose in the World Series!

At the All-Star break in 2025, we seem to be seeing the same story. The top team in baseball in terms of winning percentage is the Detroit Tigers. The Dodgers rank second, but essentially are not much better than five or six other teams. Some of those teams, like the New York Mets, also have a very high payroll. The Milwaukee Brewers, with an impressive record of 16 games over .500, pay their players less than the Tigers.

How can the Tigers and Brewers compete with the Dodgers and Mets? It turns out that baseball effectively has two different labor markets. The Dodgers and Mets generally find their best players in the free agent market. To be in free agency, a player must complete six years of MLB service. Once a player’s career reaches that point and they are without a contract, they can sell their services to the highest bidder.

Back in 2016, the Detroit Tigers played in that market. But when the Tiger’s owner Mike Ilitch passed away in 2017, his son (Christopher) decided the Tigers would get out of the free agent market and try and find their best players in the draft. Hence, most of the Tigers today have less than six years of service. As the Tigers have shown this year, such players can be quite good. And relative to the players on the Dodgers, they are also quite cheap.

Of course, the Dodgers have also built a competitive team. And maybe the Dodgers do win the title in 2025. But at the All-Star break it seems clear that title is not guaranteed. So, why won’t all that spending ensure a Dodger repeat?

Let’s start with the obvious reason. Baseball is a game where you hit a round ball with a round stick. There is no hitter in baseball that a pitcher can’t get out. And there is no pitcher in baseball that a hitter can’t hit. The game simply has a large random element. In addition to random variation in performance, there is also no way to predict injuries. The injury issue is especially relevant in the free agent market, as many players are on the downside of their career after six years of playing.

Beyond the randomness of performance is the simple fact that the difference in playing talent has shrunk considerably across time. We can see this if we look at the level of competitive balance in baseball. As noted in The Wages of Wins, competitive balance improved dramatically in the second half of the 20th century as the talent pool got much bigger. Specifically, as teams started employing African Americans and then players from all over the world, the supply of very talented players increased. Consequently, more teams had access to very good players.

One can see this simply by looking at how often teams win more than two-thirds of their games. Since 1901 this has happened just 30 times. Of these, only three instances happened in the 21st century. It also happened six times in the second half of the 20th century. That means that prior to 1950, this happened 21 times (equal to 30 less three less six). Once upon a time, it was truly possible to build a baseball team that dominated the game. This happens when your team has lots of great players and other teams… well, they don’t!

Of course, that is just dominance in the regular season. As the Seattle Mariners learned in 2001, dominating the regular season doesn’t guarantee post-season happiness. After winning 116 games in 2001—tied for the most wins in baseball history—the Mariners were eliminated in the American League championship series.

At that time, eight teams participated in the playoffs. Today that number has grown to twelve. Because playoff teams are often not much different, the odds of any playoff team winning the World Series is probably less than 10%. And that is true regardless of how much money you spend. Player performance from week-to-week is simply not that predictable. If your star hitters or pitchers (or both) have a bad week in October, your fans will end the season sad.

All of this means the Dodgers simply can’t buy a title. So, why do owners want a salary cap? The spending by teams like the Dodgers does bid up the cost of free agents. If the league could cap spending, players would generally be cheaper. And that would transfer millions of dollars back to the owners.

Yes, none of this is about improving competitive balance and making the game better. In fact, as we noted in The Wages of Wins, there isn’t even much evidence fans truly want competitive balance. Extensive studies of consumer demand and competitive balance tell that story. And every baseball fan learned that lesson when the Texas Rangers played the Arizona Diamondbacks in the 2023 World Series. Fans of small market teams (i.e. not on the coasts) being competitive got what they wanted that year. But it turns out, few other people cared to watch.

In the end, the call for a salary cap has nothing to do with making the game more popular. Owners have consistently called for a cap on pay for the obvious reason they want to pay their workers less. And gullible fans (and members of the media) are often quite happy to help them achieve their dream.

But if baseball does achieve a cap on pay after 2026, you are not going to see balance in baseball improve dramatically. And you won’t see more fans in the stands or watching on television. What you will see is more owners counting more dollars.

Once again, we said all this twenty years ago in The Wages of Wins. Yes, sometimes it is fun to hear the classics!

Since the launch of ChatGPT back in November of 2022, what was once a concept confined to Sci-Fi novels has now certifiably hit the mainstream. The highly visible advances in artificial intelligence (AI) over the past few years have either been awe-inspiring or dread-inducing depending on your perspective, your occupation, and maybe how much Nvidia stock you owned before 2023. Many white-collar workers now fear that they may face the same job-displacing effects of automation that has plagued their blue-collar peers over the past several decades.

Nevertheless, at least one powerful constituency is absolutely thrilled with the rise of AI and is betting big on its success: Big Tech. Microsoft, currently the second most valuable company in the world with a mind-boggling $3.7 trillion market cap, is a leading AI zealot. This fiscal year alone, Microsoft plans to invest over $80 billion in AI-related projects.

As one of its big selling pitches to investors and consumers, Microsoft argues that AI has prompted massive efficiency gains internally, including eliminating a staggering 36,000 workers since 2023. Microsoft CEO Satya Nadella estimated that as much as 30 percent of the company’s code is now written by AI. Mr. Nadella, of course, has a lot riding on convincing shareholders and consumers that AI is a big deal. So, to what extent this claim is legitimate, or pure marketing fantasy, is uncertain. A recent working paper authored by Microsoft researchers and academics  analyzes the productivity increases in (non-terminated) software developers who use AI tools. The authors find that developers using AI tools saw an average 26 percent increase in their productivity. If such experimental results generalize to the broader labor market, AI will certainly have a dramatic impact. Despite evident benefits towards companies from this productivity boon whether workers themselves stand to gain remains uncertain.

A Look into Software Developers’ Compensation

AI models capable of assisting with writing and coding tasks have existed for a couple of years now. Taking Mr. Nadella’s statements at face value, such models enjoy widespread utilization by developers and coders working for Big Tech. As such, if workers—and not just their employers—stand to benefit from AI, then worker compensation should reflect at least some evidence of these productivity gains.

Simple economic models of the labor market suggest that a technology that boosts the marginal productivity of labor will cause a concomitant increase in worker pay. After all, in competitive labor markets, workers should capture 100 percent of their marginal revenue product (MRP), which increases with productivity, though such an outcome rests upon a strong and often-violated assumption that the relevant labor market is perfectly competitive. When an employer has buying power, it can drive a wedge between the worker’s MRP and her wage. In lay terms, this means the employer can appropriate value created by the worker without sharing in the gains, the Pigouvian definition of exploitation. Thus, the extent to which workers benefit from this AI-induced productivity remains unclear. (In addition, a monopsony reduces employment relative to a competitive labor market; Microsoft’s mass firings since its acquisition of Activision in 2023 is also consistent with the exercise of monopsony power.)

While a recent article in The Economist highlights how the AI boom has led to some “superstar coders” seeing their “pay [] going ballistic,” this subset of workers represents a tiny sliver of the total labor market of developers. In that same article, The Economist also produced a graph showing a dramatic slowdown in hiring—job postings for software developers have dropped by more than two-thirds since the beginning of 2022. To understand how AI is affecting workers, we need to look at the labor market at large. Unfortunately, our analysis suggests that software developers have not yet benefited (and may never fully benefit) from their increase in productivity.

Figure 1 below takes the broadest look at how all software developers and computer programmers in the United States have (or have not) benefited from the rise in AI. The results are not pretty: While 2022 inflation has hit all workers hard, eroding much of their nominal wage increases, both computer programmers and software developers are faring much worse than the average worker. Per the BLS, the median wage of computer programmers decreased by 5.89 percent between 2022 and 2024.

Figure 1: Real Wages Are Flat for Most Workers, But Have Declined for Programmers and Developers

Source: Bureau of Labor Statistics’ Occupational Employment and Wage Statistics Annual Report; CPI sourced from FRED. Notes: We transformed this nominal data using CPI to be in 2024 dollars. Hence, this chart shows the real change in wages between 2022 to 2024 (i.e., accounting for inflation). 2024 is the most recent data release, and the 2024 data are not inclusive of data from Colorado.

Not even the top ten percent of software developers, including the “superstar coders” as dubbed by The Economist, appear to be thriving. Figure 1 also shows that the highest paid computer programmers (90th percentile) saw their real wages fall by 4.11 percent.

Workers for Big Tech fared no better. Indeed, the percentage change in the median compensation for software engineers employed by Big Tech effectively mirrors that reported in Figure 1—the median software engineer saw a 2.22 percent decrease in their real wages from 2022 to 2024 per data from Levels.fyi.

Figure 2: Software Engineers Working Big Tech Also Have Not Seen a Dramatic Rise in Wages

Source: Levels.fyi 2024 and 2023 year-end reports; CPI sourced from FRED. Notes: Levels.fyi collects self-reported data “for the top paying tech companies and locations.” Total compensation is inclusive of base salaries, stock grants, and bonuses. Note that Levels.fyi’s trend table has slightly different median compensation estimates than the box charts that we source our data from. It is unclear what causes this discrepancy. We transformed this nominal data using CPI to be in 2024 dollars. Hence, this chart shows the real change in total compensation between 2022 to 2024 (i.e., accounting for inflation).

At the very least, we see evidence that software engineering managers (depicted in yellow) have seen their compensation rise (by 2.61 percent), though nowhere near their supposed AI-powered productivity increase.

Microsoft-specific wage data were not easily accessible. The Economist reported that the median pay for software developers at “tech giants including Alphabet, Microsoft and, until recently, Meta” was close to $300,000. Lucky for us, however, Microsoft sponsors thousands of H-1B visas, which provides a source of publicly available salary data. Using these data, we can get a sense of the trend in how Microsoft software engineer compensation has evolved over time. Because they are beholden to their American employer, H-1B visa-holders likely earn wages below their American counterparts. Nevertheless, the trajectory of wages of H-1B workers should roughly track the trajectory of wages of their American peers.

Figure 3: H-1B Data Suggest That Microsoft Software Engineers’ Real Wage Stagnated in the 2020s

Source: Data is from H1B Grader.com which states that “salaries data is extracted from the H1B Labor Condition Applications (LCAs) filed with the US Department of Labor by [the] Microsoft Corporation.”Notes: We combined various positions’ pay information to produce this average salary measure. Positions that were consolidated had titles that indicated they were roles in software engineering or development. We explicitly excluded IT-specific roles.

While H-1B software engineers working at Microsoft saw real wage increases during the 2010s, by the 2020s, real wages appear to have stagnated. This trajectory likely reflects the trend for all Microsoft developers, including domestic workers.

While these figures are by no means perfect, if workers truly reaped benefits from their AI-boosted productivity in a significant way, the above charts should have reflected such an outcome. Unfortunately, from what we can see, wages have not captured much of AI’s productivity impact. This lends credence to the hypothesis of monopsony exploitation restraining wage growth—in other words, Microsoft (the employer) is appropriating the productivity gains of its workers, presumably because the workers do not have credible outside employment options to which they could turn easily in response to a wage cut.

Software Developers Face an Uncertain Future

Unfortunately, not only do software developers not receive boosts in their compensation commensurate with their productivity increases, but many also now risk losing their jobs. As noted above, Microsoft has shed 36,000 jobs since 2023.

The cause of these mass layoffs does not appear to lie with any underperformance on Microsoft’s part. On the contrary, Microsoft’s gross profits have continued to rise over the past few years, as seen in Figure 4 below.

Figure 4: Microsoft Has Seen Significant Profit Growth in the Past Five Years

Source: MacroTrends.net.

Microsoft stock has also performed tremendously since the release of ChatGPT. If anyone is benefiting from the increased productivity of its workers, it appears it is Microsoft itself. (To be fair, given that Big Tech workers’ compensation packages often include stock, they too benefit from the AI rally even if the compensation figures reviewed above may not reflect such increases.) The combination of layoffs and no real impact on pay appears to at least suggest that AI will function as a substitute, rather than a complement, to human labor.

Figure 5: Microsoft Stock Has Performed Well in the Age of AI

Source: Data retrieved using getsymbols package in Stata, sourced from Yahoo! Finance. Notes: As is standard, we used the adjusted closing stock price. Data is from Jan. 2, 2020 to July 11, 2025. Closing price indexed such that  November 30, 2022 equals 100 (notable for being the date OpenAI first publicly released a demo of ChatGPT, which would go on to reach a million users in less than a week).

AI Fits a Trend of Growing Productivity and Wage Stagnation

Whether AI will truly revolutionize the workplace and make many human workers “go the way of the horses” remains to be seen. From what we have analyzed, however, even if AI does not replace human labor, workers should not put too much hope that they will reap the rewards of their increased productivity. AI continues a trend that started back in the 1980s: the divergence between worker’s productivity growth and their wages. Without a significant policy intervention in labor markets, such as a federal job guarantee or unionization to countervail monopsony power, AI may be a technology that continues to exacerbate the inequality of the 21st century.

Last September, then vice-presidential candidate JD Vance proclaimed in a Pennsylvanian supermarket, “Eggs, when Kamala Harris took office, were short of $1.50 a dozen. Now a dozen eggs will cost you around $4.” The implication was clear—the Biden Administration’s policies allegedly caused egg prices to skyrocket. While Vance was mocked at the time for the contradiction between his statement and the dozen eggs on sale for $2.99 behind him, to the chagrin of his critics, we now know that inflationary conditions, regardless of the cause, may have been a key factor that brought right-wing populism back to the White House.

Despite the contemporaneous criticism of Vance’s statement, his critique highlighted a key vulnerability for Democrats. According to the Bureau of Labor Statistics (BLS), the average retail price of a dozen eggs was $1.46 in January 2020 when former President Biden took office. Through late 2022 to early 2023 and then again in late 2023 to early 2025, egg prices experienced two separate price spikes. For the latter episode, retail prices reached $3.82 in September 2024 (up 85 percent from the previous September) and then continued to soar to an all-time high of $6.23 in March 2025 (more than double the prices from the previous March).

The mainstream media, egged on by egg industry lobbyists, pointed to a one main culprit—the bird flu. Certainly, the mass culling of hens to prevent viral spread decreased egg supply, putting upward pressure on prices. In February of this year, USDA Chief Economist Seth Meyer stated that the United States had about 291 million egg-laying birds compared to a normal flock size of 320 to 325 million (roughly a nine percent decline). From an economic perspective, it is unremarkable that a sudden and economically significant supply-side shock would cause a price increase for an inelastic good. Yet bird flu may just be one part of the story.

There May Be Some Rotten Eggs

In a January 2025 letter to the Trump Administration, Senator Elizabeth Warren called for increased efforts by the Department of Justice (DOJ) and Federal Trade Commission (FTC) to investigate and curtail anticompetitive activity in the agricultural sector, pointing, in part, to the behavior of Cal-Maine, the nation’s largest egg producer. Democrats in Congress continued their advocacy for investigations through February. Then in February and March, reports by Farm Action and Food & Water Watch used empirical analysis to cast doubt on the story that bird flu alone caused the explosion in egg prices. These reports provide evidence that bird flu’s impact on total egg production has been relatively minor.

For instance, Farm Action found that monthly egg production since 2021 (the year before the bird flu epidemic) were only down three to five percent on average. These reports specifically highlight the role of Cal-Maine, producing 21 percent of domestic egg consumption, for its conduct in actively consolidating the egg industry. This period of elevated prices has been hugely beneficial to the egg producers with major egg firm, like Cal-Maine, seeing their profits triple to octuple.

One potential cause for the inflated prices may have something to do with the conduct of chicken hatcheries—that is, the firms that supply egg companies their chickens. Antitrust attorney Basel Musharbash explains that typically there is an increase in demand for replacement chicken following “Fowl Plagues.”  For this crisis, however, hatcheries appeared to have reduced the quantity of hens supplied to these egg producers. And no, this does not seem to be a consequence of the bird flu affecting these hatcheries, with only 123,000 breeder hens culled since 2022 (representing merely three to four percent of the U.S. breeder flock at any given time). As Musharbash explains, this quantity decrease is likely a strategic decision by the two companies, Erich Wesjohann Group and Hendrix Genetics, that form the duopoly that controls the production of new egg-laying hens. This lack of competition may lead to higher prices which have pass through to consumers.

In contrast to the hatcheries that supplies them chickens, the egg industry itself is far from being concentrated by traditional antitrust standards. This industry structure suggests that, absent price coordination, egg prices should reflect competitive levels or something approaching marginal costs. Using data from Egg Industry’s Top Egg Company Survey, we can provide a rough estimate of the Herfindahl-Hirschman Index (HHI) for the industry. Based on the end-of-year egg laying flock size of the top 52 largest U.S. egg producers, and assuming no overlapping ownership interests, the HHI for the egg industry in 2024 was approximately equal to 480. This measure is well below the 1,000 threshold that the DOJ and FTC view as indicating a concentrated industry. HHI does not always tell the whole story, however, and with the top five largest egg producers representing nearly half the industry, the conditions are ripe for collusion.

After all, if something suspect is occurring with prices, it would not be the first time for the egg industry. Back in 2023, a jury held Cal-Maine and other egg producers liable for participating in a price-fixing scheme running from 1999 to 2008, forcing egg producers to pay $53 million in damages. Defendants in that case used a trade organization, named United Egg Producers, to run a hub-and-spoke conspiracy to set-egg prices among major egg producing chains in America. Once companies get used to colluding among themselves, it is often a hard habit for them to break. In addition to lingering coordinated conduct, there could also be nefarious unilateral conduct: Cal-Maine was sued by the state of Texas for allegedly price gouging during the Covid-19 pandemic. This history is rarely mentioned in media coverage explaining egg prices, even when factors other than bird flu are mentioned. (Examples of other cited factors include fuel and feed costs, often times without noting that both have decreased or remained stable in the past year.)

Behold the Bully Pulpit

On March 6, Capitol Forum broke a major story that the DOJ was actively investigating several egg producers, including Cal-Maine, for leading a potential price-fixing conspiracy. As Capitol Forum elaborated earlier this week, the investigates appears to be centering on Expana (formerly Urner Barry), which produces the egg industry’s primary pricing index. Farm Action found almost all egg prices are based off Expana’s indices. Indeed, when Cal-Maine CEO asserts that the company has little control over prices and instead sets prices based on a “benchmark price for eggs,” he is likely referring to an Expana index. Benchmarking companies, such as Expana, have been increasingly put under the spotlight for how they can facilitate collusion. For instance, the benchmarking firm Agri Stats allegedly facilitated collusion among poultry processing companies (the case settled for $169 million).

As one of us touched on in a piece last month, the pricing impact of this DOJ inquiry was potentially significant. The figure below shows how news of the investigation corresponded to a dramatic collapse in wholesale egg prices. On March 5, the average cost of a dozen large white eggs was $8.12. Just two weeks after the March 6 Capitol Forum story, on March 19, those same eggs cost $3.03—a 62.7 percent decrease.

Source: USDA Weekly Combined Regional Shell Egg Report. Data from the Biden Administration available here. Note: Caged large white, Grade A eggs account for roughly half of total egg production in the United States.

While retail egg prices lag behind their wholesale benchmark, retail prices also have started to tick down shortly after the Capitol Forum report.

Source: BLS retrieved from FRED.

That there is an inflection at roughly the same time as the announced DOJ investigation does not, by itself, prove a causal impact on prices. As a prominent instance of a confounding variable, the threat of bird flu also diminished around the same time, with only 2.1 million birds affected in March compared to 23 million in January and about 13 million in February. This diminished threat of bird flu undoubtedly weakened supply-side pressures on prices. According to the libertarian Cato Institute, which struggles to conceive of any problem being caused by bad actors, the diminished threat of bird flu may explain most or all of the price decline. Simultaneously, the United States also sought to increase its egg imports to push down prices.

Despite these other factors, it is striking how precisely news of the DOJ investigation coincides with the drop in wholesale prices. Hence, it is reasonable to infer that the initiation of this DOJ investigation may have altered the pricing behavior of major egg producers. After all, the first rule of any conspiracy is to stop conspiring while under the microscope of an investigation.

Indeed, the history of DOJ investigations contributing to price declines seems to make this potential causality more plausible. For instance, during the FDR administration, a massive increase in antitrust enforcement meant that the mere launching of an antitrust investigation by the DOJ corresponded with a 18 to 33 percent reduction in prices in the industry under investigation. Famously, the use of the bully pulpit by JFK also reversed massive steel price hikes in 1962. Though we note that the impacts of JFK’s approach are not without its critics.

Lessons for Enforcement

As one of us wrote last month, pursuing antitrust claims in court might by itself be insufficient to combat the degree of price-gouging, common pricing algorithms, and surveillance pricing that we have witnessed recently. Furthermore, just as bad actors took advantage of the Covid-19 pandemic to artificially inflate their prices, the economic instability generally (and tariffs in particular) inflicted by the Trump Administration may provide similar cover for further price gouging. Yet the DOJ inquiry into egg prices demonstrates that there may be another way forward. Criminal activity thrives when it is in the dark. Just as street lamps deter night time crime, proactive DOJ investigations can highlight, and therefore deter, anticompetitive activity. In our work in a myriad of price-fixing cases, we have often seen firsthand how scrutiny by authorities is the straw that breaks the cartel’s back.

This finding suggests more investigations are needed. Yet we need to deviate from our haphazard system where issues like egg prices are investigated due to heavy news coverage while less politically flashy topics, like the explosion in the price of car insurance, are left to the wayside. According to Einer Elhauge of Harvard Law School, FDR had particular success in his antitrust crusade of the 1940s by making enforcement far more “systematic and focused.” The signal of potential anticompetitive activity that rapidly exploding prices send should be front of mind for our antitrust authorities.

To make enforcement more proactive, we reiterate the call for the DOJ and FTC to adopt formal rules outlining automatic investigation criteria in the wake of rapidly increasing prices. For instance, the DOJ could automatically investigate firms in industries where inflation exceeded some multiple (say two to three times) of the general CPI, particularly if an increase in gross profit margins accompanied this price inflation. (Note that Cal-Maine now earns margins of 70 to 145 percent for a dozen eggs.) Such a rule would not only likely catch more cartels in the act, but it would also serve as a deterrent for companies engaging in this behavior in the first place. Of course, the DOJ and FTC need sufficient funding (and staffing!) to rigorously enforce this proposed rule. We note, and strongly advise against, the Trump Administration considerations of the disastrous idea of shrinking the DOJ Antitrust Division, including possibly closing down field offices focused on the agricultural sector.

Whatever the details of a specific rule, this much is clear: It is time we expand our toolkit to tamp down inflationary pressures arising from novel forms of coordinated pricing. The historical evidence and our recent experience with egg prices demonstrate that automatic DOJ investigations may be one way to get more serious about tackling inflation.

Disclosure: Hal Singer served as an economic expert on behalf of plaintiffs in two cases concerning Agri Stats: Pork Antitrust Litigation, No. 0:18-cv-01776 (D. Minn.) and Broiler Chicken Growing Antitrust Litigation (No. II), 6:20-MD-02977-RJS-CMR (E.D. Ok Aug. 19, 2021).

In May, Heatmap’s Robinson Meyer and Matthew Zeitlin wrote an article about House Republicans’ plan to weaken environmental review to accelerate the construction of new infrastructure. The subject line of the email promoting the piece read, “Permitting Reform Is Back, Baby,” a rather nonchalant way to describe the latest legislative plan to gut the National Environmental Policy Act (NEPA). The proposal, part of the GOP’s budget reconciliation package, seeks to allow developers to pay a fee in exchange for an expedited environmental assessment or impact study that would be exempt from judicial review. Other provisions in the budget reconciliation bill would enable oil and gas companies building pipelines and export terminals to pay for favorable national interest determinations from the Department of Energy and expedited permitting from the Federal Energy Regulatory Commission. 

On May 21, Meyer and Thomas Hochman of the Foundation for American Innovation—a right-wing mouthpiece for the “abundance agenda”—discussed in a webinar the legislation’s pay-to-play NEPA provisions. Yet both commentators failed to acknowledge the context in which debates and developments related to “permitting reform” are taking place. To properly understand what’s happening, one must consider how tech- and petro-capitalists are now invoking society’s “need” for data centers to rationalize an irrational increase in fossil energy production.

According to proponents of the so-called abundance agenda, regulations are a major obstacle to building all sorts of infrastructure, including socially beneficial goods like affordable housing, mass transit, and clean energy. Meanwhile, NEPA has long been villainized by the fossil fuel industry and its allies, who lament how environmental review processes can delay, and occasionally thwart, dirty energy production. Abundance advocates misleadingly cast NEPA as the main barrier to the growth of renewables, even though an interconnection backlog at regional power grids dominated by private, profit-maximizing utilities is a far greater problem. 

A shared disdain for NEPA goes a long way toward explaining why some conservative commentators have been so complimentary of nominally liberal abundance advocates. American Enterprise Institute senior fellow James Pethokoukis, for example, recently urged “pro-growth conservatives and supply-side liberals” (e.g., Abundance co-authors Ezra Klein and Derek Thompson) to team up. He sees, correctly, that the corporate-backed abundance agenda’s deregulatory impulse dovetails with many of the right’s (often corporate-backed) goals. 

The admiration is mutual, as evidenced by neoliberal Democrat and prominent abundance champion Matt Yglesias’s early praise for Interior Secretary Doug Burgum, who proceeded to derail offshore wind projects and embrace coal. What’s more, when Open Philanthropy, a Democratic-leaning “effective altruism” organization founded by Facebook billionaire Dustin Moskovitz, announced its $120 million Abundance and Growth Fund, it cited three Republicans—Burgum, Energy Secretary Chris Wright, and President Donald Trump—as positive embodiments of abundance-enhancing deregulation. This announcement, two months into Trump’s second term, ignored the Trump administration’s extreme actions to benefit oil, gas, and coal interests. 

During the Biden administration, the United States became the world’s largest producer of oil and exporter of liquefied methane gas. Despite this development, Trump has made clear that one of his main objectives is to further increase hydrocarbon production, expand liquified methane gas exports, and revive the moribund coal sector. Echoing rhetoric used by Klein and Thompson, the Energy Secretary said in April that the Trump administration “will replace energy scarcity with energy abundance” by “prioritizing infrastructure development and cutting regulatory red tape.” 

Yet abundant renewable energy does not appear to be a priority. A recent analysis found that more than $14 billion in clean energy projects have been canceled or delayed in the United States so far this year, with more investments in jeopardy due to the GOP’s proposed rollback of the Inflation Reduction Act.

But when it comes to fossil fuels,Trump officials are barreling full speed ahead—reversing regulations, further opening industry access to public lands, and criminalizing dissident activism. Ironically, Trump’s “drill, baby, drill” edict and incoherent tariffs have earned the ire of oil executives, who typically prefer to strategically limit supply to boost prices and profits. More importantly, accelerating the construction of even more fossil fuel infrastructure is completely at odds with the scientific and moral imperative to decarbonize society as quickly as possible.

Why would Trump, who received nearly $100 million from fossil fuel interests during the 2024 election cycle, encourage unlimited dirty energy production even though it could hurt the oil industry’s bottom line, and will surely exacerbate the deadly impacts of the climate crisis? One key factor to consider is the nascent surge in the construction of energy-hungry data centers, the infrastructural backbone of both artificial intelligence (AI) and cryptocurrency.

In short, the heavily subsidized AI boom, and the concomitant buildout of land-, water-, and electricity-intensive data centers, is creating the impression that the United States “needs” to significantly increase energy supply (clean and dirty alike) to satisfy an unprecedented surge in demand. This narrative persists even though the DeepSeek model developed by Chinese graduate students proved that even if one values AI highly, it does not necessarily require a massive increase in energy use. 

Hours after he was inaugurated, Trump declared a “national energy emergency,” implying in Abundance-like fashion that overregulation is creating energy “scarcity.” Three days later, Trump issued an executive order to remove “barriers to American AI innovation.” This order rescinded a Biden-era directive aimed at the “safe, secure, and trustworthy” development and use of AI. It bears noting, however, that Trump has built on Biden’s eleventh-hour executive order to fast-track the construction of AI data centers on federal land.

In addition to AI, cryptocurrency mining is also a major source of rising electricity demand, and Trump has gone to great lengths to boost that industry as well. He claims that digital assets will “unleash an explosion of economic growth.” For himself, maybe; the Trump family has already reaped billions through memecoin corruption.

Trump’s unbridling of AI, crypto, and dirty energy supply must be understood as a singular, inseparable process. In effect, Big Tech has thrown Big Oil & Gas a lifeline by fabricating speculative justifications for fossil fuel expansion. 

In April, during a House committee hearing on AI’s energy and transmission “needs,” former Google CEO Eric Schmidt claimed that “demand for our industry will go from 3% to 99% of total generation.” He told lawmakers that “we need the energy in all forms, renewable, non-renewable, whatever. It needs to be there, and it needs to be there quickly.”

And if it isn’t? The implicit message is that humanity will be deprived of ostensibly life-enhancing technological advancements. The United States managed to expand average life expectancy by ten years (from 69 to 79 years) without this technology since the 1960s. There is, evidently, no appreciation of the fact that if fossil fuel combustion isn’t curtailed, humanity will be deprived of life-sustaining ecological conditions. 

The explicit warning is that if the United States doesn’t win the “AI race,” then China will, and that would be bad. Here’s Alexandr Wang, founder and CEO of Scale AI, during the same hearing: “If we fall behind the Chinese Communist Party, this technology will enable the CCP as well as other authoritarian regimes to utilize the technology to, over time, effectively take over the world.” But if the energy required to win the “AI race” ensures the degradation of life on earth, what would China be taking over? 

Remarkably, Scale AI’s CEO failed to apply the logic of his cautionary tale about authoritarian abuses of AI to Trump’s fascist government and its corporate allies. Sinophobia, now en vogue across much of the political spectrum, appears to have prevented greater recognition of the dangers of entrusting AI policy to Silicon Valley’s far-right billionaires, the members of Congress they’ve bought, and the Trump administration. 

For his part, Interior Secretary Burgum describes the stakes this way: “The U.S. is in an AI arms race with China. The only way we win is with more electricity.” Meanwhile, upon announcing a May 8 Senate committee hearing, Sen. Ted Cruz (R-TX) said that “the way to beat China in the AI race is to outrace them in innovation, not saddle AI developers with European-style regulations.”

In the wake of that hearing, the Koch-affiliated Abundance Institute reiterated its demands for federal lawmakers to preempt state-level regulation of the AI industry and accelerate energy permitting. (The GOP’s budget reconciliation bill would do both.) In so doing, the institute simultaneously confirmed two things about the abundance movement: (1) its anti-democratic nature; and (2) the centrality of expanding gas-powered data centers. The term “supply-side liberals” is an oxymoron. 

Notwithstanding oil producers’ complaints about Trump’s maximalist approach, other fossil fuel players who bankrolled Trump’s campaign, especially those in the fracked gas industry, are poised to capitalize on the AI- and crypto-fueled growth in energy-hungry data centers. For example, Energy Transfer—the company behind the Dakota Access Pipeline—has already received requests to supply 70 new data centers with methane gas, according to a recent investigation. That represents a 75 percent increase since Trump took office, a big return on Energy Transfer’s $5 million investment in Trump’s Make America Great Again Super PAC. Moreover, Trump recently signed executive orders to expand the use of coal, which he has characterized as a good option for off-grid backup power.

The rapid growth of data centers is deepening reliance on fossil fuels and jeopardizing our already-delinquent transition to renewables (not to mention stressing water supplies in drought-stricken areas and harming ecosystems). Existing energy injustices are being intensified, and we are likely to see a further increase in electric bills, as utilities pass costs onto ratepayers. Ultimately, the data center boom threatens to make life more expensive for working people in general given that AI-induced mass unemployment could suppress wages and because any increase in greenhouse gas pollution means more frequent and severe extreme weather, and those shocks devastate communities and disrupt supply chains.

While the left has long been adamant about the need to discipline (fossil) capital, self-described “supply-side liberals” have contended that streamlining environmental review would automatically lead to better outcomes because it would enable cheaper renewables to outcompete fossil fuels. Amid Trump’s coal, oil, and gas-friendly deregulatory blitz, however, it’s clearer than ever that if clean energy is to replace dirty energy, and not just complement it, we must take steps to eliminate polluter handouts and phase out fossil fuel production.

If that means Big Tech’s data centers can’t be built and powered as quickly as Big Tech and its abundance-aligned lobbyists would like, so be it. We must put our energy resources to good use, including the electrification of our built environment and transportation systems. We are not obligated to destroy our one livable planet just so that a few eugenicist tech billionaires can force-feed us alienating and dehumanizing AI garbage designed to further exploit us and enrich themselves and their shareholders.

Kenny Stancil is a senior researcher at the Revolving Door Project.

The Inflation Reduction Act’s failure to garner votes for Democrats has generated significant handwringing in political circles. Although targeted toward benefiting red states, the IRA failed to produce meaningful impact before the 2024 presidential election. Voters presumably care about one type of spending—the type that results in an immediate reward. Delayed gratification through subsidizing the conversion of coal-powered energy towards cleaner technologies, for example, cannot muster a political groundswell. Many policies can appeal to voters on different levels, but one surefire solution is to give the voter a good-paying job.

Matthew Zeitlin has weighed in on how the political theory undergirding the IRA broke down, and Brian Callaci noted that “centrist Democrats jettisoned the stuff that was would have kicked in immediately, been visible to public.” In my opinion, the process of converting government spending authorized by the IRA into jobs takes too long. That’s because government agencies must contract with private entities pursuant to onerous rules (out of an aBuNdAnCe of caution). And upon securing their contracts, contractors must solicit job applicants, and finally hire. The government could cut out the middleman by employing the workforce directly, as it did in the highly successful New Deal programs, the Civilian Conservation Corps, and the Works Progress Administration (WPA).

Per the Biden White House, in the first two years since passage of the IRA, clean energy projects created a meager 330,000 jobs. That’s hardly enough votes to swing an election. An analysis by the Political Economy Research Institute at the University of Massachusetts Amherst estimated that, before it was pared by the Trump administration, the IRA’s climate, energy, and environmental investments would create more than 9 million jobs over the next decade. The problem from a political perspective is that jobs created under the next administration don’t count for much, and perversely could benefit your political opponent.

It’s the Jobs, Stupid

In light of DOGE’s wicked winnowing of the federal workforce in the name of “efficiency,” the lodestar for the next Democratic campaign should be the immediate replacement of lost government jobs and the creation of new government jobs, not government spending. A spending program is just a clumsy vehicle for job creation. Aside from garnering votes, a jobs program would build human capital for workers to deploy in their future work in private or public sector. A jobs program critically would shift power balance in labor market towards workers, allowing workers to capture a larger wage share.

The U.S. economy creates jobs, but not all jobs are equal. Many jobs do not offer a pathway towards career and income advancement. With apologies to Uber drivers, who suffer mightily under their employer’s flooding of the market with replacements, we would never dream of our children becoming independent ride-hailing operators. And the prospects for recent graduates in particular is dim. The chief economic opportunity officer at LinkedIn explained how Artificial intelligence (AI) is threatening entry-level jobs. To wit, the unemployment rate for college grads has increased to 30 percent since September 2022, compared to 18 percent for all workers.

The solution to this labor market problem, which AI has materially worsened, lies in a massive federal jobs program. Such a program would provide entry-level positions with opportunities for continued development in the public sector or advancement in the private sector—that is, the very opposite of what Elon and the tech bros tried to achieve with DOGE. The notion of finding “inefficiency” among government jobs is at best a thinly veiled attempt at demonizing government workers and setting neighbor against neighbor. Government workers fresh out of college or nearing retirement might lack the skills (for different reasons) to seamlessly transition into a new position. Should they be tossed overboard?

As even The Economist admits, much if not most government spending on basic research will lead nowhere or never be commercialized; but that doesn’t mean the investment in supporting scientists in the interim was a waste of taxpayer funding. We kept a bunch of scientists gainfully employed during the project, fine-tuning their research skills. This by itself is a worthy investment. Government-funded research is an investment in the public welfare. Hence, Trump’s attacks on universities generally (and Harvard in particular) are an attack on the public welfare.

On a personal note, I was hired by the Securities and Exchange Commission (SEC) while finishing up my dissertation. At that entry-level job, I learned how to code in SAS and, along with a colleague at the SEC, I published my first paper. I took those skills with me into the private sector, advanced as a consultant, and even sold a firm to a publicly trade consultancy. Would Elon (who ironically has nursed from the teat of government for decades) have approved of that public investment in me? Who knows. Was it a waste of taxpayer money? Certainly not based on what I’ve paid in taxes over my lifetime or in the staff that I’ve been able to keep employed. That limited government investment has paid dividends many multiples over what I earned at my first SEC job.

The Benefits of a Jobs Program Would Be Significant

Public sector workers account for roughly 15 percent of all employment in the United States. By contrast, the comparable share is 30 percent in Norway. Citing work from the CBO, Gregory Acs of the Urban Institute explains that a WPA-style jobs program would create 6.5 million publicly funded jobs. He notes that the WPA was up and running in just four months, and only six months after its creation, the WPA employed about 2.7 million Americans. A 2018 paper by the Center on Budget Priorities called for the provision of universal job coverage for all adult Americans, including health insurance for all full-time workers in the program. Among the benefits of such a plan would be (1) the elimination of involuntary unemployment, (2) the establishment of a “de facto floor in the labor market, greatly increasing the bargaining position of workers throughout the economy,” and (3) increased employment, and therefore expenditures and tax revenues for local and state governments. 

Several studies have documented the benefits from public sector employment, in terms of their effects on wages and employment.

• A study in the Journal of Urban Economics (2014) examining data at the Local Authority level in the UK shows that higher local public sector employment leads to higher wages, consistent with the theory of government jobs bolstering worker bargaining power. Higher local public sector employment is not associated with any identifiable effect on total private sector employment, which undermines the claim that government jobs “crowd out” private-sector jobs. 
• Taxes are generally collected at the national level in Europe. In the United States, by contrast, most of the public sector employment is state or city employment, which entails collecting taxes within the jurisdictions in which the treatment (government jobs) occurs. A study in Review of Economic Dynamics (2024), using data at metropolitan statistical areas in the United States, finds that a high rate of public sector employment is associated with lower private sector wages, contra the prediction of heightened worker bargaining power. But the study also finds that a high rate of public sector employment is associated with a decreased sensitivity to aggregate shocks to the economy, a social benefit.
• A meta-study of prior research in IZA World of Labor finds that “the public sector competes with the private sector for workers, and this competition can increase the tension in the wage bargaining process and, ultimately, the wages of workers in the private sector.” It also finds that “when public wages are responsive to productivity and adjust similarly to private wages, then the size of public employment acts as an automatic stabilizer, that is, it reduces the fluctuations of unemployment over the business cycle.”

An alternative to a federal job is a federal wage subsidy, such as the earned income tax credit, in which the government gives a tax break to workers whose incomes are below a certain threshold. A recent paper by Maxime Gravoueille (2025) finds that local labor markets in France more exposed to an increase in wage subsidies realized faster growth in hours worked and slower growth in average hourly wages. Unlike a federal job (or job offer), a wage subsidy cannot alter the bargaining position of a worker vis-à-vis its employer.

Another weaker alternative to a federal job is a federal training program. Training displaces the worker’s income while she is being trained, and there is no guarantee of a job (let alone, a superior job) at the end of the training. In 2019, the Council of Economic Advisors under the first Trump administration sought to evaluate the benefits of federal training programs. It concludes that the evidence is mixed, with the “positive effects of training in the [Department of Labor’s Workforce Innovation and Opportunity Act] Adult program … only found in smaller scale, non-random studies.”

Spread the Wealth from Federal Jobs

Federal jobs have been centralized in or near Washington DC. That’s great for DC-area homeowners (like myself), but there is no reason to concentrate the jobs and associated benefits here. Better to spread the jobs across the country, so that each region can benefit from the federal jobs program. By maintaining a parochial presence, the federal government can engender a broader realization of what it can contribute and effectively rebut the mindless “starve the beast” echo chamber. Claiming that the federal government doesn’t understand local issues becomes far less convincing when one’s neighbors work for the Bureau of Land Management or the Census Bureau.

Imagine what would happen to wages if there were a massive new employer in every region of the country. Recent grads could be hired directly out of school, acquire on-the-job skills (e.g., programming) and experience, and then enjoy the option of staying in the federal job or transitioning to the private sector with a job in hand. Such optionality would profoundly shift the power balance towards workers, as private-sector employers would be forced to share a larger portion of the worker’s marginal revenue product, driving up the labor share. In the absence of government job guarantee, a worker’s best outside option is often welfare or Uber.

Pure self-interest motivates Elon and other tech bros’ desire to defund the government generally and federal jobs in particular. These large employers want to a desperate workforce that they can exploit to “drive shareholder value”. Competing against the government for skilled programmers or scientists cuts into the tech bros’ profits. In response to massive spending cuts at research universities, The Economist reports that the number of applications for overseas jobs from American scientists in the first three months of 2025 increased by a third compared to the comparable period in 2024. The lack of outside options for these scientists, or the prohibitive transfer costs of taking an overseas position, means they would be more willing to take a wage cut at a private sector employer.

Not convinced? Remember the time before antitrust litigation forced the NCAA to loosen its collusive grip on athlete labor and implement the transfer portal. Unsurprisingly, very few athletes sought to evade the restriction to play overseas directly out of high school. Doing so entailed significant costs for younger athletes, costs that time and family considerations only amplify for more experienced workers. The removal of that restraint has now allowed competition to flourish and labor to benefit. Of course, this exact sort of competition casts a pall of fear over “shareholder value” crowd, aghast at the prospect of having to pay workers a fair wage. After all, just over a decade ago, the Silicon Valley tech giants settled the In Re High Tech no-poach litigation, which accused them of agreeing not to compete for each other’s workers.

In summary, a federal jobs program would generate enormous social, political and economic benefits. A federal worker is more likely to vote for the party responsible for creating her job. The Democrats’ notion of getting voters excited about clean energy was a pipe dream. Democrats can pursue policies that support the environment, but that issue isn’t sufficiently potent to drive votes. It’s time to shift messages from government spending to government jobs.

Many mornings, the first thing I do is drink coffee out of my FTC mug. I worked at the FTC for three years. There, I helped the smartest career civil servants and political appointees I have ever met fight for the American people. They inspired me to see the law as a force for good and convinced me to go to law school. These days especially, that mug reminds me that good public servants can do good things in this government. The logo on that mug, the FTC’s winged flywheel, represents the role the FTC plays to ensure fairness in the American economy. No longer.

On Wednesday, that logo graced the top of a letter announcing an investigation into Media Matters for America. That investigation can only be fairly considered a politically motivated threat against an advocacy group opposed to the current administration. The investigation seems to concern Media Matters’ purportedly colluding with advertisers to deprive Elon Musk’s Twitter (renamed by Musk “X”) of ad revenue. The investigation seems prompted by Musk’s own suit about the issue—which is a blatant attempt to interfere with Media Matters’ First Amendment rights.

Needless to say, the investigation is without merit. Media Matters’ efforts to stop hate speech on Musk’s platform are in no way the type of horizontal collusion cognizable under the antitrust laws. Indeed, there is no mention of collusion, nor any claim of antitrust violation, in Musk’s original suit. (The suit instead claims that Media Matters interfered with Twitter’s contracts with advertisers, disparaged the quality of the platform.) The legality of such an attempt to coordinate a political boycott was settled long ago in NAACP v. Claiborne Hardware, a case concerning a boycott of racist businesses during the Civil Rights Era. Even the 5th Circuit has acknowledged the danger of this suit—specifically the potential for coercion or intimidation Musk’s discovery efforts to get the names of Media Matters’ donors poses. Under the first Trump administration, the Justice Department pursued a similar theory of coordination among carmakers that reached an accord with California over emission standards—a clear act of political lobbying exempted from antitrust scrutiny under the Noerr-Pennington doctrine. (The case was smartly withdrawn in the early days of the Biden administration.) Despite this background and clear caselaw, the FTC has decided to follow Musk’s vendetta and use its limited resources to pursue a claim with little-to-no chance of success.

Having worked in the agency recently, I am often asked by law school professors and classmates what I think will happen to antitrust enforcement at the FTC during the second Trump administration. Generally, I have said that I assume that not too much will change. The agency’s Republican leaders generally support strong enforcement—for example, Mark Meador is on the record as supportive of the Robinson-Patman Act (RPA), a law hated by big business. (To my disappointment, Meador voted to withdraw the FTC’s pending (meritorious and well-researched) RPA claim against PepsiCo.) In many areas of federal law enforcement, the presumption of regularity has already broken down for this administration. I hoped (though perhaps did not expect) the FTC would be different. That an agency with a history of independence would remain so. That is, after all, what happened during the first Trump administration.

I was wrong. Wednesday’s actions, likely directed by Chair Ferguson and his staff, indicate that the Chair of the FTC plans to use his agency as a weapon in Trump’s antidemocratic arsenal. Ferguson will, presumably in pursuit of Trump’s favor and Musk’s political war chest, sacrifice the goodwill the agency has built up with the judiciary and the public over the decades. I fear that after this administration is over, the agency where I started my career will be a shadow of what it once was—depleted of all its credibility, quality staff, and legitimacy. The Wall Steet Journal editorial page lambasted Lina Khan for “politicizing” antitrust by trying to dismantle concentrations of economic power—even though dismantling such concentrations was the original purpose of the FTC Act. Yet Khan’s FTC never once used its power to harass a political enemy. But that’s precisely what Ferguson’s FTC is doing.

The anti-monopoly community cannot continue to behave as if business-as-usual will continue at the FTC and DOJ. We cannot continue to segment anti-monopoly policy off from the rest of the Trump administration’s authoritarian actions. Under this administration, there is only one policy issue—democracy protection. We should do everything in our power to make sure that agencies like the FTC are not wielded as weapons of authoritarianism. If that means sacrificing the credibility of the agency I love, so be it.

Bryce Tuttle is a student at Stanford Law School. He previously worked in the office of FTC Commissioner Bedoya and in the Bureau of Competition.

In February 2022, I wrote a piece in The American Prospect advocating for antitrust enforcement as a means to combat inflation. I wasn’t totally wrong. In light of personal experience in price-fixing litigation and the fate of the Biden administration, however, my perspective has shifted. Antitrust can be part of the solution, but it can’t be the entirety. (And neither can Fed rate hikes.) As spelled out below, the scope of antitrust is too narrow to combat many forms of profiteering that drive inflation. And even where inflationary conduct is cognizable by antitrust law, antitrust moves too slowly to make a meaningful difference in the short run, especially over the four-year term of a president.

By several accounts, profiteering was a significant contributor to post-Covid inflation. A 2022 study by the Economic Policy Institute documented that 54 percent of the increase in prices from the trough of the Covid-19 recession in the second quarter of 2020 to the fourth quarter of 2021 was attributed to larger profit margins. A 2023 study by the Federal Reserve Bank of Kansas City found that growth in markups accounted for more than half of inflation for 2021. A 2023 study by the Institute for Public Policy Research concluded that business profits rose by 30 percent among UK listed firms post-pandemic, driven by a small number of firms. And a 2023 study by Groundwork Collaborate found that corporate profits fueled 53 percent of inflation during the second and third quarters of 2023. Per a 2025 BIS Working Paper, during the 2021–22 post-Covid period, one third of the price surge was traceable just to the largest firms in an industry. And a recent paper from the Federal Reserve Bank of St. Louis estimated that non-financial corporate profits, as a share of total economic output, increased from 13.9 percent in the years prior to Covid to 16.2 percent in the years after.

There are several mechanisms by which a firm’s margin—the difference between its price and its marginal costs and a measure of market power—can increase. One mechanism, as explained by Isabella Webber in her writings and on The Slingshot—is that a systemic cost shock can be used as a coordination device among sellers, which allows prices to rise beyond any true increase in marginal cost. A related mechanism is that companies have superior information about their costs compared to their customers. For example, when a tariff is applied to an input in a firm’s production process, it is impossible for a customer to know what portion of the cost is affected by the tariff, let alone the amount of the ever-shifting tariff. An entirely unrelated mechanism for profiteering is that companies can communicate their intentions to raise prices or cut capacity via public airwaves, especially during earnings calls; these announcements can be understood as an “invitation to collude” by rivals. The policy question is whether antitrust is up to the task of policing these exercises of market power.  

The Narrow Scope of Antitrust

In broad strokes, antitrust recognizes pricing conduct as being anticompetitive when it falls into one of two buckets: (1) a unilateral price hike made possible by an exclusionary restraint; or (2) a coordinated price hike made possible by an agreement among rivals or a series of acquisitions that give rise to collective market power. An example of the former would be a single firm with market power that needed to use a restraint like a most-favored-nations provision or exclusive contract in order to raise prices. (The restraint typically must pierce the firm’s boundaries—that is, appear in a contract with buyers or suppliers.) A price hike taken solely by virtue of a firm’s lawfully acquired market power, by contrast, is not cognizable under antitrust. An example of coordinated conduct condemned by antitrust would be a group of firms sharing current or future price information via excel files or some third-party information broker to jointly raise prices. A roll-up of small horizontal rivals by a private equity firm—think anesthesiology practices in Texas—could also be condemned under antitrust laws. A coordinated price hike achieved “tacitly” and thus without an agreement, by contrast, is outside the scope of antitrust law.

When we think about the types of price hikes that can fuel inflation, it becomes painfully obvious that antitrust cannot be the first line of defense. Consider the following not-so hypothetical examples:

• A company cites rising costs during a crisis as a basis for hiking prices by nine percent, even though its actual marginal costs rose by less.
• A collection of companies exploit a modest cost increase to tacitly coordinate a much larger price increase.
• A company in a concentrated industry announces that because of pending tariffs, it plans to reduce its capacity by four percent, suggesting that anything less is undisciplined.

The first two tactics fall outside the scope of antitrust. And while the third is addressable via Section 5 of the FTC Act, only the FTC could bring such a challenge.

Even for conduct that falls within the narrow scope of antitrust law, prosecuting a case can take multiple years to resolve, and even then, settlements can allow perpetrators of price-fixing agreements to pay a fraction of the harm inflicted. Consider a case of coordinated price hikes made possible via a common pricing algorithm, such as RealPage, or a more primitive form of information sharing, such as the Agri Stats cases (disclosure: I’ve been an expert in two of Agri Stats matters). Or a case of a private equity roll-up of dozens of small horizontal rivals, such as cheerleading competitions by Varsity, granting the combined entity newfound pricing power (disclosure: I was the gyms’ expert in Varsity). The complaint in Varsity was filed in October 2020, and the order approving the disbursement of settlement funds was issued in May 2025, nearly five years later. And that’s speedy for an antitrust case in my experience.

The Makings of a New Toolkit

So what is needed to effectively police this kind of inflationary conduct? Beginning with conduct within the ambit of antitrust, in addition to prosecuting the use of common pricing algorithms via antitrust enforcement, many cities such as San Diego, Berkeley, San Francisco and Minneapolis have simply banned the use of RealPage software and others should follow suit. The Lever’s Luke Goldstein recently documented a cottage industry of “price optimization consultants” spotting price-hiking opportunities for companies in the same industry. Turning over the pricing decisions, as well as competitively sensitive information, to a third party that is also advising your rivals should be banned generally. There’s no reason to wait for these “facilitating practices” to bear fruit for their clients before prosecuting; by then, the damage of higher prices has already been inflicted. Indeed, Congress should make clear that any common pricing algorithm, no matter how primitive—e.g., sharing excel spreadsheets via an intermediary or chatting over the phone with a shared pricing consultant—or sophisticated should be per se illegal under the antitrust laws.

Similarly, there is no reason to wait for a roll-up of rental units in a neighborhood by a single entity (often private equity) to lead to rental inflation before we intervene ex post via antitrust. As I documented in an OECD paper with two co-authors, the most consolidated neighborhoods in Florida experienced the steepest increase in rents in the post-Covid era. Cities and states could address this threat ex ante by imposing a cap on the share of units that could be controlled by a single entity in a neighborhood.   

Although public invitations to collude are covered by the FTC Act, Congress should extend the same policing authority to states and private enforcers. At least one federal court has decided that such cases are not amendable to private enforcement under the Sherman Act. The brazen behavior of firms, especially airlines, makes clear they perceive antitrust law to be impotent here. To wit, in March of this year, Delta and United discussed planned capacity reductions at the same JP Morgan investor conference in succession. In April, both airlines announced plans to reduce capacity in the third quarter by nearly the same amount (four percent). Given the FTC’s limited resources, the agency can’t be expected to police every perceived invitation to collude.

Moving to conduct outside of antitrust, recall that a single firm raising prices without the crutch of a restraint is permissible. Hence, antitrust cannot police episodes of firms unilaterally exploiting a crisis to pad their profits. Just as Covid served as a generalized cost shock, so too do tariffs. One pricing consultant recently bragged to DealBook that tariffs represent a “golden opportunity” to exploit customers, and explained the term “taking price,” which means using a rivals’ (potentially legitimate) price hike as cover for your own price hike. And several firms, including Black & Decker, Adidas, Hasbro, and Procter & Gamble have announced planned price increases owning to Trump’s tariffs.

A federal anti-price gouging law, as proposed by Kamala Harris during her presidential campaign, would be a good start. Price hikes would still be tolerated, so long as they could be justified by a commensurate increase in the firm’s costs. But we must go further: Industries experiencing above-average inflation should be automatically probed by a designated federal agency (either the DOJ or FTC). Egg prices were soaring, in part due to coordinated pricing in a concentrated industry as documented by Basel Musharbash, until Trump’s DOJ announced an industry probe in March. Other industries exhibiting above-average inflation, including auto insurance, should also be subjected to government probes. And the use of the bully pulpit by the president, along the line of what JFK did to turn back prices hikes by the steel industry, would also be helpful.

Yet another inflationary strategy that escapes antitrust scrutiny is surveillance pricing, sometimes referred to as dynamic pricing, in which a company adjusts prices based on the personally identified characteristics of shoppers or market dynamics (e.g., a school bus full of hungry soccer players arrives at a fast-food restaurant). Some states are moving to ban these practices in retailing. At a minimum, these practices should be subjected to regulatory oversight, as they have the potential of extracting consumer surplus (even relative to monopoly levels) by charging each customer one penny below her willingness to pay. Even worse, this technology could lead to discriminatory pricing on the basis of race or income or time since the last paycheck. Alas, the new FTC Chairman, Andrew Ferguson, closed an inquiry into surveillance pricing initiated by his predecessor.

Thinking Outside the Box

As reported in the Times, the Catalonia government has employed several remedies to address soaring rental inflation in Barcelona, including (1) imposition of rental price caps last March (rents have since fallen more than six percent); (2) ending licenses for Airbnb homes, and required owners to convert units into long-term leases at capped rates (brining 10,000 units back into the market); and (3) teaming up with private developers to build 50,000 new units by 2030. In addition to these fairly radical interventions, the government is considering a proposal to compel landlords and banks that are holding defaulted mortgages to put 75,000 units to use for long-term rentals. Another proposal would close the loophole in Catalonia’s housing laws that allow investors to convert residential apartments into tourist rentals. Not mentioned is the notion of deregulating zoning laws—potentially helpful at the margin, but not something to bring renters short-run relief (and certainly not fodder around which to build a political campaign).

It’s time for policymakers generally and progressive authors of the next presidential transition project in particular to think outside the box. As the 2024 election made clear, voters are willing to embrace autocracy when basic needs become unaffordable. Aside from stepped-up antitrust enforcement, the Biden administration took a hands-off approach to inflation, deferring mainly to the Fed. And we know the results. Although the Fed eventually brought down prices by raising rates, it did so at tremendous costs, making home ownership out of reach. The high social cost of inflation militates in favor of developing a new toolkit to preserve democracy and make America affordable again.

These past few months have had more than their share of decade-long weeks. Not even three months in, the second Trump administration has already totally shattered norms and scrambled the playing field, challenging everything we thought we knew about the government’s role in the economy. We thought that Congress had the power of the purse, but now that’s become a question seeking an answer. We thought that even the president had to follow instructions from the courts, but now everyone is left to wonder if that is still the case. Once sacred norms atrophy daily. 

Yet one thing the Trump administration has cast into doubt that gets little air time is the usefulness  of neoclassical economic theory in explaining the economy. 

The classical school of economics generally describes the theory of the first cohort of economists in our modern understanding of the discipline—though it was still radically different from the modern iteration, much more intertwined with studies of politics and philosophy. Most famous among these early economists is Adam Smith himself. Other notable figures include David Ricardo, Thomas Robert Malthus, James Mill, and James’ (more well-known) son John Stuart Mill. Most of modern economic theory descends from this small group of English and Scottish political economists. 

It bears mentioning that this is not because classical economists  were the first to rigorously investigate the economy, but rather because they crystallized it into a concrete area of study, whereas previously it was considered part of moral philosophy and political philosophy and history and in the study of the classics and on and on. Indeed, most of the classical economists were also philosophers—the key concept of utilitarianism is a philosophical foundation of most economic thought.

The neoclassical school, on the other hand, was a category originally used by Thorstein Veblen to group the Austrian school of thought with the “marginalists,” whose work centered around the insights to be gained by examining effects at the, you guessed it, margins. The term was later adopted and expanded by other economists.

Over the course of the twentieth century, much of the original canon of Austrian economics, and a number of significant theoretical advancements like F.A. Hayek’s theory of prices as purveyors of information, were absorbed into the mainstream. At the same time, the demand-side economic theory of John Maynard Keynes became so accepted that—from World War II through the dawn of Reaganomics—a common refrain was that “we are all Keynesians now.” This synthesis left “neoclassical economics” as a stand-in for all of the core ideas of the discipline. 

Nowadays, neoclassical economics is usually used simply to mean “mainstream” or “orthodox” economics, as opposed to heterodox schools of thought like institutional economics (of which Veblen is often considered a founder), Marxian or Marxist economics, or Modern Monetary Theory. Although it is arguably too broad of a term to be of much use, there are enough basic intellectual throughlines that we can at least gesture at a “neoclassical” school of thought.

Neoclassical economics models and theories are premised on a handful of key assumptions. They will vary slightly depending on who exactly you ask, but generally include:

1. Economic actors (usually meaning either people or firms) make rational decisions to optimize an objective.
2. Individuals seek to maximize their utility, within the constraints of their situations. Firms seek to maximize their profit, subject to the bounds of their constraints.
3. Each actor makes decisions independently.
4. Everyone involved has full information about the economic interaction.

These assumptions are obviously not universally true and most economists don’t believe them to be. Rather, the idea is that by reducing complexity, one can discern how various changes to a model will shift behavior, economic interactions, and, ultimately, the dynamics of a market. And once that’s done, those same general dynamics should approximate the more complicated real world. 

This has always been somewhat dubious and has never been short of critics—the modern Austrian school is partly a heterodox tradition because they were opposed to these formal, more mathematical models. Indeed, most cutting-edge mainstream economics is about relaxing neoclassical assumptions to create a richer picture that better captures human behavior. More so than actual professional economists, reporters and media personalities have embraced oversimplified models as a crutch for economic analysis. For instance, when opposing some modest intervention into a market, the talking heads insist on discussing the “Econ 101” (read: obvious) view. 

The irony is that the discipline itself understands the limited use of such simplistic concepts. Econ 101 introduces concepts that are increasingly complexified in further study. Because reporters and talking heads usually didn’t study advanced economics, much of the discourse winds up being unscrupulously grounded in the handful of assumptions outlined above. Nothing has shattered the illusion that we can understand complex situations with basic models like the start of the second Trump administration. 

Shaking the Foundations

Trump’s recent implementation and then partial rollback of tariffs is a good case study. Despite being a cornerstone of the president’s 2024 campaign, business leaders were reportedly surprised at the size and scope of Trump’s initial proffer. And investors clearly did not price such a dramatic intervention in trade policy into their expectations, as evidenced by the rapid gyrations of the stock market. It makes sense when you consider that political and business insiders often default to explaining decisionmaking via presumed rationality. The orthodox view was basically that this kind of sweeping and incoherent tariffs wouldn’t happen; because the costs so outweighed the benefits, such an intervention would clearly go against the government’s (ergo the president’s) basic self-interest. (An example of this sort of thinking beyond economics is political science’s rational state theory—a consequence of how neoclassical economics has colonized much of political science.)

Even though the tariffs have quickly been walked back—even if in the coming days, weeks, or months they are totally undone—the key issue is that, under a neoclassical framework, they would not have happened at all.

Now, one could retort that the market reacted exactly as even the most elementary model would predict; uncertainty made the prospects of financial markets less palatable, resulting in a scramble from investors to reduce their risk exposure, triggering a loss in valuation as the demand curve shifted down. True enough. But the fact that this played out so predictably is partially the point. Everyone knew that it would be economically harmful to impose blanket tariffs. It would obviously be antithetical to American financial interests. Yet the administration did it anyway.

There are basically two ways to reconcile the tariffs with a neoclassical model. First, the model could simply do away with the assumption of rationality. This would make it basically impossible, however, to use as a predictive tool (behavior would become too complex to easily anticipate). Second, the model could do away with the assumption that actors (governments, individuals) are optimizing for utility. Perhaps the White House is actually optimizing for profits for aligned businesses or for accumulating political influence. This type of tweaking of the “objective function,” is much more in line with existing economics, but still represents a major break from neoclassical models. 

(The fact that this sort of work is ongoing and most economists do not actually adhere to such restrictive assumptions is one good reason why “neoclassical” being used interchangeably with “modern” or “orthodox” can be confusing. Unfortunately, many pundits, journalists, and businesspeople don’t study the discipline far enough to move beyond the oversimplified worldview.) 

For the administration to take an action so clearly against the nation’s interest without breaking these assumptions, it would require believing that they have information that drastically changes the calculus. Possible, but unlikely when it comes to trade, where there’s little information opacity compared to, say, intelligence and national security. 

Speaking of information, the current administration has scrubbed enormous amounts of data from federal government websites and databases (some data have been made available again after litigation and public pressure). Everything from omitting the role of trans people in Stonewall to removing reams of medical data has happened at a rapid pace. Some of this information may not be immediately relevant to economic decision-making. Other times the path from that data to economic or commercial relevance is a straight line. New pharmaceutical undertakings will suffer a material harm to their research and development with fewer resources from the National Institutes of Health. The poultry industry might well miss CDC data on avian flu. 

But even beyond these specific applications, the withdrawal of mass amounts of previously public data fundamentally erodes the idea that economic actors will ever have anything resembling information symmetry. Not to mention how much widespread attacks on the media compound the issue.

One final issue is regulatory uncertainty. Rational, independent decision-making requires some degree of confidence in the laws and institutions governing the market you participate in. The pushing of novel legal theories—including that oral orders from judges are not binding or that the executive branch can eviscerate congressionally mandated departments and programs—makes it nearly impossible to presume that you can accurately predict the benefits or costs of any particular decision. When even gargantuan law firms prefer deference over self-defense, confidence in the rule of law no longer grants the basic trust required in a modern, global economy.

Goodbye to the Neoclassical World

One could argue that the weakening of these norms has nothing to do with economic thought, and that it’s just dirty politics. But markets are political. Institutions create rules governing behavior, including economic behavior. And a stable set of rules is necessary for any of the assumptions undergirding neoclassical models to play out. 

To the extent that we ever lived in a neoclassical world, the Trump administration is ensuring that we don’t any longer. We are long overdue for more nuanced economic discourse that doesn’t shy away from its own limitations, and that recognizes when it can and should (perhaps must) be complemented with other types of insights. As the illusion of perfect competition becomes ever more ethereal, the need for more sophisticated economic thinking and debate becomes ever more urgent.

After Elon Musk poured almost $300 million into his campaign last year, President Trump returned the favor by endowing Musk with unrestricted authority to restructure the federal government. In just over two months, Musk has usurped congressional power and initiated the dismantling of agencies like USAID, the Consumer Financial Protection Bureau, and the Department of Education. Even while the courts have paused some of Musk’s and Trump’s more egregious actions, such as firing all probationary employees, the most conservative Supreme Court in a century cannot be counted on to stop their institutional destruction. Despite the ongoing gutting of federal institutional capacity to rein in big business abuses, Americans still have robust tools for controlling corporate power, most notably the states.

Indeed, the states were the first to take action against the threat to our economic liberties posed by corporate autocracy. Iowa enacted the first antitrust law in 1888, and Kansas followed with a substantially more forceful bill that would be a model for the Sherman Antitrust Act of 1890, which itself was designed for the “preservation of our democratic political and social institutions.” Throughout the 20th century, the federal government and the states enacted policies like public utility laws aimed at regulating corporate misconduct. It was precisely these laboratories of democracy that would assist federal efforts to rein in concentrated corporate power. With democracy under siege, states must once again take up the antimonopoly mantle and use the legal tools available to them to serve as a bulwark against corporate domination and as a force for democratic renewal in America. States have at least five powerful tools at their disposal—each ready for immediate use.

First, state enforcers can pursue policies that directly enhance workers’ individual freedom, mobility, and dignity. They should start by targeting coercive contracts or vertical restraints in antitrust parlance. Vertical restraints are contracts of domination by firms in a vertical relationship like a franchisor and its franchisees—that, in the words of the Supreme Court, “cripple the freedom” of workers and independent businesses.

A good first step is tackling non-competes. Non-competes deprive workers of a fundamental right—the ability to quit a job and obtain better employment elsewhere. Copious research, which has been conscientiously detailed in the FTC’s rule to ban non-competes nationwide, shows that these coercive contracts have little justification, depress wages, suppress business formation, and deter businesses from engaging in more socially beneficial conduct to retain workers, such as improving working conditions.

Over the past several years, many states, like California and Minnesota, have enacted laws that substantially restrict the use of non-competes across the economy. Recently, Ohio lawmakers proposed a sweeping bill that bans non-competes and their functional equivalents. Others must follow suit.

States have also enacted other laws that target vertical restraints aimed at distributors by a supplier. For example, Maryland enacted a law that makes resale price maintenance (RPM) illegal under state antitrust law soon after the Supreme Court broadly legalized the practice under federal law in 2007. RPM restricts the price at which a distributor can sell that good by establishing a price floor. For example, an RPM contract could prohibit a retailer from selling a pair of Nike shoes below the price specified by the company. The Supreme Court once classified RPM agreements as a contract of domination that deprived businesses of “the only power they have to be wholly independent businessmen.” Like other vertical restraints, these agreements can harm workers. The effect of these agreements was made clear after a McDonald’s franchisee complained to corporate about the crushing price ceilings (think of the McDonald’s dollar menu) imposed by the company’s RPM agreements. A representative told her to “just pay your employees less.”

At least in Maryland, Schonette Jones Walker, the chief of the state’s antitrust division, expressed her office’s willingness to enforce the state’s law during a recent American Bar Association event. Again, other states must swiftly do the same by initiating lawsuits targeting vertical restraints or enacting new legislation.

Second, public enforcers have a crucial role in holding corporations accountable to the communities they impact, not only by preventing further harm but also by fostering greater responsiveness to local economies. Corporate executives—increasingly private equity financiers—often treat their workers, trading partners, and local enterprises as nothing more than commodities to be discarded at will, with no regard for community welfare or the livelihoods destroyed. The primary way this harm occurs is through mergers. Antitrust law provides states with a readily available tool to address this problem.

Congress amended Section 7 of the Clayton Act in 1950 to restrict mergers and ensure corporations were accountable to the public. Senator Estes Kefauver—one of the lead drafters of the 1950 amendments—stated during the legislative debates that:

The control of American business is steadily being transferred …from local communities to…central managers [that] decide the policies and the fate of the far-flung enterprises they control…Through monopolistic mergers the people are losing power to direct their own economic welfare.

States can use Section 7 to tackle mergers head-on, particularly because robust case law from the 1960s remains controlling. For example, in Philadelphia National Bank, the Supreme Court held that a merger forming a firm with a 30 percent market share is “so inherently likely to lessen competition substantially that it must be enjoined.” Recently, too, Colorado and Washington State successfully stopped a merger between grocery giants Kroger and Albertsons using their state laws—demonstrating that these legal pathways can be just as viable avenues for restraining corporate power as their federal counterparts.

Third, states can enact policies that grant small businesses and workers a more direct role in governing the economy by endowing them with the power to shape the rules of the marketplace. As I have previously described in The Sling, nail salonists in New York endure terrible working conditions—including breathing in large quantities of toxic chemicals—and receive sub-living wages. New York has previously proposed to address this problem by creating a wage and standards council. The council would authorize small businesses to collectively determine the wages and work standards to which all salonists must adhere. Traditionally, such coordination among market participants violates the antitrust laws, but due to a doctrine called Parker Immunity, state legislatures are able to shield the behavior from antitrust scrutiny.

This democratic process enables market participants to shift the variables of competition that are corrosive to workers and businesses to more desirable factors such as service quality. Simply put, states exercising their power under Parker Immunity can make our markets more democratic by granting workers and firms a mechanism to voice their concerns and make collective wage and price decisions.

Many states have started recognizing the value of increased democratic coordination between market participants and enacting their own piecemeal legislation. California recently enacted a law to raise wages and improve working conditions for fast-food workers. The law establishes a council of franchisors, franchisees, and workers to determine minimum standards and wages for the industry. The council established a $20/hour minimum wage in 2024. In 2023, Minnesota enacted a similar law for nurses.

States should also use Parker Immunity to counterbalance the power of dominant corporations. For example, over the last few decades, digital platforms like Google and Meta have extracted billions in digital advertising while squeezing the news industry—profiting from its content without fair compensation. This stranglehold over the technology and information pipeline has left news outlets struggling to survive.

The proposed federal Journalism Competition and Preservation Act and many state counterparts aim to help the beleaguered news industry by authorizing them to collectively negotiate fairer terms with Google and Meta regarding the distribution and web crawling of their content. Although the bill passed out of the Senate Judiciary Committee with bi-partisan support, Senator Schumer did not bring the bill to a full Senate vote, reportedly due to a conflict of interest. State lawmakers should adopt legislation to help vulnerable market participants aggregate their power to secure fair wages, prices, and working conditions.

Fourth, states can ensure all businesses have an equal opportunity to succeed on their own merits. In particular, states can ensure businesses treat their trading partners and consumers on non-discriminatory grounds by imposing common carriage obligations (CCOs) onto their business operations.

CCOs are ancient in our law—remnants of which extend back to the Code of Hammurabi. CCOs are simple. Whether through the courts’ common law or an enacted law, firms classified as “common carriers” must treat consumers and their trading partners on non-discriminatory terms. Common carriers must offer reasonably similar terms and prices to all customers. For example, if Meta were a common carrier, it could not arbitrarily prohibit news from being transmitted on its platform or modify its algorithm to preference some news outlets over others. Likewise, if Amazon were a common carrier, it could not strike special deals with large consumer goods manufacturers or penalize marketplace sellers for not using its logistics services.

While too often honored in its breach, the principle of equal, non-discriminatory treatment has been an important part of American public policy. It is enshrined in foundational documents, from the Declaration of Independence to the 5th and 14th Amendments of the Constitution. This principle has also shaped key legislation. For example, the Robinson-Patman Act prohibits discriminatory pricing practices, making it unlawful to grant preferential treatment to certain trading partners. Similarly, the Civil Rights Act of 1964 ensures equal access to commerce and employment by prohibiting discrimination based on race, color, religion, sex, or national origin.

CCOs embed the principle of equality into our economic life and therefore strike at the heart of oligarchy by substantially limiting corporate power over business relationships. They ensure that firms and individuals cannot be denied access to essential channels of commerce or subjected to unfair pricing and terms. Indeed, in the early 20th century, CCOs were seen as a “solution to the trust problem.”

State legislatures can enact legislation, or state AGs can initiate lawsuits to have courts designate dominant, oligarch-controlled firms as common carriers. Currently, Ohio’s state attorney general is in a protracted battle to classify Google as a common carrier. If successful, Ohio’s lawsuit could provide a template and incentive for other state law enforcers to replicate.

Fifth, some state AGs can directly structure the marketplace to require businesses to engage in competition that enhances the public’s welfare, job creation, and innovative activity, by using their law enforcement powers against “unfair methods of competition.” While many states can initiate lawsuits piecemeal, 12 state AGs are empowered to declare a specific business practice unlawful as an “unfair method of competition.” The laws of these states also contain reference clauses that align their interpretation with federal case law, which currently maintains an expansive interpretation of what constitutes an unfair method of competition.

Using this authority, state AGs can demonstrate their commitment to deploying every available regulatory tool to protect consumers, workers, and fair competition. As “The People’s Lawyer,” a state AG can not only quickly establish bright-line rules defining unlawful conduct, but also swiftly recalibrate how firms compete in the marketplace and how consumers and workers are treated under state law. By prohibiting business practices like those detailed in this article, public enforcers help uphold democracy by reinforcing the idea that democratic institutions, not private monopolies, should govern the economy.

Of course, enacting new legislation takes time and political will, and state legal departments are notoriously understaffed and under-resourced. But action is imperative. With Trump and the world’s richest man gutting critical parts of the federal government, either states take up the challenge to be one of the last defenses against oligarchy, or the public must come to terms with the fact that every layer of the American system of government has failed to protect them.

While state actors contemplate how to act, the public is already demanding change. As Senator Bernie Sanders’ current National Tour to Fight Oligarchy and the nationwide Hands Off protests against the Trump Administration demonstrate, millions of Americans are already mobilizing to resist corporate rule. The only question now is whether state enforcers and lawmakers will march alongside them.

Daniel A. Hanley is a Senior Legal Analyst at the Open Markets Institute. You can follow him on X, Bluesky, and Mastodon @danielahanley.

Free trade is under increasing attack by both the progressive left and the populist right. Although the left and the right offer different policy solutions—the progressive left stresses combining industrial policy, antitrust policy, and support for labor with targeted tariffs, while the populist right advocates a wider use of tariffs combined with stricter immigration policy—supporters of both of these groups no longer adhere to the neoliberal free trade approach advocated by most economists. Are both of these voices misinformed about economics?

We argue that it is neoliberal economists who are wrong about the economics of trade. Economics textbooks and popular work by economists typically hide the unrealistic assumptions that are required to conclude that free trade as practiced by the United States is a beneficial policy overall, meaning that it is welfare-improving.

The Case for Free Trade: Comparative Advantage

The basis for the economic claim that free trade is beneficial is the early 19th century British political economist David Ricardo’s theory of comparative advantage. The basic logic is that it is always more efficient for each party engaged in trade to specialize in what they do best. Per this logic, even if your spouse can earn more money than you can and they can perform better childcare, if you are better at childcare than at earning money, the childcare should be assigned to you. Likewise, if each nation specializes in what they do best, and then trades with other nations for other goods, everyone benefits.

In the classic textbook treatment, the benefits of comparative advantage are expressed in diagrammatic form. For example, the famous textbook of Samuelson and Nordhaus (2010) uses the following graph to prove the loss in social surplus caused by tariffs.

In this graph, imposition of the tariff causes the domestic price level to rise from 4 to 6 (from the line to the line ). This price increase causes domestic consumption to fall from 300 to 250 units, which in turn causes consumer surplus to fall by area C.  Interpret the “world price” horizontal line LF as the foreign supply curve and the foreign marginal cost curve, and interpret the “domestic supply” line SEHS as the domestic supply curve and the domestic marginal cost curve. The tariff causes domestic production to rise from 100 to 150 units, and area A is the increase in production costs caused by this shift from low-cost foreign producers to higher-cost domestic producers. The sum of A and C is the loss of social surplus caused by the tariff.

This demonstration has held great sway among economists. In covering the January 2025 meeting of the American Economic Association, the New York Times reported that “free trade is perhaps the closest thing to a universally held value among economists.” To back this up, the article cited a 2016 survey by the University of Chicago’s Kent A. Clark Center for Global Markets of their panel of prominent academic economists from top universities, in which 39 out of 39 strongly disagreed or disagreed that “Adding new or higher import duties on products such as air conditioners, cars, and cookies—to encourage producers to make them in the U.S. —would be a good idea.” There was another survey performed  by the Clark Center in 2018, in which 40 out of 40 of the panel disagreed that “Imposing new U.S. tariffs on steel and aluminum will improve Americans’ welfare.” For a more general question asked in 2012, “Free trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment,” the votes were 35 strongly agree or agree, two were uncertain, and none disagreed.

The economic argument depicted by the diagram is unassailable, but only if several unsurfaced assumptions hold. Although many economists highly value logical argument, they are at the same time remarkably tolerant of unrealistic assumptions of the sort we are about to discuss.

The Failed Assumptions of the Free Trade Model

There are five assumptions (two explicit and three implicit) needed to support the free-trade argument as depicted in the diagram above.

The first explicit assumption is that there is full employment in the domestic economy. It is assumed that when workers are displaced by imports, they can easily become re-employed at the same wages. If this is not the case, then removal of a tariff causes a loss of social surplus (a loss of economic rent) in the domestic labor market, which the analysis based on the above figure misses because it only depicts the output market.

Yet the assumption of full employment does not hold empirically. On the contrary, here is a revealing graph from an article by Paul Krugman (2019).

Trade job loss has been 74 percent in manufacturing, which is one of the few sectors where non-college-degree-holding males could earn a good living. Contrary to free trade theory, the U.S. lost jobs, primarily in high tech, computer parts, electronics, and durable goods manufacturing. Between 2001 and 2018, EPI estimates that the U.S. lost 1,132,500 jobs to Chinese imports but only gained 175,800 jobs to exporting industries to China.

In their work on the China Syndrome, Autor, Dorn and Hanson (2013) show that the impact on labor comes “less from its economy-wide impacts than from its disruptive effects on particular regions.” These disruptions would not have occurred if full employment, and frictionless re-employment, characterized the economy.

The second explicit assumption that undergirds the free trade theory is that there are no externalities. Pisano and Shih (2012) analyze the total impact of the loss of manufacturing jobs in particular regions. The impact can be enormous, stretching far beyond a manufacturing plant. Entire towns or cities can be hollowed out. A plant closure can destroy numerous small businesses, the tax base, and many complementary businesses. In addition, workers in the nontraded sector are hurt by an increased labor supply, and their bargaining power is undermined. None of these changes in social surplus are captured in the Samuelson and Nordhaus figure above.

Besides these two explicit assumptions, policy analysts who advocate free trade often make three more implicit assumptions, as enumerated by Fletcher (2011). These are also flawed.

The first implicit assumption is that comparative advantage results in short-run efficiencies that cause long term growth and development. The problem with this idea in practice is that comparative advantage is a static theory. The inside joke among economists is that each country should do what it is best at doing, and what underdeveloped countries are best at is underdevelopment.

The evidence is strongly contrary to this assumption. Indeed, no country has successfully developed under free trade. In his book Kicking Away the Ladder, Ha-Joon Chang reviews the development history of every developed country and shows that every one of them used significant tariffs as part of its development strategy. Joe Studwell, in How Asia Works, shows that all of the Asian Tiger countries used trade protection with government industrial policy to develop. So free trade is not a development strategy. It is a static policy that can impede development.

The second implicit assumption that undergirds free trade theory is that freely-floating currencies will keep trade balanced, limiting imports and ensuring that benefits exceed loses. This is not true, as trade with the U.S. has not been balanced for many decades per the Federal Reserve Bank of St. Louis.

After the U.S. liberalized capital markets in the 1980s, trade deficits were supported by capital movements into the United States. Foreigners have used their dollars to purchase U.S. securities and real estate, which does not increase U.S. productivity because it generates no new capital formation (at least directly).

The third implicit assumption is that the U.S. provides adequate compensation for job losses caused by international trade. On the contrary, Lori Kletzer (2001) analyzed the U.S. policy response to trade-induced job losses and found it to be woefully inadequate. By contrast, countries that have strong labor support policies (like strong social safety nets) are generally much better able to garner the benefit from international trade without suffering social and political costs from it.

In the absence of these five assumptions, the free trade argument is completely undermined.

And if these five weren’t enough, there is another, more basic assumption underlying the free trade argument that needs to be debunked—namely, the assumption that social surplus areas of the sort used in the graphic presentation of the free trade argument are a correct measure of welfare. For more on that, see our papers with Darren Bush.

Our position is not that free trade is never the correct policy. Comparative advantage exists; even permanent comparative advantage exists. But analysis of free trade policies should occur in a real-world framework, not one that makes important assumptions which do not hold, even approximately, in the real world.

Representative Ben Cline, apparently an ardent supporter of antitrust laws, has introduced a bill eliminating the Federal Trade Commission (FTC), the independent federal agency that enforces the antitrust laws. Elon Musk, possibly the head of DOGE although it isn’t quite clear, is on board with the bill.

Some have argued that the elimination of the FTC as an independent agency has already happened. And unlike former Representative John Mica’s proposals of past, this one would not turn the FTC building into a museum.

The One Agency Act proposes transferring all antitrust matters to the DOJ, including staff (for now) and budget (for now). Cline, who represents Virginia’s Sixth Congressional district, explained the rationale for the bill in his press release:

For far too long, our antitrust enforcement has been plagued by bureaucratic infighting and delays that hinder competition…These inefficiencies have allowed sophisticated entities to manipulate the system to their advantage, escaping accountability for their anti-competitive actions. It’s time we address these issues head-on. We need to streamline and reinforce our antitrust enforcement within the Justice Department. The Department is more directly accountable to the American people and is structured to deliver the decisive enforcement necessary to protect consumers and ensure a fair marketplace.

For true believers of government efficiency, however, the bill doesn’t go far enough. Sure, there are obvious “efficiencies” from reducing enforcement agencies from two to one, as well as the predictable eventual cutting of enforcement budgets. But the problem for reformers like Rep. Cline is that there are still other enforcers of the antitrust laws, beginning with the states. 

If the goal is really to consolidate enforcement into a single body, Congress needs to eliminate the states from parens patriae federal antitrust enforcement. Sometimes, states forget the principle of federalism that means if the federal enforcement agencies choose not to prosecute an action, that means the state antitrust agencies should bow out as well.  (At least, I’m sure there is a body of literature somewhere that says this). While there is some coordination between the states via the National Association of Attorneys General, coordination could be even more efficient to reduce that number via the massive economies of scale associated with only one provider of antitrust enforcement. Let the states litigate state antitrust laws in state court, until the Supreme Court rules 6-3 that state antitrust laws are preempted by federal antitrust laws.

But even that maneuver leaves too many antitrust enforcers. Private plaintiffs are uniquely situated to know what’s happening in the market. They have infinite resources compared to federal and state governments, and treble damage recoveries are plentiful. Standing is never an issue, even for direct purchasers. At least these are things I’m told. 

For members of the efficiency cult, the optimal number of antitrust enforcers is really zero. If it is true that Type I errors are a bigger worry than Type II errors, then most mergers produce efficiencies, the rule of reason ought to dominate Section 1 behavior, and Section 2 cases should be rare. In that case, maybe it is best to be done with the whole thing. Why force companies, for example, to file HSR forms when the vast bulk of mergers are efficient? Why subject defendants to rule of reason when plaintiffs mostly lose? 

Why employ law firms to defend obviously beneficial activities? After all, according to FTC Chairman Ferguson, the ABA is a left-wing political organization. Why fund it? And don’t get me started on economists, billing $1000+ an hour and increasing the costs associated with consummating an efficient merger. Think of all the cost savings from getting rid of an entire class of people who, by their own admission, think the antitrust laws are hurting their clients? Rep. Cline and his ilk are not the first to suggest the neutering of antitrust. Of course, others are more adept at killing it slowly, while some seek a quick death for it.

That’s all Congress can do to make society better and promote consumer welfare, or total surplus, or trading partners or price or output or abundance, or whatever the hell they are doing. 

But the President can do more. Canada and Greenland have antitrust enforcement agencies, for example. We need to stop that nonsense. Maybe a merger?

It would be a start.

This is either a job application for Project 2029 or an April Fool’s message.