Convocation speeches are usually filled with inspiring life lessons or sage advice, but this year’s graduating class at the University of Chicago heard something else: a battle cry against tech monopolies from one of the school’s leading economists.
What made the rousing speech surprising was not what he said, but where he said it.
The University of Chicago is the intellectual birthplace of the consensus in antitrust thinking over the last four decades — that monopoly law should place consumer interests, usually in the form of lower prices, above the concerns of smaller business rivals.
This hands-off ideology has helped Big Tech amass market power and gobble up potential competitors for years without facing significant antitrust scrutiny. It is so closely associated with the school that the thinking is widely known as “the Chicago School of antitrust.”
But amid growing concerns about the unchecked power of today’s tech giants, economists and legal scholars are questioning whether the Chicago School still makes sense. Even the university’s own faculty is starting to publicly challenge the ideology.
At a convocation ceremony in June, Luigi Zingales, a finance professor at the university’s Booth School of Business, warned about the corrosive influence of monopolies and declared that the Chicago School had a blind spot when it came to Big Tech.
“Our antitrust laws cannot do anything against these types of monopolies,” said Mr. Zingales, who is the head of the university’s George J. Stigler Center for the Study of the Economy and the State, in his address. “The world has changed, and inevitably the Chicago position has to change, too.”
A 56-year-old native of Padua, Italy, who has taught at the school since 1992, Mr. Zingales adheres to many of the traditional hallmarks of University of Chicago economics — free markets, small government and low taxes. But he is not an ideologue. After the financial crisis, he opposed breaking up the big banks but said later that he had been wrong.
His recent work laments that the American capitalist system has become corrupted by cronyism and companies that are too big, too powerful and too enmeshed with the overall economy.
When the Federal Trade Commission decided to close a broad investigation into Google without taking any action in 2013, Mr. Zingales said in a recent interview, it was clear that regulators were not sufficiently aggressive going after the new monopolies.
Although never shy about speaking out — he predicted in 2011 that Donald J. Trump could win the presidency — Mr. Zingales became more vocal about the need for the Chicago School position to evolve. He said that today’s tech giants were “unprecedented in nature” and that the rules of traditional economics did not apply to these companies.
For the last three years, Mr. Zingales and the Stigler Center have hosted an antitrust summit. The 2018 and 2019 conferences focused on how to deal with digital platforms like Google and Facebook. He gathered most of the leading antitrust scholars, a handful of top regulators, judges and attorneys general to come up with proposals on how monopoly policy should deal with the tech giants.
Discussions at those two conferences have been echoed in recent decisions by the Justice Department and 50 state attorneys general to investigate antitrust claims against Big Tech.
At last year’s summit, Makan Delrahim, the Justice Department official in charge of antitrust, told attendees that his view of the cost of free platforms “has changed” with a greater understanding of the nature and scope of data collection and sharing.
An attorney general at this year’s conference, Doug Peterson of Nebraska, was one of the main speakers when states announced an antitrust investigation into Google last week.
“The fact that you have prominent people at Chicago calling for antitrust enforcement is changing the game,” said Tim Wu, a law professor at Columbia University who is the author of “The Curse of Bigness: Antitrust in the New Gilded Age” and contributing opinion writer for The New York Times.
Mr. Zingales started a podcast with Kate Waldock, an assistant professor of finance at Georgetown University’s McDonough School of Business, in 2018 called “Capitalisn’t” about what works well in the current economy and what does not.
Their first episode called for more antitrust enforcement of Facebook and Google, centered on the idea of how dangerous it would be if Mark Zuckerberg, Facebook’s chief executive, decided to run for president — which didn’t seem so far-fetched at the time.
The Chicago School started to gain prominence in the 1970s in response to concerns about overly aggressive enforcement of antitrust laws. It argued that it was not enough for companies to possess significant market power; regulators and judges had to prove through economic analysis that consumers were harmed through higher prices.
The ideology has influenced a generation of judges and regulators, who have taken a restrained approach to antitrust enforcement in the United States based, in part, on the belief that market forces would correct imbalances better.
The Chicago School has greased the wheels for the megamergers that have reshaped many industries while providing the intellectual justification for why today’s tech giants are not dangerous monopolies. It’s hard to argue that Google’s or Facebook’s market power is hurting prices when their products do not cost money and Amazon — while not free — is celebrated for its convenience and prices.
Kevin Murphy, who teaches at the Booth Business School with Mr. Zingales, said he still didn’t see a serious alternative to the Chicago School for formulating antitrust policy. He also said there was little evidence that more regulation led to better outcomes for consumers.
“Most of what I see from companies like Amazon, Google and Apple is that they are successful because they do well in the competitive battle,” Mr. Murphy said. “The difference between him and I is that he sees a failure of competition, whereas I see the success of the companies.”
Mr. Murphy said, however, that there was not a monolithic view among the university’s faculty, especially since many of the professors hadn’t been trained at the University of Chicago.
“They would probably agree more with what Luigi is saying compared to what I’m saying,” he said.
But Mr. Zingales said the tech industry’s network-driven business models — based on the notion that a service or a product becomes more useful and valuable as more people rely on it — was a relatively new area of study for economics.
Powerful monopolies like Google are a potential threat to democracy, Mr. Zingales added, because they hold so much sway over what we read. Google declined to comment.
Mr. Zingales also noted that the ideology failed to capture the risk of a monopoly’s exerting influence to persuade regulators and politicians.
In his address, Mr. Zingales implored the graduates to push back against today’s tech behemoths, just as the colonists had resisted the monopoly of Britain’s East India Company during the Boston Tea Party. He urged the audience to vote for politicians willing to stand up to Silicon Valley.
“This country was born fighting monopolies,” said Mr. Zingales, who still speaks with a noticeable Italian accent. “To fight monopolies, your power as workers, consumers and investors is not sufficient. Your participation in the political process is critical. This is not a Republican or Democratic battle. It’s an American battle.”
Then he addressed the elephant in the room.
“My conclusions may surprise some people who identify Chicago faculty, especially the economic and financial faculty, with a certain ideology. Chicago faculty, however, abide to a method, not an ideology,” he said. “It’s a method of intellectual inquiry without the blinders imposed by conventional wisdom.”