Antitrust Won’t Help to Fight Inflation, Says Former Treasury Sec Larry Summers

Larry Summers, former Secretary of the Treasury, in a series of tweets criticized the Biden administration for allegedly trying to use antitrust policy to fight inflation.

“The emerging claim that antitrust can combat inflation reflects ‘science denial.’ There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them,” said Summers.

The emerging claim that antitrust can combat inflation reflects “science denial”. There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.

— Lawrence H. Summers (@LHSummers) December 26, 2021

His comments come after President Biden is reportedly seeking help from antitrust enforcers to try to tame price increases across the country. Biden has been calling government agencies and independent agencies to look at different industries to identify possible anticompetitive behaviors. For instance, the Agriculture Department is looking into large meatpackers which tripled their profits during the pandemic. The Federal Trade Commission (FTC) is investigating large oil companies for artificially inflating prices. And even the Federal Maritime Commission is looking into possible price gouging by large shipping companies.

Summers continued his thread suggesting that “increases in prices and profit margins are what happens when competitive industries experience increases in demand. That is what calls forth increased supply. This is how a market system operates.”

There is a fairly common agreement among economists that antitrust is not the right tool to fight inflation. But the former secretary of the treasury went one step further suggesting that the current “hipster brandeisian” antitrust, that has many followers in the Biden administration, could actually raise rather than lower prices.

Summers concluded with a tweet where he proposes a way forward: “If the administration wants to push prices down, perhaps it can stop advising the already overeager antitrust authorities to pursue cases like meatpacking where they have little chance to win and instead considering scaling back “buy America” in favor of buying cheap, reduce restrictions, scale back tariffs and reduce regulatory delays that preclude capacity increases.”