Its easy to confuse what is what is good for a market economy vs. what is good for the stock market. Daniel Indivglio wonders why the Wall Street Journal is so down on anti-trust

Markets more likely shrug off antitrust action because they like it. Anyone who’s taken intro level economics knows that monopolies and anticompetitive activity are actually bad for the market. So while monopolies might not like it, the rest of the overall economy should be very happy when antitrust regulators do their jobs.

Its pretty clear that monopoly is bad for a market economy. Its not so clear that its bad for the stock market. First, monopolies increase profits at the expense of consumer surplus. This makes society as a whole worse off. But, it makes the owners of the monopoly better off. If the monopoly’s stock price should benefit when it is able to extract more profit.

Now, its not just consumers who are worse off under monopoly. Other companies are prevented from entering the space and this lowers their potential profits. However, these companies are more likely to be upstarts and not publically traded.

Thus, on net anti-trust action should benefit firms not counted in stock market indices at the expense of firms that are counted in market in is dices. The “market” one would guess, is made worse off by anti-trust action even if the market economy does better.

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