Hillary homes in on antitrust enforcement

Hillary Clinton is putting antitrust enforcement front and center as a tool to fight income inequality, fingering industry consolidation as a major driver of said inequality. As I noted recently, antitrust enforcement was perhaps also the most important, if little-noticed, plank in the healthcare reform package Clinton put forward last month.

This is a big deal. Clinton is tying together high prices in key industries -- pharma and healthcare chief among them -- outsized compensation for the top 1%, including via stock buybacks, and the weakening of labor:

Hillary Clinton's pocket patches for healthcare costs

Hillary Clinton's  just-released package of proposed health reform proposals is very...Hillary Clinton. It's got a lot of moving parts and takes incremental whacks at a pervasive problem -- ever-rising out-of-pocket medical costs for the insured -- from multiple angles.  On the one hand, it layers complexity on complexity. On the other hand, its patches are tailored to provide complementary plugs to different holes in coverage that deter people from obtaining needed care and drain thousands from their earnings. And by the way, the most powerful ideas are are well below the top line.

Pocket patches

The  two lead proposals are aimed directly at the relentless rise in health plan holders' out-of-pocket costs for care. To reduce insureds' "skin in the game" that has become in many cases a pound of flesh, Clinton would

Best tool against inequality: antitrust enforcement? (of two kinds?)

[Update, 10/28: An updated version of Einer Elhauge's article is available here.]

The Wall Street Journal reports today that activist shareholders, who force management and operational changes in public companies to boost "shareholder value," are increasingly enlisting large mutual fund companies as allies and thus winning more battles. Their aims generally: "share buybacks, cost-cutting and asset sales."

That boost to shareholder activism, taking place over the last decade, recalls a theory of what's driving growing economic inequality recently advanced by Harvard law professor Einer Elhauge. According to Elhauge, increased consolidation of public company ownership by institutional investors like BlackRock, Vanguard, Fidelity, and State Street leads to a phenomenon called "horizontal shareholding," in which these mega-investors own major stakes in all the major players in a given industry and thus provide incentives to those companies to collude rather than compete -- or more exactly, to act in ways that boost share prices across the industry rather than relative to their competitors.

Elhauge's analysis is prompted by the fact that "the increasing share of stock held by institutional investors...has grown from 34% of all stock in 1980 to 67% of all stock in 2010." He links that rise to the often-cited drop in the percentage of corporate revenue going to wages and capital investment:

Ask whom the mandate tolls

Einer Elhauge, the legal scholar who dug up the health insurance mandates imposed on ship-owners, sailors and militiamen by U.S. Congresses and presidents in the 1790s, and economist Kevin Caves have placed the "individual mandate" in the Affordable Care Act in an arresting new frame:

Ronald Coase won the Nobel Prize in Economics for showing that social costs are symmetrical. In The Problem of Social Cost, Coase invoked the example of a farmer whose crops are trampled by the neighboring rancher's cattle. Before Coase, it would have been common to view the rancher as the culprit responsible for imposing costs on the blameless farmer. Coase pointed out that no matter which way the legal rights were allocated, one was imposing costs on the other. If the law forces the rancher to keep his cattle fenced in, the farming imposes fence-building costs on the rancher. If the law gives the rancher the right to let his cattle roam free, then the farmer bears the social cost....