Such sentiments echo through the 2020 Democratic presidential primary. In one recent TV debate, Sen. Elizabeth Warren (D-MA) vowed not to “let a handful of monopolists dominate our economy,” while Sen. Amy Klobuchar (D-MN) claimed we are living through “another gilded age.” Sen. Bernie Sanders (I-VT) expressed the predictable policy conclusion: “We need a president who has the guts to appoint an attorney general who will take on these huge monopolies.”1
The impression given is that America’s economy is besieged by a generalized monopoly problem.2 Fewer firms are said to be dominating industries, enjoying rising markups of price over cost. Consumers are supposedly suffering higher prices and less innovation as a result of these companies’ growing market power. Competitors, meanwhile, allegedly struggle to stay afloat because of unfair behavior by these behemoths. And all this, scholars and politicians tell us, is due to a failure to enforce or strengthen antitrust laws to prevent anti‐competitive behavior.3
Such a narrative, though, is highly challengeable. The measures of concentration taken as proxies for the health of competition often do not reflect the dominance of top national firms in actual relevant product markets. Local measures of industry concentration, contrary to national trends, appear to have fallen. What’s more, recent evidence suggests that jumps in national concentration have been driven by the strength of highly productive market‐leading firms, which are expanding, not constraining, output—not what one would expect from firms with monopoly market power.
Economists have long known that increasing concentration need not signify rising market power in an industry. In fact, it can be driven precisely by the competitive process—for example, by consumers opting to buy from more‐productive and more‐innovative market leaders that have found cost‐effective ways to serve more markets. That rising market concentration has also occurred in Europe, which applies competition law very differently than the United States does, suggests that weak enforcement of U.S. antitrust laws is not the likely cause of any rising concentration we have seen.