September 29, 2017


On Friday, I was honored to be a guest on the Economics Detective Radio podcast with Garrett Petersen. Our topic was monopoly power and price mark-ups in the U.S. economy, and was based on a series of posts I wrote in response to a paper by Loecker and Eeckhout that claimed that average markups in the American economy had risen from 18 percent in 1980 to 67 percent today.

As I wrote at the time, the paper’s argument is intriguing—but the question of market power in the modern economy is complex, and not amenable to our basic intuitions.

On the one hand, the fact that the authors have put together a single explanation for multiple, contemporaneous puzzles makes me very reluctant to dismiss the work they have done. It is highly likely they have stumbled upon something. The question is, what exactly?

Here is the problem. When the authors said there had been a massive increase in markups and hence market power in the U.S. economy, it seemed as though they were going to tell a story about Apple, Goldman Sachs and maybe even Wal-Mart. That is not, however, where the action is.

I encourage you to listen to the whole thing here or below, or by downloading the latest episode of Economics Detective Radio on iTunes.