Paul Glastris at the Washington Monthly magazine does an excellent and concise job of explaining why market concentration is playing a role in the current level of inflation. It has been strange indeed to see several prominent economists (e.g. Larry Summers, and more surprisingly, Dean Baker) confidently write off the very notion that market concentration could play a significant role. Strange because in just the last few years, study after study has shown how much larger than anticipated the market power effects are in a wide range of markets, from concentrated low-wage labor markets where workers are paid less than 75% of their value, to over-concentrated hospital systems that charge 4 times cost. Some estimates put excess charges in the U.S. health care system overall at $1 trillion per year.
Furthermore, the full-on rush to globalize business that started in the late 1990’s has left international markets highly concentrated as well, and high degrees of concentration leave vendors less nimble — as we see in the supply chain disruptions of the past two years.
I hope you’ll check out Paul’s article. Underestimating the effects of market power has been one of the biggest failings of the economic community over the past 30 years; it’s well past time to pull the wool from our eyes.