This week in political economy.
- Eric Schmidt is stepping down as executive chairman of Alphabet, the parent company of Google. Schmidt, who joined Google in 2001, will remain as a technical advisor and continue to serve on Alphabet’s board.
- House and Senate Republicans managed to pass the $1.5-trillion tax bill this week, the most sweeping overhaul of the US tax code in over 30 years. Many, including The New York Times’ Jesse Drucker and Alan Rappeport, have published excellent analyses of the bill, but the biggest scoop belongs to International Business Times’s David Sirota, Alex Kotch and Josh Keefe, who broke the story of a last-minute addition to the bill which could personally enrich senior Republican lawmakers, including House Speaker Paul Ryan and President Trump. The move caused a massive uproar on social media over the weekend after it was reported that Senator Bob Corker (R-Tenn.), who stands to gain financially from the provision, switched his vote on the tax bill to yes shortly after its inclusion. Corker vehemently denied the charges that his vote had anything to do with the controversial provision, which was written by Senator Orrin Hatch (R-Utah), but the scandal nevertheless earned the Twitter hashtag #CorkerKickback.
- Other than the Corker controversy, the GOP tax bill is reportedly filled with plenty of loopholes, “pork barrel” provisions and giveaways to multinational corporations and political donors. Some have nothing to do with tax policy. The New Yorker’s Elizabeth Kolbert reports on one such provision, which would open Alaska’s Arctic National Wildlife Refuge to oil drilling, added at the behest of Alaska’s senior senator, Lisa Murkowski. Another one, by Senator John Cornyn (R-Texas), would hand a massive tax break to some oil and gas companies.
- High-ranking Republicans will be the big winners of the tax overhaul, according to The Guardian, with Trump himself expected to save up to $15 million a year according to one analysis. Over at IBT, Jay Cassano and Alex Kotch wonder, “How are lawmakers allowed to vote on legislation that they could personally profit from?”
- Shortly after Congress passed the tax bill, a number of large companies, including AT&T and Comcast, announced plans to give their employees sizable bonuses once the bill is signed into law. Vanity Fair’s Bess Levin argues that the move is a “giant scam.”
- Quartz asks: what happens now that net neutrality rules have been repealed? Vice’s Motherboard reports that in order to prevent future reinstatement of net neutrality, internet service providers are pushing for a “legislative solution” in Congress, to be written by their lobbyists. Wired, meanwhile, predicts net neutrality will become an issue in the 2018 election campaign.
In case you missed it, Public Knowledge’s Harold Feld argues in ProMarket that the repeal of net neutrality will likely drive an “arms race” among ISPs to consolidate and discriminate against unaffiliated services.
- Faced with mounting criticism over the role it played during the 2016 presidential election, Facebook founder and CEO Mark Zuckerberg has denied charges that Facebook is biased toward any party or that it enables political propagandists. A Bloomberg investigation by Lauren Etter, Vernon Silver, and Sarah Frier, however, finds that a little-known team within Facebook is actively working with political leaders and parties who seek to gain power or maintain it, even those that aim to use the platform in order to stifle opposition.
- A joint investigation by ProPublica and The New York Times reveals that employers are discriminating against older workers through age-targeted recruitment ads on Facebook. The list reportedly includes dozens of the biggest employers in the United States, including Amazon, Goldman Sachs, Verizon—and Facebook itself.
- Germany’s Federal Cartel Office, the country’s antitrust regulator, is now targeting Facebook’s ad model. Amazon is reportedly facing a record fine in France over complaints that it abused its suppliers.
- On a related note, The New York Times’ Farhad Manjoo writes on how 2017 became not just “a terrible year” for the tech industry, but also a “turning point” in how tech giants deal with the outside world.
- In Agenda, former Stigler Center Journalist in Residence Brooke Fox analyzes the voting data of large institutional investments firms to see if they’re following through on their promises to impose more scrutiny on the governance of companies in their portfolios.
- Sally Hubbard writes at Forbes on how monopolies make gender inequality worse.
- “We feel like our system was hijacked”: A Washington Post story details how the DEA’s case against drug giant McKesson Corp., the biggest opioid distribution case in US history and one described by a former official as “the best case we’ve ever had against a major distributor in the history of the Drug Enforcement Administration,” ended in a whimper.
- From Axios: Executives of pharmaceutical giant AbbVie, including CEO Richard Gonzalez, apparently believe that despite the bipartisan demand to reduce drug prices, “political risks” to current drug pricing are actually “waning.”
- Carlos Slim reportedly plans to slash his New York Times holdings.
Chatter from the Ivory Tower
- Daron Acemoglu, Giuseppe De Feo, and Giacomo De Luca have a fascinating and wide-ranging new paper out linking the rise of the mafia in Sicily to the backlash against socialist Peasant Fasci groups in the late 19th century and document how mafia constrictions on political competition persist in Sicily to this day.
- Some two-thirds of FEC-registered political committees do not report their party affiliations. To help bridge that information gap, Yiran Chen and Hanming Fang of the University of Pennsylvania built a nifty estimation algorithm to detect such groups’ ideological affiliations based on their networks of financial contributions. The algorithm delivers matches to the self-reported ideology for over 94 percent of the Democratic committees and close to 90 percent of the Republican ones.
Check out ProMarket’s Campaign Finance Capture Index page for extensive analysis of the role of money in the 2016 election.
- Jordà and coauthors believe they have finally unlocked the mystery of the Rate of Return on Everything. After putting together an enormous data set on asset returns for 16 advanced economies from 1870 to 2015, they distinguish between investment income, capital gains, and total returns to address questions about the relationship of long-run growth and capital that have occupied economists from Piketty to Marx to Ricardo. No one can fault the researchers for lack of ambition.
- At CEPR, a new discussion paper examines how deadlock can evolve on corporate boards, sometimes as an intentional strategy on the part of CEOs looking to entrench themselves, sometimes due to board diversity, sometimes out of fear of future disagreements. The findings offer some inkling of how to nip board deadlock in the bud before it paralyzes a firm.
Stigler Center Goings-on
Sign up for our upcoming January 18 event: a conversation between Stigler Center Director Luigi Zingales and Duff McDonald, author of the recent The Golden Passport, on the MBA elite and the limits of capitalism. Details here.
Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.