PLATFORMS: Is Competition Obsolete, and Can Capitalism Survive?
Markets can be governed through regulation or competition, with most nations blending these approaches based on specific historical paths and cultural norms. Industries with high fixed costs and economies of scale often operate as regulated utilities, while competitive markets handle homogeneous products with minimal intervention. This chapter reevaluates the traditional view of competition as a cornerstone of capitalism, questioning its ability to discipline market power in the era of giant platforms. Platforms leverage network economies to reduce the costs of connections, fostering two-sided markets as described by Rochet and Tirole (2003). These platforms dominate by lowering triangulation, transfer, and trust costs, foreclosing competition through immense entry barriers. The chapter argues for rethinking capitalism, drawing on Foucault’s broader conception of power, as competition struggles to regulate platform-driven markets. This parallels historical disruptions like the printing press, which necessitated new frameworks for curation and verification. Public policy must address these challenges to protect the public interest while preserving the incentives for entrepreneurial innovation and economic growth.
