Competition for Google?

Many economists view competition as ubiquitous.  It is everywhere and threatens the position of dominant firms if they fail to innovate.  I don't know which products will be market winners but consumers will certainly win.  Ned Potter describes Wolfram's computational engine in "The Answer Machine? Wolfram Alpha Debuts," (ABC News, June 1, 2009).

Wolfram Alpha. It sounds like a code name from World War II, or perhaps a term a wildlife biologist would know.

Instead, it's the name of an audacious, if quirky, Web site led by the scientist Stephen Wolfram -- not a search engine, and not meant to be the "Google killer" that it was sometimes described as being, but a "computational knowledge engine." It is a Web site that will answer your questions -- at least some of them -- even if nobody has ever asked them before.

"What we're trying to do is much more ambitious," said Wolfram, 49, the lead developer of the technology behind the project, on which he says he has worked 25 years. "We're trying to take the question you ask, and automatically produce for you the answer, not giving you a collection of links, and saying, 'Go read this Web site, go read that Web site.'"

Gordon Crovitz "Google Gets Some Competition," describes Microsoft's Bing search engine (Wall Street Journal, June 4, 2009).

Microsoft says Bing, which goes live on Wednesday, will distinguish itself from Google and Yahoo by focusing on delivering answers, not just search results showing potentially relevant links. Microsoft says it's built a "decision engine, designed to empower people to gain insight and knowledge from the Web, moving more quickly to important decisions."

The goal is to understand what you're trying to know and to come up with answers, categorizing results in more useful ways. Bing has a separate approach, for example, to searches for factual research versus, say, searches for the best price for a new camera.

Finally, John Timmer describes Google's latest product enhancement, Google Squared in "Google squares the Web, hilarity ensues," (ars technica, June 4, 2009).

Yesterday, Google Labs took the wraps off its Google Squared service, which takes a spreadsheet-like approach to finding information on the Web. It's tempting to speculate that this is a bit of a response to Wolfram Alpha, the online computation engine that went live last month. But, although a spreadsheet implies calculation, Google's squared simply uses a cell-based presentation to organize data—the approach to the actual data is actually radically different from Wolfram's. We took the service for a bit of a spin and found it interesting and potentially useful, but only for those willing to put in a fair bit of effort.

The idea behind Squared, which Google announced back in May, is that users often want the results of what's essentially a multidimensional search. So, for example, if I wanted a collection of demographic information on several major US cities, I might need to perform multiple searches, one for each city. Google squared allows you to extend a single search into a second dimension—it's possible to create a square where each city has a row, and each column contains the specific demographic information you're interested in.

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Priest on Obama Administration's Antitrust Policy

Christine Varney, the Assistant Attorney General for Antitrust in the Obama administration recently outlined plans for greater enforcement of antitrust laws.  George Priest who teaches antitrust law at Yale University, dissented from her conclusions in a Wall Street Journal opinion article titled, "The Justice Department's Antitrust Bomb." dated June 2, 2009.  As always, the entire article is well worth reading.  I have selected a few quotes that I believe illustrate Priest's reasoning.

Assistant Attorney General for Antitrust Christine Varney claims that the Justice Department can aid economic recovery by prosecuting businesses that have been successful in gaining large market shares. In her announcement last month she argued that "many observers agree" that our current recession reflects "a failure of antitrust" and "inadequate antitrust oversight."

This is news to most economists. The cause of the recession is not easy money by the Fed, or the bursting of the housing bubble, or excessive risk-taking through complicated financial instruments? It's insufficient antitrust prosecution? The claim is hardly plausible. Prosecuting successful businesses will help the recovery? Again, hard to believe.......Her basic proposal is to transform American antitrust law to more closely resemble that of Europe. She states that American antitrust policies have "diverged too frequently" from those of the Europe, and that "[w]e will focus our efforts on working through our previously divergent policies regarding single-firm conduct and pursuing vigorous enforcement on the [monopolization] front."

This is a huge mistake. The principal reasons American and European approaches to antitrust diverge are that the operative legal standards are different and that the Europeans have not adopted a tradition of rigorous economic analysis.

U.S. antitrust laws condemn practices that are "in restraint of trade," which has been interpreted to mean harm to competition. The European Union, in contrast, condemns practices that constitute "abuse of a dominant position."

The European emphasis on "dominance" has consistently led to confusion. A good example is the way the proposed GE-Honeywell merger was treated in 2001. It was uncontested both in the U.S. and in Europe that the proposed merger would create economic efficiencies, lowering product costs to the benefit of consumers. In the U.S. this was reason to approve -- if not applaud -- the merger. But in Europe the expected cost savings would make the merged firms even more dominant. The EU blocked the merger, to the harm of U.S. and European consumers.

Another example is the recent $1.45 billion fine levied by the EU against Intel. Although the EU has not released its full report documenting what violations it found, it appears that the principal concern was Intel's practice of giving "loyalty discounts" to repeat customers, presumably increasing Intel's dominance in the microprocessor business...

[T]he fact that it has been able to maintain roughly an 80% market share for decades provides strong evidence that it is producing a valuable product. The antitrust questions with regard to dominant firms should be: What is the source of dominance and how has it survived over time?

The EU complaint claims that Intel has practiced a variation of predatory pricing. As is well-established in U.S. law, predatory pricing claims are highly questionable in the intellectual property field. Although the EU competition unit has added economists to its staff since GE-Honeywell, its antitrust theories are roughly 30 years behind those in the U.S.

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