Academic Talk - Interview of Prof. Michael D. Whinston, MIT
Written by Leo CAPPUCCIA
Interviewed by Léo CAPPUCCIA, Mattéo GUILLEMARD and Jade LIONG-WEE-KWONG
Toulouse, October 8, 2024
How did you get into economics? What do you appreciate in economic reasoning?
“I first followed an economics course in high school. It is where my interest in economics began. After that, I joined the University of Pennsylvania where I passed my undergraduate and a MBA in business with a focus on finance and macroeconomics. I really enjoyed the student life, as I was a member of the concert committee. With the other students we booked concerts for the university. It was very exciting as I was backstage, I had free tickets for awesome groups such as Patti Smith and the Grateful Dead! I had to manage contracts, promooe concerts and introduce the bands, and I did that for one and a half years. Almost all the students from this committee started working in the event industry. This experience was very instructive, but after a while, I started losing interest. I knew how to manage everything and there were not as many challenges anymore.
Fortunately, in my final year of undergraduate, I followed a PhD course in macroeconomics, which convinced me to continue in this field. Then, for my 4th year, I followed the PhD sequence in economics before joining MIT (Massachusetts Institute of Technology) to complete it. I really enjoyed being a PhD student at MIT and switched to doing microeconomics. Then I was an assistant professor at Harvard, and I stayed there more than 10 years, before moving to Northwestern University, near Chicago.
Since 2013, I have been back to MIT where I am half in the economics department and half in the business school.”
“Economics is a structured way to understand the world”
Professor Michael D. Whinston
“I like economics because it is a structured way to understand the world, to relate things affecting us. I enjoy how economics can allow us to describe the world, to understand the mechanisms. I also appreciate modeling them, it is a very challenging exercise. “
In 2023, you testified in the Google case in the U.S against Google’s search engine (see U.S. and Plaintiff States v. Google LLC [2020]). What was your role during this trial? How did you experience this trial?
“In the U.S, the legal case is divided in two parts. First, the Court must decide whether the defendant is guilty of monopolization, this is the liability phase. Then, if it is the case, the Court must find remedies, possibly structural ones and possibly behavioral sanctions. I was involved in the first trial, which stated that Google was guilty of monopolization. Both parties presented evidence which can be for example empirical evidence or internal documents that shed light on the behavior of the company and its effects on markets. Then expert witnesses can be called to give their analysis. I was called to be the main economic expert by the plaintiffs, the DOJ (Department of Justice). There were also other economists, such as Prof. Antonio Rangel, which gave insights into behavioral economics, and other experts, for example, in computer science.”
“Testifying was close to teaching: you are teaching the judge”
Professor Michael D. Whinston
“This experience was both similar and different from my academic work. It was similar because I had to understand the economics behind Google’s business and strategy by combining theory and evidence. I had to understand what drives their business decisions. So, I analyzed a lot of internal documents and data. In fact, in this case there was a tremendous amount of data! Using economics, the goal is to structure all this evidence to have a clear story about what happened. What was also similar to academics is that testifying is close to teaching. In this case, you are teaching the judge. In fact, in the U.S we are in front of an unspecialized judge which is different from Europe where there is an administrative and legal body specialized in antitrust. In this case, Judge A. Mehta was very impressive: although it was only its second antitrust case, he really wanted to rightly and deeply understand the industry, Google’s conduct, and its effects.
However, the main difference from academics was the legal process. It can be quite stressful. For example, when there is a cross examination, the lawyers on the other side are mainly interested in tearing you and your argument apart rather than in learning. Hopefully, that is not something that happens in the academic world!”
Last August, it was acknowledged that Google was guilty of monopolization on this market and violated Section 2 of the Sherman Act. According to Attorney General Merrick Garland, this decision is a “historic win for the American people.”
Do you think that this decision will have an impact on these markets? What kind of remedies should be proposed?
“I hope that this decision will have a durable effect on this market. Google has been found guilty of violating the antitrust laws. But now the Court must find remedies that will fix the problem. In late November, the DOJ will have to propose its remedies, to which Google will have the opportunity to respond, and a “remedies” trial will begin in late April 2025, and probably in summer 2025 Judge Mehta will unveil his decision.”
“The remedy is not really about punishment, but rather is about stopping the abuse while restoring the competition that has been lost because of Google’s conduct over many years. In this case, one of the important abuses that must be stopped is the contracting for exclusivity that Google negotiated with other companies. For example, the one signed with Apple, to make Google’s search engine the default option on Safari, for which Google paid about 20 billion dollars, or with cell phone companies using Android in the U.S. The other important thing with remedies is to restore the competition that illegal conduct reduced. So, the remedy could also be structural, for example forcing Google to divest and sell Android or make Google share its Web Index or give access to the data that it accumulated thanks to these illegal deals.
In this trial, a lot was about the data as a search engine’s quality strongly depends on the use of this data to improve search results. Google’s algorithm is extremely powerful and Google has learned what a good answer is, even to the weirdest queries, thanks to the volume of data caught by Google. A competitor, for example Bing, now struggles with these weird queries as it likely has never seen them before because it has not enough traffic. So while Google has certainly invested and innovated, its success is also due to the insufficient scale of its competitors who cannot sufficiently train their algorithms or conduct ranking and other experiments, while in contrast Google conducts maybe 10,000 experiments a year.”
“We should care on the remedy but also on its implementation”
Professor Michael D. Whinston
“In Europe, many of these cases ended-up with fines. However, the DOJ did not ask for any fines and will focus more on structural change or behavioral change. But the European antitrust administration has not only used fines. For example, in their Google case, they proposed the choice-screen solution: Google had to propose a choice screen about the search engine to consumers. The problem they faced was that the design was freely chosen by Google. Hence, they created an auction for search engines to be included in this search screen. This solution led to many issues, for example, it made the less-profit-oriented firms invisible to users (e.g. Ecosia). So, the EC came back and gave access for free to the choice screen. Therefore, you can see that the remedy in itself is important but also its implementation.
Moreover, this measure has not had an important impact on the dominant position of Google. In fact, its market share has moved only a little, mostly because there are no strong alternatives to Google. So, the difficulty is, in a sense, like the chicken and the egg problem: to get more traffic competitors must be convincing alternatives, but to achieve this they need to have traffic… Thus, improving competition is difficult. In contrast, Russia created a choice screen on a previous decision and the impact on Google was important because the alternative available, Yandex, was strong, and so this remedy totally reversed the market shares. In the Czech Republic we also observed more movements for similar reasons.”
Do you think that fines on big tech companies like in Europe cases can have an impact on their strategy?
“First of all, big tech companies are not a homogenous group. This appellation refers to very different firms and markets. So, we should not consider them as a coherent whole. However, it is true that because Google has very deep pockets, fines are not very useful, it cannot be the only remedy. Fun fact. I testified three times and after the second one, I headed outside to call a Lyft ride (a competitor to Uber) to the airport. I was trying to find my Lyft driver but couldn’t because five enormous black luxurious SUVs lined up in front of the Courthouse waiting for Google’s lawyers to leave. I couldn’t even see my little taxi across the street because of all these enormous cars! That’s a fun story, a symbolic way to see how much money Google has. The correct thing to do in my opinion is to design remedies that will affect how the market works”.
“The European Commission was ahead of the game and deserves credit for that”
Professor Michael D. Whinston
“What I can say about Europe is that it has been years ahead of the U.S in all these cases with Google and others. There already have been many cases investigated, and it is only in 2020 that a big tech monopolization case was launched by the U.S antitrust agencies. So, the European Commission was ahead of the game, and they deserve a lot of credit for that.”
Is there a risk that the market could change more quickly than the agencies react to antitrust infringements (i.e. AI)?
“The U.S trial began in 2020, the first phase ended in 2024, and the remedies will be announced in 2025, and Google could appeal so it could take even more time. I do not know if there can be a faster process, but cases are complex, the right answer depends on evidence, and we need time to produce a coherent analysis. It is possible to have more specific solutions like the DMA (Digital Market Act), but at the same time antitrust law and economic analysis are very powerful and flexible, and hopefully, they work.”
What is your link with TSE and Toulouse? Do you have any advice for future economists?
“When I was at Northwestern University, we started a program of annual conferences with TSE, so I had the opportunity to come and interact extensively with TSE researchers. In fact, I wrote with some of them and currently, I am working on a paper with Prof. Doh-Shin Jeon on tying with network effects. The idea is the following: a firm can use tying, to leverage the residual monopoly power it has on a market to monopolize another. Usually, literature uses pre-commitment to achieve this, however in reality, firms rarely pre-commit. So, in this paper we relax this assumption, thanks to a specific set-up with network effects.”
“It is my first time back in Toulouse since I joined MIT. I think TSE is an incredible environment to work on economics, and the building is very nice! I have always enjoyed my time in Toulouse. The first time I came, Jean-Jacques Laffont took me to Michel Sarran’s restaurant. It is a great memory for me. I particularly enjoyed a regional wine, Faugères, that Jean-Jacques introduced me to and if I could, I would bring back some bottles with me!”
“My advice for economics students is to use economics for the common good, as in Jean Tirole’s well-known book. I think that is a good motto.”
Professor Michael D. Whinston
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