Very interesting. From the second to last paragraph:
> They found that the higher the volume of new regulation in an industry -- measured by analyzing the text of the Code of Federal Regulation -- the less new entry is driven by high Q.
Where Q "represents the ratio of a company’s market value to the book value of the company's assets."
Did the authors not consider the common causal variable?
Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation.
The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down).
The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s.
> Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation.
None of that stuff is actually strongly correlated. Whether an industry's capital costs increase disproportionately with scale has little to do with whether that industry has significant externalities requiring more regulation as it grows. You can find major examples of every combination of those things.
Moreover, if the increased capital costs are a result of increased regulatory compliance costs, that's not actually disproving the original point either.
> The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down).
That would be expected regardless because the lower amount of competition would be expected to result in higher profits and higher valuations regardless of the cause.
> The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s
Whatever gridlock existed hasn't stopped them adding some 40,000 plus new pages to the CFR in that time.
> They found that the higher the volume of new regulation in an industry -- measured by analyzing the text of the Code of Federal Regulation -- the less new entry is driven by high Q.
Where Q "represents the ratio of a company’s market value to the book value of the company's assets."