You’re Paying More in America Than You Would in Europe

Thomas Philippon

By Thomas Philippon & Germán Gutiérrez

Free markets are supposed to discipline private companies, but today, many private companies have grown so dominant that they can get away with bad service, high prices and deficient privacy safeguards.

By Thomas Philippon & Germán Gutiérrez

Like many foreigners visiting the United States in the late 1990s and early 2000s, we were pleasantly surprised to discover that nearly everything — from laptops to Internet to airplane tickets — was cheaper. Where we grew up, in Mexico and France, it cost at least 30 percent more to fly or connect to the Internet.

This was no accident. For decades, the United States had been a leader in deregulation and breaking up monopolies. The Airline Deregulation Act of 1978 phased out government control over airline prices and routes, which encouraged new airlines to enter the market. Since then, prices have nearly halved and the number of passenger miles flown have steadily increased. Similarly, the 1984 breakup of AT&T boosted competition and significantly drove down prices for long-distance phone calls. By the 1990s, a dial-up Internet connection was practically free. At the time, the United States was a great place to be a middle-class consumer.

But starting around 2000, U.S. markets began to lose their competitive edge. Now, Internet access and monthly cellphone plans are much cheaper in Europe than in America, as are flights. Even in Mexico, mobile data plans are better priced than in the United States.

Read the full The Washington Post article

Thomas Philippon is a Professor of Finance.