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Quotation of the Day…

… is from pages 194-195 of Louis De Alessi’s superb 1995 paper “The Public-Choice Model of Antitrust Enforcement,” which serves as the Introduction to Part Three of the 1995 collection edited by Fred S. McChesney and William F. Shughart II, The Causes and Consequences of Antitrust (original emphasis; references deleted; typo corrected):

Even if, in principle, antitrust could do some good, it does not follow that antitrust is desirable. That judgment depends on the alternatives available and the value criteria used. The alternatives are the economy as it would function in practice without antitrust and the same economy as it would function in practice with antitrust. Those responsible for antitrust are constrained by political and bureaucratic considerations as well as by a frequently naive and incomplete understanding of how the economy works. Both theory and evidence suggest that antitrust suits deter business practices, mergers, and other voluntary contractual arrangements that evolve to ease specialization and exchange and encourage competition. Indeed, some scholars have argued that antitrust deters instead of promotes competition and is used to establish and maintain monopoly. Moreover, the random component of antitrust generates uncertainty, which increases the cost of doing business and reduces competition and consumers’ welfare.

DBx: Very true.

Here are a few key realities revealed by study of the history both of antitrust enforcement and of antitrust scholarship:

– Bigness is simplistically equated with monopoly

– New and unfamiliar business practices and contractual arrangements are too quickly assumed to be either the results of monopoly power or evidence of attempts to secure monopoly power; thus, a bias exists among pro-antitrust people against organizational and contractual innovations

– Economists continue naively to take the theory of perfect competition to be the ideal against which real-world markets are to be compared

– There’s a bias to use antitrust intervention to secure (what are believed to be) better market outcomes today with little regard for (1) what consequences that intervention might unleash tomorrow, and (2) what the unimpeded market might have generated tomorrow had there been no antitrust intervention

– Far too little weight is given to the possibility that today’s ‘inefficient’ market arrangement will be ‘corrected’ – and corrected better than by antitrust regulators – by entrepreneur-driven market competition; economists, administrators, and judges seem to believe that if they, as individuals, cannot imagine themselves entering the market as private entrepreneurs to profitably take advantage of existing inefficiencies – and thereby to eliminate those inefficiencies – then any such entrepreneurial effort is impossible or too unlikely to take seriously; government intervention is all that these people can imagine

– The political biases and knowledge limitations that inevitably act – as they have always acted – on antitrust enforcers are either completely ignored or hugely discounted, as is the very real possibility that antitrust can – as it has often been in the past – abused to stifle rather than to promote competition.