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Quotation of the Day…

… is from pages 120-121 of Frank Easterbrook’s classic 1989 paper “Ignorance and Antitrust,” which first appeared in Thomas M. Jorde and David J. Teece, eds., Antitrust, Innovation, and Competitiveness (1992):

If judges had the data, we would not trust them to make good decisions. The business world relies on financial incentives to encourage managers to make the best use of knowledge and to weed out those who, despite their best efforts, cannot do as well as others. Judges do not profit from making astute business decisions and are not let go for making bad ones…. To the extent judges make economic decisions in antitrust cases, they are making predictions about tomorrow’’s effects of today’’s practices. This is problematic under the best of circumstances. Economists start from existing practices and try to explain why they exist and survive. Even when all agree about the effects so far, they disagree about impending effects under changed conditions. Experts will take diametrically opposed positions.

DBx: Easterbrook’s work on antitrust is simply superb. I worry, though, that his work – along with that of George Bittlingmayer, Yale Brozen, Harold Demsetz, Ken Elzinga, and other pioneering theorists and empirical researchers during the second half of the 20th century – will be ignored as new generations of economists, law professors, antitrust regulators, and judges enter the scene.

History supplies ample evidence that unholy, anticompetitive alliances are formed by academics with rent-seekers. As Ronald Coase famously observed in 1972, the former too readily conclude that any business practice, organizational form, contractual arrangement, or outcome that they haven’t encountered in textbooks or casebooks is anticompetitive. And the latter are all too happy to have the former use their credentials and word-smithing – and ‘math-smithing’ – to convince the general public, regulators, and courts that unfamiliar business and market arrangements are anticompetitive. Existing businesses are thus protected by the state from the competition of rivals who use innovative ways to attract consumers. The great irony is that this process of stifling competition is carried out in the name of keeping the economy competitive.
Here’s my 1993 review, in Public Choice, of the Jorde & Teece collection.