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Quotation of the Day…

… is from page 123 of the late Columbia University economist Donald Dewey’s 1984 paper “Antitrust According to Robert Bork: Some Reservations,” as this paper is reprinted in the excellent 1990 collection of some of Dewey’s papers on antitrust – a collection titled The Antitrust Experiment in America:

Surely the clear, unambiguous implication of conventional price theory is that only entry and exit conditions matter – and that of the two, entry conditions matter most. Unless it can be shown that cartels create entry barriers that would not otherwise exist, they are entitled to the same presumption of welfare creation as any other type of private contract.

DBx: Yes. And, of course, cartels or other horizontal price-fixing agreements as such do not create artificial barriers to entry (or exit) into their industries. Thus, any private cartel agreement that survives likely promotes consumer welfare in some fashion – say, by enabling the efficient survival of high-fixed-cost firms during economic slumps. (See, for example, the important work of George Bittlingmayer.) To use antitrust to prevent private cartel agreements, therefore, is to use antitrust to prevent contractual agreements that likely promote consumer welfare.

The best antitrust policy is simply for government not to obstruct entry into any industry or profession – a policy that implies also no obstruction of exit from any industry or profession, as any obstruction of exit is necessarily also an artificial discouragement of entry.

Don Dewey’s “reservations” about Bork’s splendid 1978 book had mostly to do with Dewey’s correct observation that Bork did not carry his significant skepticism of antitrust policy far enough.