A Kantian Critique of Antitrust: On Morality and Microsoft
White, Mark D., Journal of Private Enterprise
Most economists support free markets - to a point. I chose that kst word very carefully, for just as a geometrical point is a theoretical construct that does not exist in the real world, so is the textbook model of perfect competition. But most economists support free markets only insofar as they adhere to this idealized conception. Many economists go so far as to define "free market" to mean a perfecdy competitive industry, as if an efficient outcome has anything to do with the word "free." Indeed, the term "market failure" has been coined to describe any deviation from perfect competition, including imperfect competition and monopoly (as well as externalities, public goods, etc.).2 But the only sin of the market, in this case, is a failure to live up to an impossible example, a failure to do that for which it was never designed or intended. So according to this view, market failure is everywhere what to do about it?
The typical economist's first impulse is to bring in government to solve the problem: if the market fails (which it does almost by definition), then the government can fix it. There are, of course, many problems with this, and I will emphasize two in particular. One is that government is no less imperfect than the market (to be generous); therefore, it is by no means guaranteed to resolve any "market failure," and may indeed exacerbate the situation (making any "problem" worse). Examples of this include incentive problems, as highlighted by the public choice school, or informational problems, as emphasized by the Austrian school. The second problem, the one upon which I choose to focus, is not whether the government can do anything about so-called market failure, but whether the government should. In other words, is the government justified in using its coercive power to interfere with business operations for the purpose of (hypothetically) increasing some measure of social welfare?
In cases of monopoly, price-fixing, cartels, mergers, and other "anti-competitive" behavior, the prescribed government action is antitrust. As far as most economists are concerned, if monopoly is evidence of the devil in man, antitrust is the avenging angel. But in the real world, antitrust is far from perfect, as even its fiercest adherents admit. Though the "problem" of monopoly or monopolization is easy to identify in general, it is notoriously difficult to correct in specific cases. In fact, behavior that is used to support antitrust allegations can just as well be interpreted to show competitive behavior (as in cases of predatory pricing). The antitrust kws are vague, some extraordinarily so, and when combined with the changing tide of Supreme Court decisions, they result in a chaotic environment for business owners who have little idea what comprises legal activity and what does not. Finally, there are infamous problems with proper remedies for antitrust violations, including the possibility of second-best outcomes, efficiency-raising mergers, and other welfarist quandaries.
But the issue I plan to explore is not how well antitrust works or how it can be made better, but whether it should be used at all. Few economists have any reservations about the justification of antitrust, even if they do have doubt about its efficacy. Almost never do economists question the right of the government to use its coercive power to punish firms for not maximally promoting social welfare.3 To most economists, the term "free market" describes a result of maximal efficiency, not an institution embodying secure property rights. In their view, antitrust is justified if it helps achieve that efficiency result: Richard Posner, a staunch defender of antitrust law and economics, writes that "the issue in evaluating the antitrust significance of a particular business practice should be whether it is a means by which a rational profit maximizer can increase its profits at the expense of efficiency" (2001, ix). In my view, antitrust is a violation of property rights with no parallel justification-in other words, with no initial violation of property rights which antitrust action seeks to offset. …