Molting Time for Antitrust: Market Realities, Economic Fallacies, and European Innovations

Molting Time for Antitrust: Market Realities, Economic Fallacies, and European Innovations

Molting Time for Antitrust: Market Realities, Economic Fallacies, and European Innovations

Molting Time for Antitrust: Market Realities, Economic Fallacies, and European Innovations

Synopsis

This revisionist analysis of antitrust history and policy argues that a practical government policy, not a doctrinaire and unrealistic set of rules, is necessary to preserve competition. Economic theories, such as the "Chicago school," that promulgate unfettered competition and identify consumer welfare as the primary objective of antitrust policy, far from being scientifically valid, are an intellectual scandal. Antitrust policy in this country has been flawed from the outset by historical misperceptions, market malfunctions and misguided teaching of economic theory. The author proposes that we look to Europe as a model for effective antitrust policy and legislation.

Excerpt

Antitrust law and policy, both in the United States and abroad, have undergone revolutionary changes in the last decade or so. United States antitrust has moved from the strict enforcement policies and strict case law of the 1970s to the more relaxed case law and enforcement of the Reagan years. Business practices that were condemned in the 1960s and 1970s are now treated with benign neglect or even encouraged, such as in restrictions on the distribution of goods and licensing of intellectual property rights. This revolution in U.S. antitrust law and policy was occasioned by shifts in both economic and political philosophies. The prevailing approach rejects populist political goals and purports to limit antitrust analysis to price-theory microeconomic considerations with primary (if not exclusive) emphasis on efficiencies.

A counterrevolution calling for tougher antitrust enforcement is now being urged by many lawyers, economists and public officials (particularly state officials). Traditionalists argue that the emphasis on allocative efficiency is an inappropriate political judgment. A new wave of economists is challenging many of the premises underlying the prevailing approach, notably its static nature, its undue assumption of information symmetries and its underestimation of the dynamic aspects of many business practices, particularly strategic behavior.

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