Category Archives: Competition

Tit-for-Tat Tariffs Don’t Work: Boeing and Airbus Show Why

A 16 year-long aerospace subsidies dispute between the United States and the European Union began another round this week. The U.S. claims that the EU’s Airbus subsidies are unfair. The EU argues that America’s Boeing subsidies are unfair. Both sides are right. But neither wants to admit that the other side has a point, too. The result has been tit-for-tat tariff increases and no subsidy reforms.

Today, the World Trade Organization (WTO) ruled that the EU may impose tariffs on up to $3.99 billion of American goods, because Boeing’s favorable tax treatment violates WTO rules.

This follows a 2019 decision allowing the U.S. to impose tariffs on up to $7.5 billion of EU goods due to the EU’s Airbus subsidies.

Boeing called today’s decision “irrelevant.” Last year, Washington state repealed the tax provision at the center of this decision. However, the larger sticking point in the dispute remains. Yes, this one tax break is gone, but Boeing still receives massive subsidies. That means the EU will not stop pressing the matter. Nor has the EU reformed Airbus’ special treatment. That means the U.S. won’t stop, either.

In addition to being ineffective, the tariffs are causing collateral damage to other industries that have nothing to do with the dispute, from French wines to American motorcycles. This deadweight loss matters at a time when the world economy is already hurting due to COVID-19.

The lesson both sides need to learn is, don’t copy other people’s mistakes. Instead, set a better example. Subsidized companies grow soft and lose their competitive edge. There is a reason why so much aerospace innovation these days, from space travel to supersonic flight, is happening outside of Boeing and Airbus’ subsidized comfort.

The right thing to do is for governments to stop subsidizing private businesses—even if the other side doesn’t. Set the right example. Boeing would likely do just fine without subsidies. They would certainly have far more incentive to improve their products and address their safety concerns than they do now.

And if Boeing can’t survive without subsidies, there is no shortage of entrepreneurs capable of unleashing engineering and manufacturing talent.

Either way, consumers and taxpayers win. Europe and Airbus can then either follow America’s positive example or be content with subsidized mediocrity. Realistically, they will very likely choose the subsidies. But we cannot let Europe’s mistakes be our own. The U.S. has been doing that for at least 16 years now, and we know it doesn’t work.

A modest starting point on the U.S. side would be closing the Export-Import Bank, which often devotes half of its business to securing below-market financing rates for Boeing’s customers, many of whom are state-owned. Boeing set record profits while Ex-Im was mothballed from 2014-2019, so we already know the company will do just fine without that multi-billion-dollar program.

For more on that idea, see my most recent Ex-Im paper.

The House Judiciary’s Antitrust Reports and Predatory Pricing

It is human nature to fear what we do not understand. And if there is anything politicians do not understand, it is markets. This is clearly shown in the 449-page report issued this week by the House Judiciary Committee’s antitrust subcommittee, headed by Democratic Rep. David Cicilline, and its 19-page companion report from Republican Rep. Ken Buck.

The current state of affairs in Washington reflects what the Nobel economist Ronald Coase wrote in his 1972 paper “Industrial Organization: Proposal for Research,” before the revolution in law and economics scholarship became mainstream:

If an economist finds something—a business practice of one sort or another—that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be very large, and the reliance on a monopoly explanation frequent.

In that spirit, the Democratic report advocates for breaking up the biggest tech companies, expanding antitrust laws with new legislation, banning most tech mergers, and flipping the burden of proof to presumption of guilt in many instances. The Republican report doesn’t go quite that far, but as is often the case in the Trump era, the difference between Republican and Democratic policies is pretty small.

This post will focus on predatory pricing. My colleagues and I will discuss other facets of antitrust policy elsewhere.

Predatory pricing involves selling products deliberately at a loss in order to force competitors out of the market. When the predator has the market to itself, it can then raise the price to unfair levels. Apple, Google, Facebook, and Amazon have all been accused of predatory pricing at some point.

Predatory pricing is already illegal. But the Supreme Court admitted in the 1986 Matsushita case that it has never been able to find an instance of it. After that, courts essentially gave up on their quest. The law in that area is now unenforced, on purpose.

The Democratic report seeks to bring it back by amending the Sherman Act to specifically ban predatory pricing. The Republican report shares the Democrats’ goal, but only recommends “a thoughtful plan,” which it does not specify, and “further committee hearings.”

There is a reason the Supreme Court has never found proof of predatory pricing. That reason is math. A predator has to lose money. The larger that predator’s market share, the more money it has to lose before driving competitors out. And as soon as the predator raises its prices, it also raises an opening for competitors to come back into the market.

It’s easy for many former competitors to reenter the market when the predator’s price goes back up. They already know what they’re doing, and have the infrastructure. And if the predator raises its prices super-high in order to make back its losses, the door opens to even more new competitors who take note of the predator’s unusually high profit margins.

In order for the predator to take back its monopoly, it will once again have to lose money, then raise prices to recoup the losses, which lets competitors back in. And on it goes in a potentially endless loop.

The counterargument goes that a company can sustain predatory prices forever if it subsidizes its losses with profits from elsewhere in the company. But this makes the company less competitive in those other markets. And taking resources away from a profitable product to subsidize a loss-making product is not exactly a profit-maximizing strategy.

So, despite progressives and populist conservative wishes, the Supreme Court’s Matsushita decision’s despair at the lack of predatory pricing is unlikely to change. That is, unless the definition of “predatory pricing” itself is changed via new legislation or what the Nobel economist Oliver Williamson called “creative lawyering” in the courts. That is what to look out for.

For more on antitrust policy, see Wayne Crews’s and my paper, and CEI’s dedicated antitrust site at antitrust.cei.org.

Observations from the Tech Antitrust Hearing

This post collects some observations from yesterday’s lengthy House Judiciary Committee Subcommittee on Antitrust, Commercial, and Administrative Law hearing with the chief executives of Amazon, Apple, Facebook, and Google.

  • The parties had different conversations, as they often do. The Republicans mostly talked about political bias. Democrats mostly talked about concentrated power. Despite the different charges, their verdict was the same: guilty.
  • On net, the hearing likely hurt any future antitrust case. For example, as Mike Masnick pointed out, Rep. David Cicilline (D-RI) demanded that Facebook take down certain content—minutes after Rep. Matt Gaetz (R-FL) demanded that the same content be kept up. Judges tend not to look kindly on such incoherence.
  • The hearing had limited fact-finding value. The CEOs’ answers to questions were often interrupted after just a few seconds. The committee members appeared more interested in getting tough questions on camera than in building a case. Alternatively, since many antitrust cases tend not to survive careful scrutiny, perhaps the members knew a proper dialogue would not be in their interest, and avoided one intentionally. Neither possibility reflects well on the legislators.
  • Republicans have forgotten a basic rule of politics: Never give yourself powers you don’t want the other side to have. Reps. Jim Jordan (R-OH), Matt Gaetz (R-FL), and Greg Steube (R-FL) all argued for the federal government to regulate political speech in their party’s favor. If they succeed, Democrats will almost inevitably use that same power in their party’s favor when they are in power. The GOP’s Trump wing’s shortsightedness is quietly making some of their opponents very happy. As the saying goes, never interrupt your opponent when he is making a mistake.
  • There were no gaffes on the level of an 83-year old Sen. Ted Stevens’ (R-AK) 2006 description of the Internet as “a series of tubes” or Mark Zuckerberg’s “Senator, we run ads” response in 2018 to former Sen. Orrin Hatch (R-UT), then 84, on how Facebook makes money despite not charging its users.
  • In fact, yesterday’s oldest member, 77-year old Rep. Jim Sensenbrenner (R-WI), who is retiring after this term, came off comparatively well. He briefly defended the consumer welfare standard in his opening remarks, stated his belief that current antitrust laws do not need to be changed, then mostly stayed out of the fray.
  • The lack of meme-worthy gaffes does not mean the committee members are well versed in technology. The Committee’s average Democrat is age 57, the average Republican is 52, and frankly, it shows. For example, Rep. Lucy McBath (D-MD), 60, seemed to not know how cookies work. On at least one occasion, an angry Republican confused Twitter and Facebook, requiring Zuckerberg to point out the difference.
  • Members, who typically spend most of their careers in government, apparently know little about how retail works. Amazon came under fire for selling self-branded products at cheaper prices than name-brand equivalents, and placing them prominently in searches. Nearly every grocery store and retail chain in the country does the same thing. House brands with low prices and guaranteed shelf space have been standard practice in groceries and retail since the pre-World War II heyday of A&P—which was itself the target of dubious antitrust cases.
  • There was little, if any, discussion of regulatory capture or rent-seeking. This is an important unintended consequence of antitrust enforcement. Many established companies would be happy to comply with adverse antitrust judgments if it meant putting up barriers to entry against competitors. In the long run, cartels can only survive with government help.
  • My colleague Jessica Melugin writes, “Surely, politicians can find a better use of their time than harassing the companies that have helped so many Americans make 2020 a little more bearable.” Antitrust enforcement requires proof of consumer harm, yet this was rarely discussed at the hearing. Search engines make it easier to keep up with the latest news about the virus. Social networks help people stay in touch. Online retail and delivery services help keep people fed and supplied while social distancing. Other tech companies provide entertainment, access to medical care, and make it easier to work or learn from home. We will likely never know how many lives have been saved by these services, many of which are free of charge.
  • A running theme of the hearing was that the current big tech companies have enough market power to squash competitors—and then presumably raise their prices. But Zoom, which was not represented at the hearing, shows that the tech industry is still engaging in creative destruction. Six months ago, almost nobody had heard of it. Now, giants such as Microsoft-owned Skype are already essentially legacy services. The Committee’s own technical troubles with its older video conferencing software, which required the Committee to take a recess, underlined the point. Other tech companies are well aware of creative destruction. Facebook’s once-hip user base now has an average age of 46. More than two thirds of TikTok users, by contrast, are between ages 13 and 25.
  • Language matters. And some congressmen are slippery with it. For example, Rep. Cicilline stated that Amazon controls 70 percent of “online marketplaces.” This is a non-standard term that Rep. Cicilline did not define. It almost certainly has a much narrower definition than most people would assume when thinking of a company’s market share. Cicilline’s 70 percent of “online marketplaces” is equivalent to about 4 or 5 percent of retail sales. If people were not listening carefully to Rep. Cicilline’s boutique phrasing, they would get the impression that Amazon has a larger share of its relevant market than it actually holds—by more than an order of magnitude. Does Rep. Cicilline’s terminology include Amazon’s major competitors, such as Walmart, Target, grocery stores, electronics stores, book stores, and more? For more on this type of error, see Patrick Hedger’s recent post and my earlier one on the relevant market fallacy.
  • Rep. Cicilline argued that Google controls 85 percent of Internet searches. This is also misleading. Google does not power many common Internet searches people perform daily. Netflix famously hosted an open competition for developers to design a new search algorithm for its searches that would deliver results tailored to each viewer’s likes and dislikes. Other streaming services also use their own search technology, not Google’s. Amazon product searches use an in-house algorithm. Internet dating sites use proprietary search algorithms as selling points. Internal searches in Word documents or PDF files do not use Google. Were these included in Rep. Cicilline’s statistic? Or is this another example of the relevant market fallacy?
  • Though the hearing lasted for six hours, members missed some opportunities to score valid points. For example, Rep. Mary Scanlon (D-PA) briefly discussed price gouging. She did not bring up, as I recently did, that Amazon’s support of federal price gouging legislation has a potential anti-competitive rent-seeking component. The extensive tax breaks Amazon is receiving for its new second headquarters are another example of anti-competitive corporate welfare. Of course, the blame for these is on politicians as well as companies. This may be why they were downplayed.
  • Facebook CEO Mark Zuckerberg’s public support for heavier regulations for his company has a similar rent-seeking dynamic. Regulations often favor incumbents and lock out potential competitors. Facebook can afford expensive content moderation and privacy regulations; its startup competitors often cannot, or would be discouraged from even trying. Regulations, which Facebook would likely help to write, would likely lock in its leading position in a way that consumers would never allow.
  • Google’s sometimes-accommodating behavior to the Chinese government’s censorship and human rights policies is questionable. At the very least, the company should do more to stand up against illiberal governments. This, however, is not an antitrust issue.

In short, committee members addressed a lot of things they shouldn’t have, and did not address some things they perhaps should have. If this hearing has a part seven (yesterday was actually part six), it should have fewer threats to regulate political speech and fewer common analytical mistakes. And it should focus on how tech companies affect consumers, for both good and bad, and on likely consequences of antitrust enforcement, such as regulatory capture.

For a broader view of antitrust regulation, see Wayne Crews’s and my paper. A new #NeverNeeded paper on tech regulation during COVID-19 by my colleagues Jessica Melugin, Patrick Hedger, Michelle Minton, and John Berlau is here. Jessica’s thoughts on the hearing are here. More resources are at antitrust.cei.org.

Time for a Federal Price Gouging Law?

Amazon’s vice president of public policy, Brian Huseman, calls for a federal price gouging law in a recent post over at Amazon’s in-house blog. This is a bad idea for several reasons.

One is that there are already effective ways to reduce price gouging without regulation. At Amazon, Huseman writes, “We deploy dynamic automated technology to proactively seek out and pull down unreasonably priced offers, and we have a dedicated team focused on identifying and investigating unfairly priced products that are now in high demand, such as protective masks and hand sanitizer.”

This should be a competitive selling point for Amazon, not a call for more regulation. Regulations, remember, are made by the government we have, not the government we want. Amazon’s technology and in-house policies are almost certainly more effective than what Donald Trump, Nancy Pelosi, or Mitch McConnell would enact during an election year and a pandemic. Company-level policies are also more adaptable than federal-level policies as technology and circumstances change.​

In fact, if Amazon isn’t already doing so, it could license or sell its anti-price gouging technology to competitors for a profit. Price gouging is unpopular, and companies that fight against it look good to customers. Amazon does not need federal regulations to force this business opportunity into being.

Looking at price gouging legislation from Amazon’s perspective, but without the public relations filter, they stand to gain three things from a federal price gouging law:

  1. Regulatory certainty. One federal standard is easier to follow than dozens of state standards.
  2. Liability protection. Amazon will face fewer price gouging lawsuits if the company is cooperative with legislators, or even has a hand in crafting the rules.
  3. Rent-seeking, which is economists’ term for using government for unfair advantage. Price gouging legislation is a way for Amazon to raise rivals’ costs without having to improve its own offerings. Amazon has already invested in artificial intelligence algorithms (AI) and in enforcing guidelines for its third-party sellers. Many of Amazon’s competitors have not, especially the smaller ones.

There is something to be said for the first two items, though there are also arguments against them. But the third item, rent-seeking, is anti-competitive behavior at its worst. One of the primary reasons CEI opposes antitrust regulation, for example, is that antitrust regulations themselves are a major rent-seeking opportunity. Big companies routinely game the rules to thwart competition. Price gouging legislation is another example of the same rent-seeking process. These initiatives happen when companies compete in Washington, rather than the marketplace.

Other Factors

Amazon’s call for a price gouging bill might be part of a larger effort to get itself out of antitrust crosshairs. Ironically, such a bill would make retail less competitive. Not only would Amazon raise rivals’ costs, legislation would prevent companies from competing with each other to offer price gouging policies their customers most prefer.

The timing is as bad as the idea itself. Retail sales declined by 16.4 percent in the month of April, the worst ever recorded—for the second month in a row. Retailers have enough to deal with without having to spend resources complying with new rules their competitor helped to write.

There is a federalism angle, as well. A federal rule would impose standards on more than a dozen states that intentionally refuse them.

Prices Are More than Money

As any good economist will tell you, money isn’t everything. Prices are a lot more than money. Every good has a mix of both money and non-money prices. Price gouging legislation is ultimately ineffective because it only reduces ­money prices during a crisis. Tamping down on those means more severe non-money price increases. These cannot be legislated away.

A high money price causes people who don’t urgently need toilet paper or hand sanitizer to hold off until later, when the price goes back down. That leaves more left over for people who need it now. This matters a great deal during an emergency. On the other side of the equation, that same money price increase also induces producers and distributors to go the extra mile, often literally.

What about non-money prices? One example of a non-money price is when a good becomes harder to find. You might have to drive to a store further away or do some deep digging online for some potentially shady sources. Queuing and waiting lists emerge or shipping times might take longer. These things don’t cost money, but they still have a price. They are not measured in dollars, but in wasted time, extra hassle and stress, and lost opportunities. These non-money price increases leave people with less time left over for other things such as job searches, home schooling, or even taking some time for self-care.

Shortages will happen during a crisis. That is unavoidable. The question is how to deal with them. Just as pushing on a balloon doesn’t change how much air is in it, squeezing down on money prices with a price gouging regulation doesn’t actually do anything to stop price increases. It mostly just redirects them to non-money areas.

What is the correct mix of money- and non-money prices? That is a subjective value judgment. There is no truly right or wrong answer, which is another reason why federal price gouging legislation is bad policy.

Public opinion is pretty well set against price gouging. Importantly, though, most anti-price gouging activists have likely not considered the tradeoffs they would pay in steeper non-money prices. Some of them would likely change their mind if they did. Pollsters should find out. Corporate PR departments would likely change their tune quite a bit based on the results.

Federal price gouging legislation would not stop price increases or alleviate shortages. It would sharply increase non-money prices during emergencies and drive some economic activity into black markets. Companies can set their own price gouging policies without regulation, as Amazon has proven with a mix of AI and sanctions against violating sellers. The rent-seeking aspect of potential price gouging legislation is worth considering for people concerned about business ethics and about large companies gaining an unfair advantage over smaller rivals.

In short, a price gouging bill is #NeverNeeded. Congress has already passed enough harmful flash policy. There’s no need for still more.

Lawrence Freedman – Strategy: A History

Lawrence Freedman – Strategy: A History

There are a few subjects I’ve always found uninteresting, despite my best efforts. Most of them involve conflict, rather than cooperation; this may be why I am so drawn to economics, which is the study of human cooperation. Uninteresting (to me) conflicts include theological disputes, most military history, and strategy of the zero-sum variety.

This book didn’t change my mind about military history, but the rest of it is surprisingly engaging. It is also very long—I recommend the audio version. Organized mostly chronologically, the book starts with ancient Greek, Roman, and biblical figures, quickly dispenses with the cliched Machiavelli and Sun Tzu, and gives John Milton’s Paradise Lost a surprising turn.

The part titled “Strategy from Below” is mostly about different theories of socialist revolution, which has a wealth of different approaches and strategic philosophies that apply well outside that ideology. One complication is that socialism is a top-down strategy to social organization; “Strategy from Above” would have been a more accurate title. He also could have done more to highlight the differences between Marx’s belief that revolution could only happen in an already-industrialized country; Lenin’s focus on small professional cadres; Mao’s blend of pastoralism and centralized decentralization; and various decentralized anarchist movements. But I still learned a lot from Freedman’s treatment.

Freedman’s discussion of the civil rights movement is excellent, and far more rewarding than the usual black-and-white contrast between Gandhi and Martin Luther King, Jr.’s non-violence versus more radical strategies. As is often the case, there is much more to the story, with many in-between strategies working towards the common goals of equal rights and ending segregation.

The mostly white and middle-class 1960s campus radicals often come off as privileged twits by comparison. Counterculture has great value in moving social norms over in favor of individualism and dynamism, against war. The movement also produced some excellent art, literature, and music. But it fell short in more serious areas such as political philosophy and strategy, and badly failed in staying clear of self-evidently dumb new age philosophy.

The next part, “Strategy from Above,” focuses mainly on business and management, which is more a blend of blending top-down management strategies in firms that are constantly reacting to new developments in bottom-up emergent orders. The section title is poorly chosen, but the content is good.

As the baby boomer generation entered middle age and middle management, some of its members became part of a new management guru movement. It came complete with ghostwritten self-help books, outrageous speaker fees, and power suits with built-in shoulder pads. Freedman calls them these management gurus the snake oil salesmen they are, and shares some amusing behind-the-scenes stories from this movement’s heyday.

But life did not begin with the baby boomers. Freedman begins this movement’s roots to about a century before, while offering an unfortunately conventional and easily disproven account of Standard Oil and the early antitrust movement. At the same time, he is critical of Frederick Taylor and his top-down Taylorite management philosophy, which was espoused by early-20th century thinkers from Rockefeller’s nemesis Ida Tarbell to President Woodrow Wilson.

Freedman doesn’t go into detail about this, but Taylorist thinking grew out of the German Historicist school. Its regimented, top-down ethos inspired much fascist and corporatist public policy, most openly by Mussolini. More bottom-up inclined thinkers such as Mises and Hayek both grew up in Austria when German Historicism was at its peak, and developed their emergent-order liberalism in part as a direct reaction against the Historical School.

Later sections introduce underappreciated figures such as Henry Simon, William Riker (the political scientist, not the Star Trek: The Next Generation character), and Mancur Olson. Freedman also discusses the role of game theory in corporate, military, and government strategies in the post-war era.

Blocking the T-Mobile-Sprint Merger: Competition, Rent-Seeking, and Uncertainty

Nationwide 5G networks are coming. They will expand possibilities for everything from smartphone applications to GPS to streaming video, and will enable new technologies that have not yet been invented. President Trump wants the U.S. to be a world leader in 5G adoption. But his Justice Department’s antitrust division might hinder that goal by blocking the proposed merger between Sprint and T-Mobile.

The antitrust division’s rationale is that the deal would decrease the number of major wireless carriers from four to three. But my colleague Jessica Melugin argues that without the merger, the number of carriers might actually be two: “T-Mobile and Sprint will [need to] be able to combine their resources [in order to] stay competitive with Verizon and AT&T, and hopefully help the mobile communications industry in the United States win the race to build the first 5G network.” Together, they might survive. Apart, both might go under.

On the other hand, the rule of thumb is that 90 percent of mergers are failures, remember. This could well be the next AOL-Time Warner. Nobody knows how Sprint-T-Mobile would turn out, including the Justice Department, as well as the companies themselves. But unlike antitrust regulators, Sprint and T-Mobile have skin in the game, and thus a stronger incentive to make the right decision.

Then there is the rent-seeking angle. As my colleague Wayne Crews notes: “It’s also important to note that invoking antitrust laws in this case is de facto corporate welfare for Verizon and AT&T. It means they can stand pat rather than reacting to dynamic changes to the marketplace.”

Third, there is the uncertainty angle. There are no set criteria for what makes a merger legal or illegal. Regulators decide at their own discretion—and politics are often involved, as with President Trump’s recent unsuccessful attempt to block the AT&T-Time Warner merger (Time Warner owns CNN, which is often critical of Trump).

There are ways to measure market concentration, such as the Herfindahl-Hirschman Index. But its numbers are easy to manipulate to reach any conclusion—just define the relevant market however narrowly or broadly you want, and you can generate a number showing any desired degree of market concentration. The Federal Trade Commission has a set of merger guidelines, but they are not binding and can easily be ignored if politics or other merit-unrelated factors are more important at the moment.

This regulatory uncertainty has costs far beyond whatever happens with the Sprint-T-Mobile deal. Even if the merger goes through, and a merged T-Mobile-Sprint proves a viable 5G-era competitor, the fact that mergers are approved or denied at a whim will continue to have its chilling effect on companies far outside of technology or communications. For some companies, the upside is not worth the cost in legal fees, political engagement, and potential bad publicity. This is consumers’ loss, not just entrepreneurs’ and investors’.

For more reasons to be skeptical not just of the move to stop the Sprint-T-Mobile merger, but of antitrust regulation in general, see Wayne Crews’ and my just-released paper, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.”

New Study: The Case against Antitrust Law

Antitrust regulation is a complex, multifaceted issue. It brings together insights from law, economics, political science, history, philosophy, and other disciplines. Right now both political parties are ramping up their antitrust rhetoric, and it will likely be a live issue throughout the 2020 election cycle. A working understanding of how antitrust regulation works is important for understanding why it works so poorly, and should ultimately be abolished. To that end, Wayne Crews and I have a new study out, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.”

If you prefer the short version, here is a press release. We will also be running a series of blog posts hitting the main arguments. Often, a frequent drips-and-drabs approach to learning an issue is as effective as one intensive sitting. The initial posts will sketch out broader themes of antitrust regulation and the main sides of the debate. After that, we will go through the items on our “Terrible Ten” list of failed antitrust policies that should be abolished.

For additional CEI antitrust resources, we also have a dedicated landing page at antitrust.cei.org. Wayne’s and my full study is here.

Dominick Armentano – Antitrust: The Case for Repeal

Dominick Armentano – Antitrust: The Case for Repeal

A slim volume that is neither broad nor deep, but has its uses. It is a more strident, though more accessible younger sibling to Armentano’s more thorough Antitrust and Monopoly. It has some good arguments for abolishing antitrust regulation outright, but the shrill delivery makes the content less palatable. That is its own lesson.

Richard Posner – Antitrust Law, Second Edition

Richard Posner – Antitrust Law, Second Edition

A foundational text in modern antitrust regulation. From the 1890 Sherman Act up until about the late 1960s, antitrust policy was strictly for lawyers and politicians. Posner, though a lawyer, incorporated economic analysis into antitrust questions. This was a controversial departure at the time, and came to be called the Chicago School approach.

Unlike more populist analysts, Posner placed results above aesthetics. Do large market share, mergers, tying, charging high or low prices, and more cause consumer harm? If so, then antitrust enforcement is appropriate. If not, then not. It is an empirical question, not an emotional one.

The consumer welfare standard displaced the previous Brandeisian “big is bad” standard. Posner’s work is vulnerable to criticism on public choice grounds, and his command of economic analysis not perfect. But his influence has been largely positive, and greatly improved policy outcomes in an area badly in need of reform.

The story is not over, though. The Trump administration and progressive activists would both like to revive big is bad; the coming years will see who prevails in this next chapter.

On a personal note, back in college I once had lunch at the same table as Posner. This would have been around the time this book’s second edition came out, though I don’t recall it being discussed. The conversation mostly revolved around prescription drug reimportation regulations, a hot issue at the time. Had I been more knowledgeable about Posner’s place in the law-and-economics movement, I would have loved to pick his brain about improving antitrust policy and other legal areas.

Frank H. Knight – The Economic Organization

Frank H. Knight – The Economic Organization

A short introduction to the economic way of thinking, published in 1933 by the legendary University of Chicago professor. Despite its brevity, it contains deep insights on monopoly and competition, long- and short-term thinking, and the place of economics in a life well lived.