Legal Boundaries as Political Economy: The Scope of Antitrust and a General Theory of the Regulation-Competition Dichotomy
Posted: 25 Jan 2012 Last revised: 13 Jul 2013
Date Written: January 24, 2012
In American policy we apply a basic and useful fiction in a variety of ways, but it ordinarily goes unrecognized, remains essentially untheorized, and is usually deployed poorly. The fiction consists of the following dichotomy: Government can regulate any particular conduct in one of two ways. It (a) can command the manner and means of that conduct, or (b) can subject it to the disciplinary force of competition. That is, in principle, American governments can pursue policy objectives either by making rules to direct or forbid specific conduct - they can “regulate” it - or by employing competition itself as a regulatory tool. We have traditionally said that competition is the preferred option in America, though there have been major exceptions, as during the Progressive and early New Deal years.
The paper will explain how this concept is so often misapplied, and how it could be used better to serve policy goals. A case will be made that where the distinction is misused, it is for one of two reasons: it is either underdeployed or overdeployed. Briefly, “underdeployment” means forgetting that competition itself can do good, and “overdeployment” means expecting that competition can work miracles. Both problems reflect confusion of this fictional dichotomy with a claim of sociological fact. To that extent the paper joins an ancient jurisprudential struggle between an aspirational objectivity, said to inhere in law as a reflection of either logic or sociology, and acknowledgement that rules of decision are merely tools of normative policy. Next, a stronger theoretical claim is that, whether it is consciously used or not, the dichotomy is always deployed. That is, even where it is ignored, it retains explanatory power as to the consequences that follow policy choices. The paper will draw from this fact its strongest theoretical claim. As a practical matter:
The function of the regulation-competition dichotomy in American political economy is to situate the location of social decisionmaking.
Finally, the paper will offer a revised dichotomy as a tool for courts and policymakers. It would reorient certain legal doctrines toward competition as the favored regulator, but only as supported by pro-competitive market institutions and liability rules. The paper will work through several practical applications of the retooled dichotomy, with an emphasis on the scope of antitrust.
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