Abandoning Antitrust's Chicago Obsession: The Case for Evidence-Based Antitrust

Abstract

The antitrust community retains something of an inconsistent attitude towards evidence-based antitrust. Commentators, judges, and scholars remain supportive of evidence-based antitrust, even vocally so; nevertheless, antitrust scholarship and policy discourse continues to press forward advocating the use of one theory over another as applied in a specific case, or one school over another with respect to the class of models that should inform the structure of antitrust’s rules and presumptions, without tethering those questions to an empirical benchmark. This is a fundamental challenge facing modern antitrust institutions, one that I call the “model selection problem.” The three goals of this article are to describe the model selection problem, to demonstrate that the intense focus upon so-called schools within the antitrust community has exacerbated the problem, and to offer a modest proposal to help solve the model selection problem. This proposal has two major components: abandonment of terms like “Chicago School,” “Neo-Chicago School,” and “Post-Chicago School,” and replacement of those terms with a commitment to testing economic theories with economic knowledge and empirical data to support those theories with the best predictive power. I call this approach “evidence-based antitrust.” I conclude by discussing several promising approaches to embedding an appreciation for empirical testing more deeply within antitrust institutions.

Keywords: Armen Alchian, behavioral economics, Benjamin Klein, empiricism, error costs, Frank Easterbrook, George Stigler, Harold Demsetz, jurisprudence, Lester Telser, market, mergers, Milton Friedman, monopolization, oligopoly, paradox, price, Richard Posner, Robert Bork, Ronald Coase, vertical restraints

JEL Classification: K21, L41, L42, L43, L44, L51