Other Markets, Other Costs: Modernizing Antitrust
36 Pages Posted: 18 Feb 2016 Last revised: 6 Jan 2017
Date Written: February 17, 2016
Today’s antitrust law is characterized by stagnation and indeterminacy. The failure is so thorough that it is not clear that U.S. competition law actually leads to any outcomes that are defendable except at the most superficial level. Moreover, when enforcement does result in a desirable outcome, it not clear that it is the best outcome. The principal reason for this state of affairs is that antitrust scholars and courts cling to misguided goals and theories that have not evolved despite an avalanche of information now available that can modernize the discipline.
This Article has two main sections that necessarily overlap. The first examines the three principal goals of antitrust — consumer surplus, allocative efficiency, and productive efficiency — and explains why they are imperfect, incomplete, and indeterminate guides for policy. The purpose of this section is not to express a nihilistic view of antitrust but to demonstrate that those who protect the status quo approach to antitrust stand on a wobbly foundation and to suggest that if the current rigidity in antitrust economics continues it will be at the expense of the relevancy of the discipline. It includes, sometimes by implication, proposals for improvement.
The second section continues that basic theme but considers two areas in which growth is needed if antitrust is to remain relevant in the next fifty years. They may or may not be addressed but, if they are not, the legitimacy of antitrust economics and its application will surely be called into question. This material stresses the need, if there is to be a coherent antitrust policy, to broaden the scope of factors to consider when assessing the effectiveness of modern competition policy. The concluding section offers specific recommendations for the modernization of antitrust.
Keywords: antitrust, consumer surplus, allocative efficiency, productive efficiency, utility, Kaldor-Hicks, Kahneman, false positive, false negative, status signaling
JEL Classification: A1, A12, D12, D21, D62, K21
Suggested Citation: Suggested Citation