Framing the Chicago School of Antitrust Analysis

39 Pages Posted: 14 Nov 2019

See all articles by Herbert Hovenkamp

Herbert Hovenkamp

University of Pennsylvania Law School; University of Pennsylvania - The Wharton School; University College London

Fiona M. Scott Morton

Yale School of Management; National Bureau of Economic Research (NBER)

Date Written: November 5, 2019

Abstract

The Chicago School of antitrust has benefitted from a great deal of law office history, written by admiring advocates rather than more dispassionate observers. This essay attempts a more neutral stance, looking at the ideology, political impulses, and economics that produced the Chicago School of antitrust policy and that account for its durability.

The origins of the Chicago School lie in a strong commitment to libertarianism and nonintervention. Economic models of perfect competition best suited these goals. The early strength of the Chicago School of antitrust was that it provided simple, convincing answers to everything that was wrong with antitrust policy in the 1960s, when antitrust was characterized by over-enforcement, poor quality economics or none at all, and many internal contradictions.

The Chicago School’s greatest weakness is that it did not keep up. Its leading advocates either spurned or ignored important developments in economics that gave a better accounting of an economy that was increasingly characterized by significant product differentiation, rapid innovation, networking, and strategic behavior. The Chicago School’s initial claim was that newer models of the economy lacked testability. That argument lost its credibility, however, as industrial economics experienced an empirical renaissance, nearly all of it based on various models of imperfect competition. Students getting PhDs in economics increasingly abandoned perfect competition as a useful starting point.

What kept Chicago alive was the financial support of firms and others who stood to profit from less intervention. Properly designed antitrust enforcement is a public good. Its beneficiaries — consumers — are individually small, numerous, scattered, and diverse. Those who stand to profit from nonintervention were fewer in number, individually much more powerful, and much more united in their message. As a result, the Chicago School went from being a model of enlightened economic policy to a powerful tool of regulatory capture.

Suggested Citation

Hovenkamp, Herbert and Scott Morton, Fiona M., Framing the Chicago School of Antitrust Analysis (November 5, 2019). Available at SSRN: https://ssrn.com/abstract=3481388 or http://dx.doi.org/10.2139/ssrn.3481388

Herbert Hovenkamp (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
319-512-9579 (Phone)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Fiona M. Scott Morton

Yale School of Management ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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