Posted by: captainfalcon | January 6, 2013

Antitrust for a Fallen World

Here is Herbert Hovenkamp’s argument in favor of under-deterrent antitrust rules (taken from The Antitrust Enterprise).  The insight underlying it — that antitrust intervention is only justified if the costs of “false positives” (i.e. mistaking pro-competitive for anticompetitive conduct) are not too high — comes from Frank Easterbrook’s article The Limits of Antitrust.

When a particular form of behavior is too complex for reliable analysis, then the only defensible antitrust rule is to let the market rather than the courts control.  Of course, Congress can always intervene, and further development in our tools of analysis may permit more definite conclusions later.  But a court is in hazardous territory when it assumes that it can make society wealthier by condemning a practice whose competitive effects are poorly understood.  The basic rule should be nonintervention unless the court is confident that it has identified anticompetitive conduct and can apply an effective remedy.

Antitrust is not good at transferring wealth, and cannot be defended on that basis in any event.  Nor does it have any moral content of its own, and is not well designed to provide rules of business ethics.  To be sure, we may wish the jury’s values about fairness to trump the harsher business judgments made by firms in competition.  But the whole purpose of antitrust is to make markets work better, and “better” means more efficiently,  Furthermore, antitrust as an enterprise is dedicated to the proposition that markets work tolerably well as a general mater, and enduring failures are the exception rather than the rule.  So intervention must be justified.  If the judge does not hear a fairly robust theory explaining why certain behavior is anticompetitive . . . then intervention is not justified (Hovenkamp, 47-8).

Note that this is not an argument against market intervention or wealth transfers generally.  It is, instead, an argument against accomplishing these goals using the antitrust laws.  Hovenkamp’s argument for the underlined portion, which is the crucial premise, is that because antitrust is devoted to protecting the market from abuses — i.e. deviations from the norm — “[o]pting to have antitrust at all entails a belief that in most cases the market will produce the correct amount of competition and innovation” (Hovenkamp, 15).  Hovenkamp’s view therefore does not follow from any kind of dubious skeptical conservatism.

Note also that Hovenkamp recognizes his argument is contingent: “[t]o the extent that it rets on grounds of administrability, antitrust’s reluctance to advocate a general use of post-Chicago economics [i.e. economics that does not presume that all markets are basically competitive because barriers to entry are low] is a contingent rather than immutable truth.  There is nothing inherently wrong with much of post-Chicago antitrust analysis.  The problem is that in many cases the analysis has not yet been transformed into rules that a court can apply with confidence that it is making markets work better” (Hovenkamp, 49).

In light of these two nuances, Hovenkamp’s view seems sensible.



  1. I fail to see how Hovenkamp’s position does not follow from (or at least does not relate to) the “skeptical conservativism” you critiqued earlier. Both seem to hold a presumption in favor of the status quo in complex and organic systems based on the irreducible ignorance of an observer, with Hovenkamp applying this principle more narrowly than an hypothetical SC’er.

  2. Their grounds and their statuses are different.

    Statuses. Skeptical conservatism is a conclusion about what our attitudes should be given the world we live in (it is conclusion of ethics or politics); Hovenkamp’s position is a conclusion about what judges should do given how our antitrust law is set up (it is a conclusion of law). Hovenkamp nowhere says that we should believe that markets work reasonably well, only that that presupposition is built into our antitrust law. (But note that Hovenkamp makes no claims about the commitments of other areas of our law. Nothing Hovenkamp says is incompatible with our law’s becoming committed to a planned economy; it is only incompatible with antitrust law’s being used to promote a planned economy.) More generally, Hovenkamp’s position is compatible with the view that markets actually do not work all that well. It is also compatible with the view that markets work well, but so too would central economic planning. Skeptical conservatism is not.

    Grounds. Hovenkamp’s position follows from the conjunction of (1) antitrust law’s presupposition that the markets work well, and (2) humdrum policy considerations about the limited resources and expertise of judge and jury. Hovenkamp goes out of his way to note, as I indicated in my penultimate paragraph, that under-deterrence is not an “immutable truth” precisely because he does not think that judges suffer from “irreducible ignorance,” merely that we have not yet been able to give judges reliable means of identifying certain anticompetitive conduct in light of the other constraints on the judiciary. By contrast, skeptical conservatism insists that, given the inherent complexity of markets (and other complex human systems), our inherent epistemic limitations, and the strong a priori likelihood that an intervention will make us worse off rather than better off, we should have a strong presumption against intervention.

    Finally, though you nowhere commit yourself to this view, one might think that antitrust law’s commitment to the proposition that interventions in markets need to be justified must follow from something like skeptical conservatism. This is an error. It could equally follow from a view that we have fully analyzed markets and realized that they work quite well within certain realms. One could, in other words, believe that markets should be allowed to work on their own because one thinks one fully understands how markets operate, which is a view totally opposed to epistemic conservatism. (It is also likely to be more discriminating — view some markets as better off without intervention and others as requiring significant oversight.)

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