Antitrust Economics Is ALL 'Junk Science'?

[charles mueller <cmueller@metrolink.net>]

        U.S. antimonopoly policy essentially died around 1975, with the
introduction of 'economic' science as its controlling standard.   

        It now holds that mergers yielding single-firm market shares of 60%,
90%, and even 100% are perfectly consistent with 'competition' and
'competitive prices' for the consuming public.

        All this is obviously pure economic fantasy.  In the airline
industry, for example, fares are nicely corelated with the market share of
the dominant firm at each of the airline cartel's big-city 'hubs.'  U.S.
industry, for example, ponies up 10 times as much to fly its employees from
A to B when the departing hub has been 'consolidated'  down to a 1-firm-90%
share, as contrasted with one where Southwest and the other 'no-frills'
airlines are allowed a fair share of the gates and landing slots.

        Joe Bain, an empiricist (like Adam Smith), did his homework.  The
theorists who have come after him, playing games with their computers, are
the ones who would most likely be thrown out of court if required to
demonstrate that they meet the rigorous intellectual demands of 'science.'

        An honest judge would admit Bain's hard empirical work as good
economic science--and would look closely indeed at whether the pro-monopoly
crowd's 'new' theories have the predictive power of real science.  A sound
policy would be:  Admit the empirics, ban the unsupported theories.  Let the
economic 'expert' describe for the jury the empirical research he (and
others) has done but allow him to express no 'opinions.'  He has no real
science to back them up.  Joe Bain did.

        It might be helpful to mention that Bain did not, as the saying
goes, suffer fools gladly.  Were he alive today, his critics would be in for
the intellectual thrashing of their lives.  One of the big-name Chicago
theorists sent me a proposal for an article a couple of decades ago in which
he said he was going to debunk Joe Bain.  Naturally, I forwarded a copy of
the letter to Bain for his comment.  His reply spelled out with some
particularity how he would demonstrate the silliness of the proposed article
if it was actually written.  Fascinated with these developments, I passed
along Bain's note (to me) to the big-shot Chicagoan.  End of story.  He had
no stomach for taking on Joe Bain.  I never heard from him again about his
plans to intellectually dethrone Bain.  And no other Chicagoan, in the
ensuing decades, has ever asked to take him on in our pages. 

        Adam Smith and Joe Bain had it right:  Big market shares equal
inflated prices, shoddy products, and suppressed technology.

        Charles Mueller, Editor
        ANTITRUST LAW & ECONOMICS REVIEW
        http://webpages.metrolink.net/~cmueller

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