An entirely unregulated free market, after all, wouldn't have any antitrust regulations or trade barriers.
Societies erect those restrictions because there are compelling political reasons against having an unregulated free market.
Not true -- every economics 101 textbook will tell you that monopoly power leads to market failure, giving rise to a case for government intervention against monopolies, cartels, and trusts.
joefromchicago wrote:An entirely unregulated free market, after all, wouldn't have any antitrust regulations or trade barriers.
Not true: Every economics 101 textbook will tell you that monopoly power leads to market failure, and that this is a case for government intervention against monopolies, cartels, and trusts.
Not true: Every economics 101 textbook will tell you that monopoly power leads to market failure, and that this is a case for government intervention against monopolies, cartels, and trusts. I have no problem with government interventions that promote the general welfare, as measured in Kaldor-Hicks efficiency or whatever measure your economics textbook uses. Even the economic case for free trade has exceptions, although they are much narrower than the exceptions in current trade policy.
Although the reasons may feel compelling to politicians and their voters, they can still be bad reasons. And I think they are -- unless the intervention is narrowly tailored to correct market failure.
Just because economics textbooks say that monopolies lead to "market failure" (I think that's a bit much, but never mind) doesn't mean that an unregulated free market would have antitrust regulations.
No doubt. But are you suggesting that there's an objective measure for economic regulations -- such that we can say that some regulations are per se bad -- or are you just expressing your personal opinion?
Antitrust and trade law may look like they're dealing with economics, but they're strictly political.
I didn't say it means that. I said it justifies specific departures from the free, unregulated market -- or in other words, specific regulations by the government.
I submit that a regulation is bad if it decreases aggregate wealth without offsetting benefits to the distribution of income. That's my personal opinion, but it's also pretty well-accepted in principle. I would expect that Obama, if asked in the abstract, would agree with it too.
I also submit that on the available evidence, the tire tariffs are a bad regulation in that sense. It reduces wealth by denying American consumers the good value the Chinese give them for their tire money It denies Chinese producers the good money Americans give them for their tires. And it doesn't substantially affect the American income distribution because American tire makers earn about average incomes, as do American tire users. Finally -- not that Obama would care too much -- it affects the worldwide income distribution adveresly because Chinese tire makers are poorer than American tire makers. That part isn't just my opinion, it's pretty close to an objective fact.
To be clear, my position is this:
1) I agree an unregulated free market wouldn't have anti-trust laws or trade regulations.
2) Anti-trust and trade law not only look like they're dealing with economics, they actually do.
3) The economics 101 principles about monopolies (and, in very very limited cases, trade) do justify some departures from unregulated free markets and free trade. Therefore, you are wrong to say that anti-trust regulations, by their nature, are primarily political. In principle, government interventions to curb monopoly power do have a solid economic rationale.
Perhaps in Thomastopia, but I am not convinced that the true believers in an unregulated free market would agree with you.
Such regulations make little economic sense, but they respond both to popular concerns about unqualified businesses and complaints from businesses about cut-rate competition.
It may indeed be an objective fact that such laws defy economic common sense, but who said that laws must conform to the laws of economics?
As Justice Holmes would remind us, the laws do not embody Mr. Herbert Spencer's Social Statics.
If you look at the history of antitrust legislation, you'll find very few advocates arguing that such laws contribute to an efficient marketplace. If such laws have a economic rationale as well, I'm sure that was largely an unintended consequence.
Unlike certain not-to-be-named other members in this community who call themselves libertarians, I have never been a True Believer in anything. So how is this an argument against anything I actually claimed? That said, for what it's worth, Bork and Posner agree with me. And people to the right of Bork are a waste of time to argue about -- as you well know.
To the extent that these popular concerns about unqualified businesses are factually correct, licensing regulations do increase the general welfare as economists would measure it, and accordingly would make economic sense. Conversely, to the extent they are factually incorrect, or only care about protecting the monopoly rent of businesses, I think these licensing regulations are bad policy. Do you disagree?
I'm not saying they must. I'm saying that sensible laws ought to, in the same sense that sensible building codes ought to conform to the laws of physics. But if all you're saying is that some laws are stupid, I have no argument with you. In this case, I would simply rephrase my claim to say that the tire tariff, as enforced, is an example of a stupid law.
Sadly, he was right. (If the Supreme Court had interpreted the 14th Amendment that way, blacks and women would have had equal rights as early as 1868.)
Based on my superficial understanding of that history, I tentatively agree this was true until about the 1970s. Beginning in the 70s, publications like Posner (1976) and Bork (1978) did advocate for interpreting the Sherman Act and companions under a general policy of protecting the general welfare against the market failure that monopoly power generates. In the meantime, as best I understand it, their view has for the most part become accepted by the Federal courts. I welcome that. (To limit my embarrassment, Bork's Antitrust is the only book of his that I fully agree with.)
What is called anti-trust "law" might more accurately be called anti-trust tradition or even anti-trust ideology. Its failure to define what competition means and doesn't mean and its relying on murky notions like "control" of the market make it more vague than other laws that courts have struck down as "void for vagueness."
We all agree that the World Series is a competitive process. It is competition whether one team wins four straight or the Series goes all the way to seven games.
In anti-trust "law," however, the fact that one company's product is overwhelmingly preferred by consumers and vastly outsells similar products is taken to mean that the "market" is "controlled" by the company with the bulk of sales, so that there is a lack of competition.
If baseball were not exempt from anti-trust laws, the New York Yankees could be fined and punished for having won so many World Series. Tiger Woods could be in big trouble in golf as well.
Competition means that there are winners and losers. When someone wins big, that is not a sign that the competitive process did not exist or had something wrong with it. Too many judges see the anti-trust laws as protecting competitors, instead of protecting competition as a process.