Most people, including many among those who think of themselves as defenders of free markets, believe that antitrust laws are justified. It nearly goes without saying. So the recent paper of Ryan Young and Clyde Wayne Crews (“The Case Against Antitrust Law,” Competitive Enterprise Institute, April 2019), which reviews the case against these laws, is most welcome. They conclude:

Antitrust regulation harms competition, consumers, and innovation, and therefore should be repealed. Congress should repeal the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, as amended, including the Celler-Kefauver Act of 1950 and the Hart-Scott-Rodino Act of 1976. …

Consumers and competition would greatly benefit from the repeal of antitrust regulations regarding restraint of trade and monopolization, horizontal and vertical mergers, collusion such as price fixing and market division, predatory pricing, price discrimination, minimum resale prices, exclusive dealing, tying and bundling, strategic predatory behavior, and technological lock-in.

Ryan Young just published another of his useful posts on antitrust, this time on the misleading Herfindahl-Hirshman index of competition.

That antitrust legislation was a product of the first populist era (the end of the 19th century) and the succeeding progressive era (the beginning of the 20th) should raise a red flag.

A more general question can be asked: Isn’t as blindly ideological to claim that the market is nearly always efficient as it would be to claim that government intervention is nearly always efficient? This is a valid question, but I would argue the negative.

The reason is that we (by “we,” I mean we, or many of us, who know a bit of economics or political economy) have a theory showing that a spontaneous order based on voluntary cooperation, without constant coercive intervention by political authorities, is possible. The same theory shows that such an order is efficient in the sense that it equally favors the welfare of all individuals according to their own preferences. James Buchanan emphasized this idea.

We cannot, however, find a theory showing that political and bureaucratic processes (including democratic voting) can automatically promote the welfare of all individuals according to their own preferences. On the contrary, the theories we have— notably public choice theory—strongly suggest that government intervention is generally inefficient. Politicians and bureaucrats, even if they are benevolent dictators, don’t have the information and the incentives to equally promote the welfare of all individuals. Left to themselves, governments, even pure democratic governments, exploit some individuals for the benefit of others.

It is then not a paradox that governments are the main creators and supporters of monopolies and other forms of market power. It is part of the way they work. Among the many examples, just think of the ban on foreign airlines flying domestic routes, which are protected for the benefit of a small number of American airlines. What George Stigler wrote is still true:

Most important enduring monopolies or near monopolies in the United States rest on government policies.

Young and Crews observe:

Monopolies cannot last without government assistance (barring some very narrow limited circumstances, such as near-total control of a natural resource).

As for judging each case of government intervention on its own merits—the principle of expediency—it leads to the state exercising discriminatory and arbitrary power. Friedrich Hayek discusses this issue in his Law, Legislation, and Liberty, Vol. 1, Chap. 3. Arbitrary power through antitrust laws is illustrated by the US federal government preparing to use them against companies that have won the political ire of the president.

Exceptions to the benefits of spontaneous order are not inconceivable. Institutions guaranteeing the maintenance of the “system of natural liberty,” to use Adam Smith’s terminology, are arguably part of these exceptions. But each exception has to be carefully justified, keeping in mind its systemic danger for the long-term stability of the spontaneous order. The general presumption of liberty that Anthony de Jasay proposed in a more anarchist context is also valid for the sort of more traditional “ordered anarchy” that James Buchanan defended.

In The Wealth of Nations, Adam Smith explained that antitrust laws could not be consistent with liberty or justice, and that the government should be content not to encourage breaches of competition:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

This suggests a (classical) liberal solution to obstacles to competition, to the extent that there is a problem. Law and economics scholar Fred McChesney wrote:

Before 1890, the only “antitrust” law was the common law. Contracts that allegedly restrained trade (e.g., price-fixing agreements) often were not legally enforceable, but they did not subject the parties to any legal sanctions, either. Nor were monopolies illegal.

Hayek—who, to be fair, has a nuanced view of antitrust—is sympathetic to the alternative of the government not enforcing agreements in restraint of trade (Law, Legislation and Liberty, Vol. 3, Chap. 15). This alternative remains far from the current populist-progressive antitrust arguments and apparatus.

Saying that it is not blind ideology to favor the spontaneous order of voluntary cooperation does not imply that no normative (moral) value is involved. Normative values are required for any policy recommendation. But the values underlying opposition to antitrust laws are classical liberal values that lie at the basis of modern Western civilization—at least before what Benito Mussolini welcomed as “the century of the state.”