Faculty Research Working Papers Series
How Conservative Economics Has Influenced Antitrust
F. M. Scherer
John F. Kennedy School of Government - Harvard University
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conference in April 2007, addresses the allegation that
"conservative" economic analyses have had a disproportionate
influence on the substance and vigor of U.S. antitrust
enforcement and adjudication. It acknowledges the significant
impact of research associated with the University of Chicago and
its satellites, much of it inspired by the critical suggestions
of Aaron Director. It argues that the "Chicago" efforts have
for the most part been beneficial, helping to illuminate
weaknesses in accepted antitrust doctrines. Thus, a vigorous
academic debate has been stimulated. To the extent that biases
have resulted, they stem more from one-sided judicial
interpretations of the extent theories and evidence and from the
appointment of antitrust enforcement officials who take a one-
sided view of the academic debate and/or who believe that
"government is the problem, not the solution."
HOW CONSERVATIVE ECONOMICS HAS INFLUENCED ANTITRUST
F. M. Scherer
This paper, written for a Georgetown University Law School
influence conservative economics has had on the enforcement and
adjudication of antitrust in the United States. I assume it to
be proven, without undertaking the arduous task of providing
support, that the economic doctrines underlying the corpus of
judicially accepted antitrust law have gravitated during the
past half century in a more conservative direction.
This statement of the problem immediately demands a deeper
level of analysis. Antitrust is accomplished through
enforcement, and what gets done depends in significant measure
on the laws Congress passes and how the courts, especially the
higher courts, interpret statutes whose implications and intent
are often not precisely stated. What gets written into the
statutes and how they are interpreted by the courts depend in
part upon economic analysis, although to be sure, much else is
thrown into the stew. If there has been a change in emphasis
over time, the cause may lie in the underlying economics. But
it is much more probable in my opinion that changes are
attributable to how antitrust enforcers and the courts read what
economics has to say, that is, on which among conflicting
propositions they have placed emphasis and which ones they have
downplayed. And those choices depend importantly upon the
values the decision-makers -- typically, lawyers rather than
economists -- bring to the table. As Paul Samuelson wisely
quipped, "Economists should be on tap, not on top."
No one can deny that there are conflicting economic
analyses. That, in my opinion, is an unmitigated blessing.
Knowledge advances through the juxtaposition of alternative
theories and testing against evidence to determine which ones
are more nearly correct. "More nearly correct" is as close as I
dare come in characterizing what economics can add to the
debate, because economic propositions are among the least
provable of those addressed in the various sciences.
Economists' subject matter is intrinsically complex,
HOW CONSERVATIVE ECONOMICS HAS INFLUENCED ANTITRUST
F. M. Scherer
May 2007 Revision
The conference task, as I interpret it, is to evaluate the
characterized by uncertainty, reciprocal expectations puzzles
(the analogue of physicists' three-body conumdrum), and
incommensurable values. Our data are often deficient and our
empirical methodologies less than satisfactory (but improving).
Accepting that we cannot conclusively separate what is true from
what is untrue, the best one can hope for from economics in
informing antitrust enforcement and adjudication is that
differences in the findings from economic analyses will be made
clear, as will the probable reasons why those differences cannot
readily be resolved.
If the above premises are anywhere near correct, we should
be thankful for the existence of a so-called "Chicago School" of
economics, which is often (incorrectly, I shall argue)
associated with conservative economics. One clear
characteristic of the Chicago School -- not the only one, to be
sure -- is what I, as a person born and raised in what Chicago
Tribune publisher Robert R. McCormick called "Chicagoland,"
identify as the great Chicago "a'giner" tradition. If the
conventional wisdom says X is true, one redoubles one's efforts
to find the flaws supporting that inference and perhaps also to
show that instead, Y is true. Epitomizing this attitude was the
role of Aaron Director at the University of Chicago.1 Director
encouraged legal and economic scholars at Chicago to investigate
critically the facts, assumptions, and theories underlying
important antitrust doctrines. Those investigations often
identified weaknesses in the foundations and sometimes showed
that the emperor had no clothes. That train of scholarly work
has been of enormous benefit to all of us.
It should be recognized too that virtually all professional
economists plying their trade in the United States are
conservatives, in the sense that we believe in free markets and
capitalism as instruments of discovery and engines of progress -
1 . On Director's influence, see Stephen Stigler, "Aaron Director Remembered," and Sam
Peltzman, "Aaron Director's Influence on Antitrust Policy," Journal of Law & Economics, vol.
48 (October 2005), pp. 307-330. In the Preface to his book, The Antitrust Paradox ((Basic
Books: 1978), p. ix, Robert Bork acknowledges the decisive role Director played in Bork's
education and says that Director "has long seemed to me, as he has to many others, the seminal
thinker in antitrust economics and industrial organization." Director was in residence at the
University of Chicago from 1947 to 1965.
- views we adopt inter alia from Friedrich Hayek2 -- and in
markets as relatively efficient allocators of resources. If
some of us (not I) once believed in central planning as a
superior alternative, we were disabused of that notion by the
failure of socialism in the Soviet Union and China and the
rather more equivocal triumph of capitalism. I believe it was
Chicago's George Stigler who once observed that "The study of
economics makes a person conservative."
That said, it must be recognized that there are widely
varying degrees of conservatism in the economics practiced
within the United States (as elsewhere). The differences stem
more from fundamental values and assumptions about human
behavior and about the desirability of such phenomena as unequal
income distribution than from the choice of one analytic or
empirical technique over another. It would certainly be a
mistake to view Chicago as the citadel of all conservative
economics. One could with equal accuracy point to conservative
schools with roots at Auburn University (uniquely attached to
the pronouncements of Ludwig von Mises), the University of
Virginia, George Mason University, the University of Rochester,
and Washington University, not to mention minority groups at a
host of institutions including my alma mater and employer,
Harvard University. And for dogmatic differentiation, one would
be hard-placed to match the range of extremes represented by
economic think tanks.
2. The Influence of "Chicago" Economics
As I have indicated, the University of Chicago is often
singled out as the leading bastion of conservative economics.
This, I believe, is wrong for at least two reasons. First, by
digging into and exposing flaws in accepted antitrust doctrines,
Chicago has focused and sharpened the debate -- a virtue that I
identify with enlightened liberal scholarship. But second and
more tellingly, Chicago economists and antitrust scholars have
been far from monolithic in advocating a retrenchment of
antitrust enforcement programs. I mention briefly four of the
most prominent counter-examples.
(1) While New Deal politicians were backing off from their
2 . See Friedrich A. Hayek, The Road to Serfdom (University of Chicago Press: 1944).