Are Antitrust Laws Effective?
LETWIN, WILLIAM
Are Antitrust Laws Effective? Antitrust Policies: American Experience in Twenty Industries. By Simon N. Whitney. Twentieth Century Fund. 2 vols. 1101 pp. $10.00. Reviewed by William...
...as long as the antitrust laws do not in some hidden way foster the evil, they remain worthy of support because they declare our opposition to monopoly...
...Industry studies of this sort are much less liable to the defect of broader studies, in that it is often possible to say quite concretely what effect the antitrust action has had...
...No civilized community would repeal its laws against murder unless they were shown to inspire rather than inhibit murder, and no civilized community would believe such a demonstration...
...Economic studies, whether of the economy as a whole or of separate industries, can give us at best only approximate and hypothetical answers...
...The antitrust laws may facilitate the process of natural decay, as for instance by destroying such obstacles as patents...
...The material is neatly set out, the conclusions tidily gathered at the end of each chapter and capped by a very brief summary...
...If entry into the industry is not blocked by legal obstacles such as patents or licenses, competitors will enter...
...or they may impede it, if for instance they reduce the monopolist's profits so much as to destroy the would-be competitor's incentive to enter the industry...
...Such theories are altogether beside the point...
...Taken by itself it would not constitute a strong plea for the existence of the antitrust laws...
...High profits are an incentive to would-be competitors...
...Certain companies, for instance, have been required to license their patents freely to competitors...
...A profusion of studies of this sort exists, analyzing the effects of antitrust decrees on the aluminum, tobacco, meat-packing, or movie industries, to mention only a few...
...Many of the questions about effectiveness stem from unsophisticated ideas about what law is supposed to do...
...The chief exception to this rule seems to be the antitrust laws...
...And that is in some ways enough...
...It is so moderate, indeed, that it might seem inconclusive...
...Why...
...If this criterion of effectiveness is applied to the anti-trust laws, then the question is not how much monopolistic activity persists in the U. S., but how much less takes place than there would have been in the absence of those laws...
...The outstanding work of this sort, by Professors M. A. Adelman, George Stigler, G. Warren Nutter, and a few others, has shown that there is certainly no more monopoly—or more precisely, monopolistic concentration—in American industry now than at the turn of the century...
...They are universally revered, almost as though they were part of the Constitution, they are close to 80 years old—and yet their effectiveness is forever being scrutinized...
...but they do not and cannot show that this result is due to the antitrust laws...
...The proper use of law is not to punish wrongdoers but to prevent wrongdoing, and a law would be very effective, even though it failed to punish every instance of disobedience, if it made disobedience exceedingly rare...
...The latter does not follow as neatly and simply from the former as one would like it to...
...Another way of studying the consequences of antitrust laws that apappears, at first sight, to have more direct bearing is to examine the effects of antitrust action on the operation of specific industries...
...Monopolies do or can earn unusually high profits...
...Both are taken for granted because both are thought to be good in themselves...
...They do not demonstrate that the antitrust laws are doing a great deal...
...One of these can serve to illustrate that Whitney has taken into account causes other than the laws that might intensify or curtail competition...
...We have long since decided that competition is desirable and (that private monopoly is an evil in itself...
...It follows therefore that monopolies are generally their own executioners...
...This is not to say that the antitrust laws are ineffective or useless, for he concludes on the contrary that their operation has often outlawed monopolistic practices and facilitated the increase of competition...
...it may be asked, is the question of effectiveness so often raised about the antitrust laws, and if the results of Whitney's study are correct...
...The first of these has to do with the difficulty of moving from the court's decree to the degree of competition in the industry...
...One must gather the facts and reach a judgment...
...Reviewed by William Letwin Assistant professor of industrial history, MIT A POPULAR LAW is like a thorough education: Once people have it they do not ask what it is good for...
...Their conclusions, which result from detailed analysis of data on the economy at large as well as on considerable estimating, have withstood a great deal of criticism...
...These studies show that competition has persisted...
...Among these he mentions changes in technology, in demand, in management and in other economic conditions that alter the number and relative strength of firms in the industry...
...Unfortunately, however, industry studies are not free of defects of their own...
...That question is obviously difficult to answer, for no man can say certainly what would have happened if something that is had not been...
...The conclusion, taken as a whole, is a very moderate one: That the antitrust laws do something of what they were meant to do, but that independent "natural" causes do as much or more...
...In his extensive study of the effects of the antitrust laws, Professor Whitney has used the method of industry studies...
...Since the war, a number of economists have investigated the somewhat broader question whether the American economy is more or less competitive now than it was in 1890...
...Moreover, even when a fairly convincing argument can be made that the antitrust action has reduced monopolistic control in some industry, the perplexing question still remains whether economic causes might not have achieved the same result without the intervention of the antitrust laws...
...One of the commonest complaints proceeds from the well-known fact that we do not enjoy perfect competition to the false conclusion that the antitrust laws are faulty...
...Of the farm-machinery industry he writes, "the influence of the antitrust laws on this industry has been relatively slight compared with the dynamic effect of technological competition, which has resulted in considerable fluctuation in the shares of market held by different companies...
...They are extremely important because they show, even when interpreted conservatively, that the situation is not rapidly deteriorating, as many advocates of increased governmental supervision would like us to believe...
...what is the argument for maintaining such laws...
...It is more important, however, that they do not suggest that the law is accomplishing the opposite of its intended purpose...
...has this in fact increased competition in those industries...
...And another takes the fact that culprits occasionally escape punishment or are not even haled into court as ground for solemnly deducing that there must be great loopholes in the antitrust laws...
...In fact, on the basis of his 20 samples, Whitney concludes that "the effects of antitrust suits on an industry are often matched or even outweighed by other influences...
...Twenty representative industries were investigated in detail, their histories surveyed and the reasons examined why they are relatively competitive or monopolistic in organization...
...Whether they have done the one or the other, or nothing at all, is a question to which no definitive scientific answer can be given...
Vol. 42 • January 1959 • No. 1
