Economics and the Law

...But it is farfetched to assert, at this late date, that it regulates major corporate business or major industrial markets, and makes them more "competitive...

...The method can be characterized as "abstract-model" thinking...

...Anti-trust is the grossest, most incredibly ineffective technique for that purpose that self-interested Man could devise...

...The main anti-trust laws are based on the simplest article of dogmatic faith—disorganized competition as the true road to salvation...

...And I would suggest that one has even more opportunity to operate nicely as a pluralist-of-good-will, there, in that messy area, than in the neatly arranged but somewhat less than real world of academic theory...

...You read along through a nice textbook layout of the antitrust laws, enlivened by clarion calls for more vigorous and perceptive enforcement, and then you get a line like this: "The purposes of the Sherman Act have not been fully realized in our economic life...

...All contrary facts are, first and foremost, theoretical irritants...

...But one can be a regular, right-minded American pluralist without subscribing to Intelligently Imagined Competition as the only road to salvation...

...The author's limitation on permissible planning is all justified in terms of capital "F" freedom—the dispersal of economic power...

...Big corporations are not less powerful because the government lacks interest in their operations...

...Revieived by David T. Bazelon Contributor, "Commentary," "Reporter," "Dissent" PROFESSOR ROSTOW, dean of the Yale Law School, is known as one of the advanced interdisciplinary legal thinkers for which Yale is well reputed...

...Hearing this in 1960, one never knows whether to laugh or to cry: Over half a century of farcical failure, and still the beckoning Image...

...It is primarily deductive and it tends to be dull...

...The key to the issue is price, since price is the bridge between the real world of product and the make-believe world of money and credit...

...Now, of course, the mere existence of the anti-trust laws—especially the private treble-damage action which also serves as the main force behind the consent decree, the Justice Department's primary enforcement technique—has restrained certain forms of daylight stealing...

...They serve two primary purposes: (1) They remind big corporations that in some vague sense there is a national government looking over them...

...Ho-hum...

...While there is some of this hoped-for descriptive insight scattered throughout Rostow's book, his primary method and his emphasis are something else again...

...I cannot see how effective national planning can be anything less than such coordination...

...Some of the key phrases in this kind of economic writing are "the level of spending," "the balance of optimism in the economy," "output at prior price levels," "competitive equilibrium," "adequate incentives for private investment," and so on...

...He works in the joint fields of law and economics, which certainly belong together, and has distinguished himself as an expert on the organization of the oil industry...

...Keynesianism, with its rationale of deficit spending, had one meaning during the Depression...

...and generally comports himself on this issue as if he would like Middle Western businessmen to support him sometime as a candidate for Secretary of the Treasury...

...It is as if naughtily disordered reality were approached very gingerly indeed, with the mind's eye firmly fixed on an inner television screen presenting a spectacular show of coherent theory...

...Leaving method aside for the moment, the core of Rostow's thesis is that there are two kinds of planning, and only through one of these can "freedom" be preserved...

...Quite the contrary...

...And I would suggest that in the latter circumstance, our present circumstance, it is the last line of defense of some of the basic capitalist myths...

...He trots out a low-legged version of the ancient human-nature argument, refers to "the debate between socialism and liberty...

...The folklore Thurman Arnold discussed in that book was the "fundamental principles of law and economics"— the same elaborate gook that J. K. Galbraith, (of Harvard, unfortunately) calls the "received wisdom" in The Affluent Society...

...Under this theory, even planning doesn't have to be planned...

...The fiscal-monetary approach assumes that prices are established and re-established in a free competitive market, and that therefore fiscal-monetary controls are adequate "to maintain high levels of employment at reasonably stable prices...

...These lead to such rousing announcements as: "The flow of expenditure for consumption is a function of people's attitudes toward saving...

...There is also the real world of imperfect institutions, which include direct-control planning by private corporate government as well by public national government...

...One naturally looked forward, therefore, to reading his new book on planning and legal control of the economy, a very important subject on which he is fully qualified to speak with authority...

...and (2) such management, supplemented or displaced by direct intervention in the actual productive process itself, infamously identified with price controls, rationing and government control of wage rates...

...But if you begin with, or even at last pay very much attention to, the descriptive reality, then the absolute distinctions are seen to be just what they are— more or less useful theory...

...He's more interested in the validation of his theory than in his perception of realities...

...calls "democratic socialism a contradiction in terms...

...In 1937 another lawyer-economist, a one-time professor at Yale Law School, wrote a book which he called The Folklore of Capitalism...

...The two kinds are: (1) fiscal and monetary management, with the blessings of Keynes, Eisenhower (mixed blessings), Rostow and others...

...Which only goes to show that every professor has a free choice between analyzing it and perpetuating it...

...But the book—work on which the author dates from 1949 through 1958 —is disappointing...

...That is, a theoretical model of the economic system is projected, then various quantity changes are imagined and the theoretical effects thereof stated, so that causative factors—inherent in the assumptions—can be identified...

...And they lead also to a reasonable and measured exposition which at rare points only seems to penetrate the actual texture of economic existence...

...Failure to use power does not in and of itself amount to an equitable distribution of power...

...I suspect that this approach also assumes that the manipulation of the amount of money and the price of money is sufficient to control investment as well, because that is also supposed to be dependent on a competitive money market...

...I kept expecting subtle interdisciplinary insights into the form and effects of regulation of the economy, the sort of thing one almost always finds, say, in Adolf Berle's work...

...But in a full-production economy, where the problems are allocation of resources and price-piracy, it seems to be a creaky overblown dogma based on some kind of Revealed Wisdom...

...The capital "A" answer, as always, is fresh enforcement of the antitrust laws in true accordance with academic theory...

...The bigger elephants in the ointments are the same in both instances—the major corporations which dominate our economic life, since these administer their own prices and use the profits achieved thereby to finance internally the greater amount of their capital investment...

...and (2) they are indispensable to the continued respectability of academic economic theory, which relies on the supposed existence of price-competitive markets to make everything come out all right in the end...

...From the theoretical point of view, the differences between the two approaches can be limned in black-and-white—and the author takes full advantage of this theoretical prerogative...

...This is borne out by the surprising venom with which Rostow "discusses" socialism...

...He makes believe that anybody left of him who does not support his version of what he calls "capitalism" is ipso facto an authoritarian...

...I think it should be recognized that there is also a law of marginal utility governing the exposition of marginal utility theory...

...These corporations thus engage in direct-control planning, but their plans are not necessarily coordinated with those of the governmental budget or the Federal Reserve Board money-magioians...