That's the headline and Greg Mankiw comments. My point is a simple one: if this administration is so pro-science, should they not attempt to move major antitrust trials away from the jury system?
Some commentators are suggesting that the demonstrated political clout of the banking lobby suggests a growing need for antitrust enforcement. Yet the pre-crash banking system was not a prime candidate for legal strictures on the grounds of competition policy. Citigroup arguably is too big in absolute terms, and had too many contacts in high places, but antitrust policy, and the underlying theory and legal precedents, puts far more emphasis on relative market share. In fact the unfolding of the crisis is an object lesson in how antitrust policy doesn't target the real competitive abuses much at all. Furthermore the sin of Citigroup has been to lose money and become insolvent (or nearly so), not successful monopolization. Those are close to being exact opposites.
If anti-trust policy isn’t going to affect the total size of the financial services industry, then isn’t shrinking Citigroups relative market share only possible by shrinking them in absolute size?
A fascinating book by Gabriel Kolko (The Triumph of Conservatism) points out that many super-large businesses of the Progressive Era such as the railroads, steel, insurance, not only weren’t dismayed by the passage of the antitrust laws, but actively campaigned for them. Competition was so vicious and margins so thin that they could barely stay afloat.
If this truely is the case, as it appeared to me to be in the Microsoft fiasco, one wonders who would invoke the antitrust statutes now and why. I am cynical enough not to believe that any political administration is idealistic enough to do it for the “common man” but, rather, to pay back or support some powerful political interest. Under Kolko’s thesis one should be looking at the banks “too big to fail” for the instigation.
My question, one a real economist should be able to answer (I don’t even play one on TV), is why was Citigroup losing money and becoming insolvent, and how does the antitrust litigation help them?
I would say the real story is the eventual government takeover of the oil/gas industry. Banks, schools, autos and healthcare are being absorbed by the big government, leaving energy the last great indepentant target. Paying off the green constituents. Cap and trade or carbon tax and the current trend to rename global warming, similar to rename terrorism and calling it man made disasters. Let’s expose this fraud of a president and the clowns in congress that puppet master soros makes dance to his anti american desires. Using changes in law to social engineer thru the back door and using “crisis” and government as savior. Pay attention folks.
MSG, the status of jury trials in antitrust is complex, see for instance this piece: http://www.antimonopoly.com/jury_deprivation.html. The point, however, is not about the malleability of the procedure but rather than antitrust law in practice isn’t implemented with much science behind it. So why have so much faith in it?
“Mankiw appears to claim that monopolies don’t matter.”
I saw him pull out the single monopoly profit theorem, which makes sense. Does Justice not get basic monopoly law?
And, monopolies aren’t universally bad. The antitrust law is designed to make monopolization an offense, not mere possession of monopoly power (thank goodness). Alcoa was not a good case.
“Are you saying that existing anti-trust law, by only restricting companies with very large (>50%) market share, is too weak and needs to be strengthened?”
Existing antitrust law prohibits restraints of trade where market power is far below 50%, and the antitrust law of mergers scrutinizes things where market share is far below that (check the HHI numbers). Sherman sec. 2 is only part of antitrust law.
One may have different a priori views as to how aggressive antitrust enforcement should be and what is the likelihood of Type I and Type II errors, but the Microsoft case is not very clear evidence in either direction and Mankiw does not even seem to get what the alleged theory of harm was in that case.
The main issue was not bundling as a way of damaging consumers directly by “forcing” them to buy IE instead of Netscape, but bundling as part of an exclusionary strategy that would eliminate a competitive threat to Windows and/or Office (i.e., the idea of the Java+Netscape combination evolving into a middleware working on both Windows and non-Windows platforms, allowing developers to write applications software in an OS-independent way and then allowing OS-developers to challenge Windows).
@alex, disagree. one problem with the banks was that they were trying to outdo each other. that is the essence of competition.
I think the real problem that many people have with anti-trust law, is that it is almost entirely subjective and highly politicized. If there could be a concise and precise set of anti-trust laws with objective standards of guilt and innocence, virtually no one would have a problem with that. But anti-trust law seems to me the “you better pay a lot of money to the people in power or they will arbitrarily charge you with a crime” law.
Anti-trust law, in its present form, seems to be just another way for the political class to extract more tribute. It doesn’t really stop trusts or monopolies, it simply assures that trusts and monopolies pay their protection money.
@alex
I will let Mr. Charles Prince speak for me on this matter. From the NY times, 7/2007:
But Mr. Prince used an interesting metaphor to describe his company’s situation as a major provider of financing for leveraged buyouts. “As long as the music is playing, you’ve got to get up and dance,† he told The Financial Times on Monday, adding, “We’re still dancing.†
“I think the real problem that many people have with anti-trust law, is that it is almost entirely subjective and highly politicized.”
That is not the problem I have with anti-trust law. My problem is that it generates uncertainty, it is extremely costly and it hurts consumers. The Windows 7 unbundling of IE and many other utilities hurts consumers since they now have to download Windows Live themselves. Same with the bundling of Windows Pdf printer. Who pays for the cost of Microsoft antitrust fines? Consumers and investors. Antitrust is basically good for nothing. In many of the industries where huge trusts were being built up – railroads, oil industry etc – the trusts were extremely beneficial. Competition in this case was resulting in massive instability, profits which were way too low etc. These industries were in turmoil. Car industry in another very good example were there was once too much innovation.
I am not a fan of government monopolies but I don’t believe private sector monopolies are bad thing. In fact I would even say some government created monopolies like power utilities were not so bad.
Tyler-
I don’t think Prof. Green said he has faith in the jury system. I’m pretty certain he said that civil litigants have a right to a jury trial under the 7th Amendment, and criminal defendants under the Sixth, and that precludes any choice Obama might have in moving antitrust towards a judge-based system.
The link you provided does not suggest this is a “complex” process, rather it elaborates (in a sarcastic manner) on a ridiculously standard legal process. If there is no dispute as to facts, there is nothing for a jury to decide. Thus, the judge gets to make the call. The same process applies to practically any other federal civil suit.
Further, your argument is that we should move *away* from juries. The link you provided was for juries to have a *greater* role.
I think Prof. Green’s point still stands. Absent a constitutional amendment, we are stuck with juries in antitrust cases (unless the parties agree to waive them).
Ok, Assman, you lose. That is all.
It’s a rare antitrust trial that goes to a jury these days. In a merger case, the main battle is over a preliminary injunction against the merger, and that’s decided by a judge. Most monopolization cases (eg Microsoft) also end up in front of a judge. I don’t think the defendents are particularly interested in having a jury hear complicated economic evidence.
And it’s hard to argue that if it’s a price-fixing case, with possible criminal penalties for the people involved, that they shouldn’t have the right to a jury trial.
Now, *private* antitrust suits may be another beast entirely. But the Department of Justice and the FTC aren’t involved in those.
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