Holiday Review of Antitrust Books by Bert Foer

Dec 10 2004

Aug. 18, 2004 Copyright Albert A. Foer

About Markets and States: Five Twenty-First Century Perspectives

Albert A. Foer*

The Company: A Short History of a Revolutionary Idea John Micklethwait and Adrian Wooldridge New York: The Modern Library (2003) 225 pp., $19.95

The Market System: What It Is, How It Works, and What To Make of It Charles E. Lindblom New Haven: Yale University Press (2001) 296 pp., $26.00

Antitrust Law (second edition) Richard A. Posner Chicago: University of Chicago Press (2001) 316 pp., $35

Global Political Economy Understanding the International Economic Order Robert Gilpin Princeton: Princeton University Press (2001) 422 pp., $18.95 (paperback)

The Bigness Complex: Industry, Labor, and Government in the American Economy (second edition) Walter Adams and James W. Brock Stanford, CA: Stanford University Press (2004) 386 pp., $24.95 (softbound)

Markets and governments have been with us throughout history, but our notions of how these two featured instruments of civilization should interact are constantly changing. Five recent books throw light on current thinking about the nature of firms and markets and the appropriate role for government, particularly with respect to government’s paradoxical antitrust role as the middle way protector of competition, the principal alternative to a heavy-handed regime of economic regulation or its opposite, laissez faire capitalism. The microeconomic paradigm known as the Chicago School (or what Joseph Stiglitz in the international context calls “the Washington Consensus”) has controlled federal antitrust policy since the election of Ronald Reagan. The paradigm is flawed, but its successor has not yet congealed.


The Economist is driving me crazy. A wonderfully authoritative and all-encompassing magazine it indubitably is, and if one could absorb each issue from cover to cover, one would become an enormously well-informed but notoriously single-minded individual. Thus, when two writers for the Economist collaborated on a topic as potentially big as “the company,” I wasn’t sure that the subtitle, “A Short History of a Revolutionary Idea,” could be trusted. It can. The book quickly and gracefully covers a period that begins in Mesopotamia 5,000 years ago and concludes with a critique of the Sarbanes-Oxley Act in the post-Enron U.S.

My purpose in beginning with The Company is not to talk about the revolutionary nature of the company as a peculiar form of economic organization, but to create a context for discussing several other books that focus more specifically on the role of the very large company, the market, and the state. Taking the long view, Micklethwait and Wooldridge argue that, in general, companies have become more ethical: “more honest, more humane, more socially responsible.” Indeed, although the influence of companies as a species has never been more widespread, the clout of individual big companies has arguably declined. The much-vaunted idea that companies are now bigger than mere governments is…statistically fraudulent. Big companies are giving way to small ones, so much so, in fact, that an old question is now more pressing: What is the point of companies?

Does it matter to say that the clout of individual big companies has arguably declined? Sure, fortunes of large companies wax and wane. Ask Enron or Chrysler. But many companies (like Procter & Gamble or General Motors) persevere at or near the top of the heap for generations and any movement toward decentralization that comes from the divestment of assets that “don’t fit” is not about to offset the more general tendency toward centralization. When the 1960s and 70s experiment with giant conglomerates failed, a single company, ITT, divested a total of more than two hundred units, but that didn’t keep the next waves of “strategic mergers” from restructuring the American economy. It seems a stretch to say that Big Business is stronger than ever while big businesses are growing weaker.

Micklethwait and Wooldridge observe that by the First World War, “the giant corporation had become the dominant business institution in America.” Most Americans “disliked concentrations of corporate power – the United States, after all, is based on the division of power—but they admired the sheer might of business.” Three things, they say, kept the public’s ambivalence about the corporation from tipping into hostility. First, the big companies wised up to politics. Second, they undertook what we now think of as corporate social responsibility (e.g., “the robber barons embraced philanthropy.”). And third, the company was making America richer.

The productivity of these companies was usually tied to gigantism, which also raised barriers to market entry. The only way to compete with one of the huge companies was to build a huge new company of your own. Even if you could raise the cash and recruit the right managers, you risked introducing so much new capacity onto the market that the whole market would crash. This, rather than anything to do with collusion, remained the underlying reason why a handful of huge companies dominated their respective industries from the 1880s to at least the 1940s.

Thus, domination by the biggest is explained as inevitable because productivity was tied to size. Whether this controversial explanation is based in reality or myth is a question we will revisit.

The next key period in this short history is the last quarter of the twentieth century, surprisingly characterized by the authors as the “unbundling of the company”.

Far from being a source of comfort, bigness became a code for inflexibility, the anthithesis of the new credo, entrepreneurialism. In 1974, America’s one hundred biggest industrial companies accounted for 35.8 percent of the country’s gross domestic product; by 1998, that figure had fallen to 17.3 percent. Their share of the nation’s workforce and its corporate assets also roughly halved…By 2000, roughly half the biggest one hundred industrial firms in 1974 had disappeared through takeovers or bankruptcy.

Of course, as we have seen, 1974 was near the peak of the giant conglomerate wave. The authors do not comment on the consolidating impact of an unprecedented merger wave during the ensuing period. Much of the load-shedding they observe is probably the divesting of acquired assets either by failed conglomerates or by mergers where the acquiring company got what it wanted plus more, throwing back the smaller fish caught in the net. A more complete statistical picture of this dynamic period would have to include events outside of the traditional industrial sector: the rise of high tech companies (many of which have since fallen), of increased transnational business in services, and rapid consolidation in non-industrial sectors such as finance and retailing.

By 2002, the authors say, society’s attitude toward the corporate sector seemed two-faced. On the one hand, governments around the world had set the company free, deregulating markets, loosening trade barriers, and privatizing state-owned companies. But on the other hand, “politicians and pressure groups were looking for ways to turn the company to social ends.” After Enron and other scandals, George W. Bush, “America’s first M.B.A. president,” had signed into law the Sarbanes-Oxley Act, “arguably the toughest piece of corporate legislation since the 1930s.” Sarbanes-Oxley dealt with governance and accounting problems revealed by the scandals, but the authors have probably mistaken the exception for the rule. Bush may have his uses for Ralph Nader, but a Nader’s Raider he isn’t.

What had gone wrong for the company? The authors note two explanations-- the “bad apples” school (scandals are caused by individual greed) and the “rotten roots” school (the problems are systemic). Their own conclusion, apparently contradicting their evaluation of Sarbanes-Oxley, is that “the fuss about Enron looked less like a revolution against American capitalism than a restatement of its basic principles.” The bottom line: “While the company in general has never seemed more vibrant, individual companies have never seemed more fragile and insubstantial.”

Interestingly, something very important seems to be missing not only from the index of this little book, but also from the analysis itself: the role of competition. The company is said to be weak because politics can turn against it. But companies as a whole are strong, because the public is ambivalent and accepting. That is, the public is happy enough with the riches being generated that common citizens have only rarely actually exercised the latent political power that could reduce corporate power. An antitrust enthusiast might well ask, are not these the very conditions in which powerful companies would try to protect themselves from the weakening effects of competition? Competition can be smothered in many ways, e.g., by explicit collusion, tacit collusion, vertical restraints on trade, unilateral exercise of market power; or by using economic power to court friendly legislation and regulation that neither promotes nor protects competition. The authors do not quite tell us that marketplace competition is irrelevant to the power of companies, they simply do not address it.


Charles E. Lindblom, the great Yale political scientist, has long been interested in markets and politics. His 1977 classic Politics and Markets ended with a tantalizing, even mysterious sentence: “The large private corporation fits oddly into democratic theory and vision. Indeed, it does not fit.” Whereas Micklethwait and Wooldridge focus on the company, Lindblom’s subject in The Market System is the market itself, into which the large private corporation does fit.

This subtle and vexing book raises more questions than it is able to answer, partly because it operates at a very high level of generality. Lindblom admires the market system because it enables “mutual adjustment as a fundamental social coordinating process.” This point is brought home in a terrific visual metaphor:

"Think of two dozen pedestrians on a city street corner facing a similar group across the street. How do they coordinate to avoid collision? A central coordinator on the sidelines could call out instructions to each on when and by what route to move through the oncoming others. Intolerably slow and clumsy—would anyone bother to listen? Without anyone’s giving it a thought, however, everyone coordinates quickly and precisely through various mutual adjustments."

It is voluntary mutual adjustment on a large scale that is the essential achievement of a market system, which Lindblom defines as “a system of societywide coordination of human activities not by central command but by mutual interactions in the form of transactions.”

Going back to Lindblom’s tantalizing question in 1977, do large corporations fit into democratic theory? A starting point might be whether markets are essential to democracy. Lindblom contends that there have been no democracies that are not tied to market systems, and (more importantly, he says) no democracies that have voted to eliminate a market system. But he does not see the tie-in as inevitable. (I’m not sure what he would say about the professor from China who is visiting Washington right now, preparing the course he will teach in Beijing on the role of antitrust in a socialist nation.) Lindblom explains the frequent conjunction of democracy and markets in terms of “the assault on the mind” of the population not only by market elites but also by their allies among governmental elites, who “urge the market system on society because any alternative to it would bring an end to their powers and advantages.”

This argument proves too much, in that any persevering system must be based on the self-interest of those with power. It invites a further question: if market elites together with governmental elites are strong enough everywhere to protect the market system, why would they not also be strong enough to replace it with something that gives them even more power and advantage? For example, one can imagine a formally democratic society that turns over the most important political questions to a small group of very large corporations, not cabined by concerns about competition, whose money and adherents are tools for domination of the government. Is there something self-limiting about the market system that minimizes this potential for converting democracy into a corporate state that squeezes competition into an insignificant role?

Although he says buying and selling may be natural to humankind, Lindblom quite rightly also observes that markets are “neither natural nor God given…nor all alike.” They require “a great deal of help from the state.” Indeed, “If the market system is a dance, the state provides the dance floor and the orchestra.”

I would go further: the state also prescribes the rules for dancing (thereby distinguishing dancing from mayhem and the dance floor from the jungle). This important function is missing from Lindblom’s discussion. At times, it seems like he will get there, but he doesn’t. Lindblom notes that monopoly and price fixing undermine the efficiency of markets and he can be eloquent on the political power available to the large corporation. Lindblom also allows that competition plays a role in a market system, although he somewhat downplays its signficance by emphasizing that competition is only one type of relationship within a much broader network of constant adjustments that are being made. “Market systems work,” he says, “only because enterprises are controlled by their customers, employees, and suppliers through the interactions of the market system, as well as through government controls…Societies need enterprises that are not free but are compelled, at the risk of extinction, to respond to people’s wishes.”

Decentralized adjusting is fine, but what is it that will force enterprises to respond to people’s wishes? What role should the government play in the market system and in whose interest? It is to Lindblom’s discredit that antitrust as a mechanism for maintaining competition and restricting centralization of power in the interests of consumers, is never mentioned.



Nobody can accuse Richard A. Posner of ignoring antitrust. In fact, Posner was the professor at the University of Chicago who sparked my interest in this subject about thirty years ago. He still professes there part-time, but is now also an influential federal appellate judge as well as an unbelievably prolific writer on all subjects relating to law, economics, and more. Posner’s book of antitrust essays first appeared in 1976 and was, along with Robert Bork’s The Antitrust Paradox--which came out two years later-- the leading statement of what is called the Chicago School model of antitrust, an efficiency-based semi-laissez faire analysis. In the preface to the second edition of his Antitrust Law, Posner says that his “jeremiad of 1976 is here replaced by the story of a profound, a revolutionary, change in law.” He is right, in that the Chicago School ascended to power in the U.S. with the election of Ronald Reagan and has been in power ever since.

The essence of the revolution is that a particular brand of economics that rests in a neoclassical way on microeconomic price theory has displaced all other approaches as the key to antitrust analysis. Posner now issues a unilateral declaration of victory:

"Almost everyone professionally involved in antitrust today – whether as litigator, prosecutor, judge, academic, or informed observer—not only agrees that the only goal of the antitrust laws should be to promote economic welfare, but also agrees on the essential tenets of economic theory that should be used to determine the consistency of specific business practices with that goal. Agrees, that is, that economic welfare should be understood in terms of the economist’s concept of efficiency; that business firms should be assumed to be rational profit maximizers, so that the issue in evaluating the antitrust significance of a particular business practice should be whether it is a means by which a rational profit maximizer can increase its profits at the expense of efficiency; and that the design of antitrust rules should take into account the costs and benefits of individualized assessment of challenged practices relative to the costs and benefits of rule-of-thumb prohibitions, notably the per se rules of antitrust illegality."

Suffice it to say that Posner dramatically overstates the degree of unanimity. In our business schools, for instance, what is routinely taught in marketing and strategic management classes goes almost directly opposite to the assumptions of the Chicago School, e.g., with regard to the role of profit maximization and rational behavior. Most business school texts downplay profit maximization as being too broad to have much strategic content and as being insufficient, alone, to motivate people. Instead of profit maximization, the holy grail for strategic management tends to be “sustainable competitive advantage.” Similarly, the business schools often depart from the Chicago assumption of rational behavior, recognizing that the behavior of firms depends at least in part on emotional and psychological factors. Among economists themselves, even though all agree that efficiency is an important objective, there is disagreement on what efficiency means and whether it is an adequate guide for antitrust policy.

One may criticize Posner for cheerleading and puffery, but there is little question that his viewpoint dominates the antitrust field today. Let us be clear that it is not a thorough-going libertarian viewpoint that denigrates the very idea of antitrust. To the contrary, Posner justifies an active role for antitrust in regulating a market system; but the realm he would allot to antitrust is narrow, assuredly narrower than that which had prevailed in previous eras of antitrust enforcement. For example, although Posner opposes monopoly, it is not on grounds that he would dismiss as politically-based, such as that it re-distributes money from the consumer’s pocket to the monopolist’s or that it concentrates political power. Rather, monopoly hurts the economy because it creates a “dead weight loss” when products for which there would have been a demand had they been offered at a competitive price are not produced. (Posner even puts his own wrinkle on this traditional microeconomic model by demonstrating that the active pursuit of monopoly rents entails social waste in the form of legal and related expenses. It goes without saying that large parts of the bar dissent, at least in public. ) Monopoly is bad, the Chicago School teaches, because it is inefficient for the society as a whole. This is all very theoretical, not the sort of argument that generates a hot desire to go trustbusting.

Indeed, the Chicago School shows very little interest in busting anything other than cartels. This is important, to be sure; recent data shows that cartels generally raise prices between 20 and 36 percent, despite government presumptions of only 10 percent. But putting cartels aside, Chicagoists are dubious about most theories of harm that can be caused by unilateral action, even by monopolists; they do not believe that vertical restrictions (such as when a supplier with market power refuses to sell the product that the buyer needs unless he also buys the one he doesn’t want) in and of themselves are likely to be anticompetitive.

Interestingly, Posner wanders off the Chicago reservation in one important way. Suppose there are only three companies in a market and their prices always move in unison (usually upward). It is argued that the three rivals, eyeing one another’s behavior and understanding how they are interdependent, might very well reach identical price decisions in a reasonable, non-collusive way, through three separate independent decisions. The prevailing view is that such “conscious parallel behavior” or “tacit collusion” is not illegal unless there is a “plus” factor that shows actual collusion. Professor Posner, to the contrary, would like to find illegal price fixing within such oligopolies in the absence of a smoking gun, if there is a pattern of pricing behavior within a market where the conditions—determined by economists-- are propitious for the emergence of collusion. Were such a position to become law, there might at last be some hope for forcing the large firms in highly concentrated industries to behave more competitively.

Posner recognizes that most people disagree with him on this and that this leaves them wondering how to deal with highly concentrated markets. He believes that too much weight was given in the past to concentration. He argues strongly against breaking up the major sellers in highly concentrated markets as a method of preventing them from tacitly colluding. Indeed, he opposes “structural” remedies such as divestiture, except for recently acquired assets in an unlawful merger. “Any proceeding to deconcentrate an industry by reorganizing the major firms into smaller units would be cumbersome, protracted, and unmanageable.” Moreover, Posner shows, the relatively few monopolization cases in which divestiture was actually used as a remedy do not present an edifying picture. He is right about most past cases (for instance, the famous breakup of the Standard Oil monopoly in 1911 merely created a series of regional monopolies), but that should not be the end of the story. That many efforts at structural relief have been poorly executed does not mean that structural relief is necessarily a flawed strategy although it does imply the need both for extremely good planning and sufficient political courage and political capital to follow through.

Posner “gets” the all-important role of competition and builds antitrust into his concept of a market system, but his “economics and the law” approach can nonetheless be criticized for trying to take the politics out of political economy.


The Chicago School takes as its starting point that the purpose of an economic policy is to maximize the society’s welfare or perhaps the welfare of consumers – this is not entirely clear—through the efficient allocation of resources. The more that is produced from the given resources, the more there is for everyone to share. This derives from a system of logic that starts with the sovereign individual, works its way through voluntary exchange, and ends up with the invisible hand of competition creating the best of all worlds. In Global Political Economy, Robert Gilpin, the Eisenhower Professor of Public and International Affairs Emeritus at Princeton, takes a different perspective, that of international political economy. In the study of political economy, he says,

"The purpose of economic activity is a fundamental issue: Is the purpose of economic activity to benefit individual consumers, to promote certain social welfare goals, or to maximize national power? The question of purpose is at the core of political economy, and the answer is a political matter that society must determine."

For Gilpin and other political scientists who believe that social and political affairs cannot be reduced to a subfield of economics, “political economy refers primarily to questions generated from the interactions of economic and political affairs.” Like the business school strategic management faculty, and unlike neoclassical economists who explain the creation of institutions as resulting from rational intentions, Gilpin’s political economists believe that institutions are created for a variety of rational, irrational, and even capricious motives. Moreover, in contrast to economists’ emphasis on efficiency or rent-seeking, the political economists argue that institutions are built on the idea of path dependence and that economic and other institutions are the result of accidents, random choices, and chance events that frequently cannot be explained as the result of rational economic processes…[O]nce these institutions are created, for whatever chance or irrational reason, they have a powerful advantage over new and more efficient institutions that could otherwise displace them.

Like Cass Sunstein, a University of Chicago law professor whose Free Markets and Social Justice is perhaps one book that would not have been written by Richard Posner, Gilpin understands that markets are “embedded in larger sociopolitical systems.” Consequently and contrary to neoclassical economists’ belief that economic activities are universal in character, “the specific goals of economic activities are in actuality socially determined and differ widely over the face of the earth.”

A large part of Gilpin’s lucid volume on the international economy is taken up with his critique of the limitations of the neoclassical concept of an economy, which he sees Washington trying to impose on an often-unwilling world. He accepts economics as a more rigorous and theoretically advanced field of study than political economy but he believes that combining the insights and theories of economics with the “more intuitive and less rigorous” techniques of history and the other social sciences leads to “a more profound and useful comprehension of economic affairs than does adherence to any one field alone.”

Having circumnavigated international political economy, from trade to monetary policy, from harmonization to multinationals, Gilpin concludes that governance, at any level, whether national or international, “must rest on shared beliefs, cultural values, and, most of all, a common identity.” This brings us back to the specific question of how comfortably the big company, the market system, and antitrust (now called “competition policy” in most of the world) sit within the shared beliefs, cultural values and identity of twenty-first century America, or for that matter, the globe.



In polite antitrust society in America, one does not say, “Big is Bad” any more. There was a time when many people worried about the gargantuan size of certain economic institutions. They recognized that economic power is closely associated with political power, that large size carries with it significant inefficiencies, and that an industry consisting of a small handful of giants is not likely to be sharply competitive or highly innovative.

The issue of what to do about the biggest corporations last obtained substantial political salience in the 1912 presidential campaign. Some, led by the Republican Teddy Roosevelt, wanted the government to control the giants directly. Others, like the former judge William Howard Taft, wanted the courts to take the lead in keeping markets competitive. And a third force, led by Progressives Woodrow Wilson and Louis Brandeis, wanted an independent and expert regulatory commission with wide-ranging powers to play a leading role in maintaining free and fair competition. The election of Wilson was reflected in the two antitrust laws of 1914, the Clayton Act and the Federal Trade Commission Act, which together with the 1890 Sherman Act still constitute the essence of our national framework for dealing with giant corporations.

Obviously, the framework did little to stop the growth of mega-firms. One could even say that in the past quarter century the framework has been converted into a tool of neoclassical economists who believe that “Big is Good” and have used antitrust to assure that only the worst behavioral abuses are deterred. Industrial structure, as opposed to behavior, has largely been removed from the antitrust agenda.

Although neo-classical economics rules the antitrust roost, it has not by any means captured all economists. One of the foremost critics was the late Walter Adams, President and Distinguished Professor of Economics at Michigan State University. Adams and James W. Brock, the Moeckel Professor of Economics at Miami University in Ohio, teamed up on a series of books that focused on industry structure, the most important of which was The Bigness Complex, originally published in 1986. Adams himself was acquired by The Great Monopolist in the Sky in 1998, but Brock has faithfully kept their joint output up to date and I shall refer to Adams/Brock as coauthors. The second edition of The Bigness Complex is a masterful if occasionally repetitive analysis that will make sense to lay as well as specialized readers. It is an important book that will unfortunately but in all probability be ignored by anyone powerful enough to make a difference.

Economists Adams and Brock, intellectual cousins of the political scientist Gilpin, begin by arguing that power is a proper subject of economic analysis. “The essence of power is dominance. And dominance may arise simply from disproportionate size.” In contradistinction to the neoclassicists who believe that the only relevant power is the ability to influence price in a particular market, they include the capacity to obstruct technological advance; to manipulate the alternatives from which society is allowed to choose; to coerce society to accede to its demands through threats to shut down facilities or to relocate them elsewhere; to infiltrate government agencies with influential decision makers drawn from the industries ostensibly being regulated; and to obtain government bailouts when collapsing giants are considered to be too big and too important to be allowed to fail.

Again in contradistinction to the neoclassicists, Adams/Brock hold that economic power is primarily rooted in organizational structure, which has a decisive influence on economic performance. Consequently, public policy must search for structural solutions to market failures. The difference between what they would want and what now happens may be seen in the government’s Microsoft antitrust case, where the Clinton administration originally asked that the convicted monopolist Microsoft be broken apart, but the Bush administration settled the case for some limited behavioral modifications.

The neoclassical argument identifies efficiency as the sole objective of antitrust policy. At the heart of the Adams/Brock book is the question of whether great size is truly efficient. The authors draw together a compelling body of evidence, most notably from business circles, that questions the faith that “bigger is always better.” The point is driven home through case studies of the automobile and steel industries and the failure of the conglomeration movement of the 1960s and 1970s. In the new edition, earlier case studies are brought current and a substantial amount of information that arose after 1986 is integrated into the text.

For example, the earlier book uses the tobacco industry as a case in point for arguing in favor of structural relief in monopoly cases. Here was a trust that was found by the Supreme Court in 1911 to have illegally monopolized the trade. Dissolution created a tight triopoly instead of a more competitive industry. Thirty years later, the Supreme Court found the three major lineal descendents of the trust to have collectively and illegally monopolized the trade. The remedy left the structure of the industry intact and the industry continued to exhibit noncompetitive oligopoly pricing. The new edition adds this:

"Thus, by the 1990s—eighty years after the original conviction of the tobacco trust—the Big Four tobacco firms continued to account for 98 percent of U.S. cigarette sales. In yet a third major antitrust suit, the Supreme Court in 1993 observed that “cigarette manufacturing has long been one of America’s most concentrated industries”; that it “also has long been one of America’s most profitable, in part because for many years there was no significant price competition among the rival firms”; and that the list “prices for cigarettes increased in lock-step, twice a year, for a number of years, irrespective of the rate of inflation, changes in the cost of production, or shifts in consumer demand”—in short, that the industry continued to display all the hallmarks of a highly concentrated, noncompetitive industrial milieu."

Little did Brock suspect as he went to press that on June 22, 2004, the F.T.C. would by unanimous vote close its investigation of the merger of Reynolds Tobacco and Brown & Williamson, solving the problem of domination by the Big Four through the process of subtraction!

If Adams/Brock are right about the importance of industrial structure, the implications are clearest with regard to mergers. They favor corporate growth through success in the marketplace and oppose it, at least where large size is concerned, when it comes through the elimination of a competitor via merger.

In fact, public policy since the election of President Reagan has considered mergers to be presumptively good – why, enforcers ask, would companies want to merge unless it is to obtain efficiencies? Roughly 3% of mergers large enough to require prenotification to the government receive “second requests” for more detailed information and about half of these are allowed to go forward without modification. Today, it is rare to see the government stop a merger outright unless it will create a monopoly or possibly a duopoly. All that is considered illegal is the creation of a horizontal overlap where parts of the two combining companies are in direct competition and the result is likely to be increased prices in the near term. The government invites the companies to divest part of the competing assets, then allows the merger to proceed. Thus it can be said that competition within specific markets is preserved, even while the industry itself becomes more concentrated.

If Adams/Brock are right in their conclusion that the positive efficiencies of giant mergers are minimal and the other effects (economic, political, and social) are both large and largely negative, then antitrust has its presumptions exactly backwards: rather than putting the burden on the government to stop the largest companies from merging, the burden should be on such companies to demonstrate that their merger is in the public interest. Exactly how this might be done must be debated, but I believe that this basic point about misplaced presumptions needs to be taken very seriously. It doesn’t rest on the supposition that big is always bad and does not challenge size attained (in the fashion of Wal-Mart) by internal growth on the merits in the face of competition. The point, rather, is that because extraordinarily big is potentially dangerous in a democracy for reasons that go beyond price, growth by large merger should be discouraged.

The Adams/Brock critique will be blown off by conservatives as radical, but it is more properly a centrist position. The niche to their immediate right is occupied by semi-laissez faire, as fashioned primarily by Richard Posner and the Chicago School of neoclassical economics. Even further to the right is the libertarian view that would dismiss antitrust altogether. (Adams/Brock refer to both groups, a bit indiscriminately, as Darwinists.) To the left are populists, who either accept the inevitability of giant corporations, reject economic arguments about the benefits of competition, and would impose direct public regulatory controls or ownership over the largest corporations; or who would break up large corporations because of their political potency, without regard to economic costs.

The Adams/Brock position sees more aggressive antitrust as a reactive alternative to detailed and heavy-handed before-the-fact economic regulation. The authors are particularly critical of the neoliberal Galbraithian model of countervailing powers, in which big government, big labor, and big business operate cooperatively (would Lindblom say, adaptively?) to achieve what they would agree among themselves is in the public interest. Indeed, it is the collusion between large oligopolistic companies and their large labor unions that Adams/Brock see as responsible for many of the problems that attend great corporate size, including the capturing of government to serve protectionist purposes. Adams/Brock approve of deregulation where it can create competitive markets, and they blame a failure of antitrust enforcement in many of those instances where deregulation has not been as effective as it should be.

The middle road is an antitrust policy that is aggressively managed and attuned to a broader economics than the Chicago School has posited. This would recognize that “concentrated power exists and that it has far-reaching social consequences.” Adams/Brock are more impressive at diagnosing the problem than at explaining in detail how antitrust policy should be changed. There are difficulties the authors do not discuss in trying to establish what goals, in addition to the appropriately skewered static efficiency goal, should direct antitrust policy. Supplemental objectives such as consumer choice, diversity, and innovation are easy to say but hard to operationalize. The challenge is to craft standards that provide predictability, are relatively impervious to politicization, and are not likely to create important inefficiencies. While the regnant paradigm of the Chicago School is increasingly seen as badly flawed, the successor paradigm is still only coming into sight.

*Albert A. Foer is President of the American Antitrust Institute,