Friday, October 02, 2015

Antitrust Assassins



Antitrust law has increasingly become anti-antitrust law. This is generally the influence of those who claimed to be well-versed in economics but who apply basic principles inconsistently to favor big business.

For the most part we want businesses to compete by offering the best they can to consumers at the lowest price. Sometimes being competitive means also being anti-competitive or so the theory goes. In fact, most of the examples of this are duds but let's take the example of college football. The theory is the college football is a product and the market for sports entertainment is better for it. If colleges competed for football players by paying them, so the theory goes again, the rich schools would get the best players, beat all the less rich school and college football would not be a very interesting sport. So the schools can agree not to pay the players at all. That is their logic, not mine.  (There are other justification but they are even sillier than this one.)

The cost of having college football is largely put on the back of laborers who are not paid.  This cost is like the cost of uniforms, balls, and coaches except that those costs are absorbed in some measure by those who profit from college football. The cost of labor, though, is paid by the players, not by those who profit from their labor.  It is exactly like a producer of cars that pollutes, factories that put toxic substances in rivers or employers whose employees are injured because of unsafe work conditions. In economics the costs imposed on others are called externalities. The fact is that we have a massive network of environment regulations, tort law, and the like that force those who give rise to externalities to absorb them.

In every area but antitrust,  businesses are given the choice -- reduce the externalities or pay for them even if they make you more competitive.  In short, produce what you want but pay all the costs of production. Now a contingent of law professors and judges have decided that rule does not apply when it comes to the costs of anti-competitive activity  It's fine for business to force everyone from football players to consumers to absorb the externalities. They do this my refusing to ask businesses to reduce the costs of their antitrust externalities  as much as possible. In fact, they argue against the position they generally support for other costs.

The message from these folks is to "trust business."  Yes, you know, like we trusted BP, Volkswagon, Enron, Exxon, and all the others who, in an effort to maximize profits, shifted costs to others. It is the nature of business to try to cut costs they have to absorb  to make a profit. On the other hand, why cut costs you impose on others, like the costs of  being anti-competitive.

Inconsistent is probably too nice a way to put it when thinking about why the anti-anti-trusters  say business should internalize all costs, even in the interests of producing better products, except when it comes to the costs imposed on the public by anticompetitive acts.

Make no mistake. These folks want to kill antitrust and their economic principles go by the boards when it comes to anticompetitive activity. Yet, don't you just know when looking for a car, house, or shirt, they want the best deal possible for themselves.

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