Competition Policy in America, 1888-1992: History, Rhetoric, Law

A separate issue is that, as some of the prior reviews demonstrate, this book is apparently not well suited for economists. They seem to look for particular things in legal histories (note that at least one of the reviewers mistakenly characterized this book as an "economic history") and, when they don't find them, they claim that the history is a failure. Two reviewers ("Disappointing Read" and "Inaccurate") have now argued that there is something wrong with Peritz's book because he fails to observe empirical data and theoretical research allegedly showing that the monopolists of the late 19th c.--the time when the U.S. adopted its first federal antitrust law--in fact promoted healthy markets because they "caused prices to fall and output to rise." The implicit argument that flows from this is a little mysterious--the reviewers seem to argue either that Peritz is wrong because antitrust is wrong (i.e., that the monopolists were good and therefore Congress should not have adopted antitrust), or that in fact the Congress of 1890 did not have the monopolists in mind when they enacted the Sherman Act because they recognized, as some conservative economists now argue, that the monopolists were socially beneficial.

Neither argument follows at all; the criticism is off base at least for the following three reasons:

1. To the extent that the criticism faults Peritz for his failure to show that antitrust is in fact good policy--that is, for his failure to offer a substantive response to the alleged empirical proof of the social beneficence of the monopolists--it misunderstands Peritz's project. Again, he sets a very big-picture task for himself, but no part of it is a substantive defense of either the antitrust laws nor any particular vision of competition policy. He merely wants to examine the "history, rhetoric [and] law" that surrounds the idea of "competition" in U.S. history (note that both of the prior negative reviews assume that this book is about "antitrust history," but neither in the title nor in Pertiz's statement of his purpose does he say that this is a book about "antitrust history"--rather, it is a history of "competition policy"). He *never* sets for himself the task of arguing that the monopolists were bad as a matter of economic substance nor that antitrust is good as a matter of substantive policy.

2. To the extent that the previous reviews quibble with Peritz's view of the historical origin of U.S. antitrust law, they are wrong. As was shown beyond serious doubt in a classic legislative history of antitrust (John D. Clark, "The Federal Trust Policy" (1936)), the Congress that passed the Sherman Act and the later Congress that passed the significant 1914 amendments to that Act utterly and apparently intentionally ignored the prevailing academic economists of their day. Therefore, though some academics at that time argued that markets are sufficiently self-regulating that even the Rockefellers and J.P. Morgans and so on should just be left alone, Congress didn't care. (And, moreover, that was _not_ a universally held economic view, nor is it today, by any stretch of the imagination.) So how is any purported empirical proof of the efficiency of the mega-monopolies relevant at all to a legislative history of antitrust? Congress didn't care about it.

3. But most importantly, the final reason that I think the previous reviews are off base is that they simply reflect a political bias that nowadays is very common amongst economists and conservative lawyers, and accordingly they reflect (though only implicitly) the basic ugliness of conservative microeconomics. Both reviews imply a basic tenet of all right-wing economics: that where markets are "self-regulating," according to the pinched and narrow definition that conservatives give that term--namely, when particular companies cause "prices to fall and output to rise"--they must be left alone. Believing in such a view depends on one's willingness to believe that the only social values that matter are endogenous to the simplistic model of perfect competition. But that requires several large empirical leaps of faith, because it requires one to believe that the simplistic model of competitive equilibrium that is the heart of neoclassical economics is in fact sufficiently similar to the real world that it is the answer to all policy questions. In fact, as was observed in a previous review ("Best In Its Field), the simplistic model, however useful it may be in the classroom and in textbooks, ignores profound matters of policy and conscience that are not endogenous--that is, values that are not internalized by market participants and therefore can only be served by policy makers.

Failure to understand this problem explains how men like Ricardo, for example, could look across the human wasteland of poverty, disease and suffering that was the British Industrial Revolution and say that, hey, it's okay, because markets are efficient and since the markets have produced this human tragedy, then it must be the best we can do.


Inaccurate   December 5, 2001
 1 out of 7 found this review helpful

Unlike the previous reviewer, I agree with the review entitled "A Disappointing Read". As I read the history of antitrust in the US, I am struck by how aware the lawmakers of the late 19th-century were of the fact that the alleged monopolists (such as Standard Oil) caused prices to fall and output to rise.

In this book, the author seems totally unaware of this fact. I found this book to be frustratingly bad, poorly argued and too often based upon myths about American economic history.


Best in Its Field; Previous Review Off Base   August 9, 2001
 7 out of 8 found this review helpful

Histories of antitrust are not new, but this has got to be one of the most thorough and carefully considered so far. That probably explains why, even though Peritz is a law professor, it has been so well received amongst historians. Peritz takes an important step beyond most of the current debate about antitrust, recognizing that federal "competition" policy is about more than just one statute. Rather, our nation's perspective on the structure of industry and the relation of industry to government is an all-encompassing political phenomenon, with constitutional and philosophical overtones as broad as any issue concerning the structure of government.

One word of warning is that the book is ideologically tilted. Peritz is associated to some degree with a left-leaning movement in legal scholarship called "critical legal studies," and a primary purpose of this book is to combat what Peritz considers the revisionist history or historical ignorance underlying the conservative economic revolution in antitrust since the 1970s. That said, however, his readable and informed book is a work of genuine and serious scholarship and not at all a simple political broadside. It is a welcome dose of perspective in a debate that recently has grown narrow and unduly obsessed with theoretical abstraction.

A brief word about the prior, very negative review (entitled "Disappointing Read"): it is beyond me why the assertedly "large (and still growing) body of research" which purportedly "show[s] that [the 19th c. monopolies] in fact promoted competitive markets" has anything to do with the "mythical notion" that "antitrust legislation was enacted in response to increasing monopolization of the U.S. economy." In fact, whatever economists may have come up with during the late 20th c.--the "large (and still growing)" body of research--is itself irrelevant to the motivations of the policymakers who first created the antitrust laws.

Moreover, though it is true that certain writers in recent decades have begun to argue that the megacompanies of the late 19th c. in fact were good for the economy, and that the so-called "muckrakers" and other populist critics of the early monopolists had gotten it all wrong, that is not to say that that research is right and Peritz is wrong. In fact, this allegedly "large (and still growing)" body of research is itself controversial and, so some would argue, politically biased. It is at a minimum at odds with nearly a century of widely held belief and therefore to be received with caution. Moreover, it seems contrary to mountains of anecdotal evidence of intentional and serious wrongdoing, like brutality towards labor and willful disregard of basic quality and safety, that when committed by a monopolist represent a genuine threat to our polity and a legitimate concern of our government. Whether or not the vaunted synergistic efficiencies that purportedly flow from industry consolidation outweigh the evils of monopoly is not at all a settled matter (which evils, contrary to the glib implication in the prior review, cannot necessarily be measured by endogenous market phenomena, but may very well produce externalities like massive distributional inequalities, distortion in capital markets, undue political influence in private hands, environmental harms, etc.).

Anyway, it may or may not be a "mythical notion" that monopolies are bad, but whether it is "mythical" or not, the evidence suggesting it was not available to the 1890 Congress that enacted the Sherman Act and it is therefore irrelevant to a history of their motivations.


A disappointing read   February 13, 1999
 6 out of 20 found this review helpful

Professor Peritz reports lots of detailed facts about the legislative debates and courtroom proceedings surrounding America's antitrust regulations. Unfortunately, he far too uncritically accepts the mythical notion that antitrust legislation was enacted in response to increasing monopolization of the U.S. economy. Peritz ignores the large (and still growing) body of research showing that Standard Oil, the Chicago meatpackers, U.S. Steel, and other firms vilified in popular histories in fact promoted competitive markets -- these firms dramatically reduced prices, improved their operating and distribution efficiencies, and consistently increased the quality of the goods they offered to consumers. With his incorrect understanding of economic history, Peritz's explanations of the origins and role of antitrust legislation and case law are, largely, unfounded.