Antitrust and the Theory of the Firm
14 April 2009 at 9:48 am Peter G. Klein 5 comments
| Peter Klein |
Josh has a nice post at Truth on the Market on the place of antitrust research and practice within the legal academy. “[C]ontrary to the conventional wisdom I hear from the legal academy, it is an incredibly exciting time to practice, think about, and write about antitrust issues. . . . I suspect that right now is one of the most intellectually active antitrust eras in history.” Josh proposes several hypotheses on the increasingly popularity of antitrust analysis in law schools and within the law-and-economics movement.
Josh’s post got me thinking about the economic theory of the firm. The pioneers in this field — Coase, Williamson, Klein, Alchian, Demsetz, Teece, Masten — were actively interest in antitrust issues. The subtitle of Williamson’s Markets and Hierarchies (1975), after all, is “Analysis and Antitrust Implications.” In the more recent literature, however, antitrust doesn’t make much of an appearance. None of the leading scholars, such as Oliver Hart, Bengt Holmström, Jean Tirole, John Moore, Bob Gibbons, George Baker, Kevin Murphy, Tom Hubbard, or Steve Tadelis works juch on antitrust (please correct me if I’m wrong). Even giants like Foss, Klein, Langlois, and Lien are not active in this area.
One might respond that antitrust is an economic policy issue, not a firm-strategy issue, and note that transaction cost economics (TCE) has migrated from economics departments to business schools, where it joins the resource-based view (RBV) as a leading theoretical perspective on the the firm. Indeed, while the people mentioned above are economists, mostly teaching in economics departments, Williamsonian TCE has largely been supplanted by the Grossman-Hart-Moore model among mainstream economists, while it remains highly influential within the fields of strategic management, organization theory, and marketing.
This leaves us with two questions: (1) Why isn’t the property-rights or Grossman-Hart-Moore approach to the firm more influential in antitrust economics? (2) Why isn’t antitrust a bigger topic within strategic management (e.g., as part of a firm’s legal and political strategy)?
Entry filed under: - Klein -, Law and Economics, Strategic Management, Theory of the Firm.
Organizations and Markets 
1.
Paul Walker | 14 April 2009 at 7:50 pm
Maybe Coase gives us the answer:
“Ronald [Coase] said he had gotten tired of antitrust because
when the prices went up the judges said it was monopoly, when
the prices went down they said it was predatory pricing, and
when they stayed the same they said it was tacit collusion.”
–William Landes, “The Fire of Truth: A Remembrance of Law and
Econ at Chicago”, JLE (1981) p. 193.
2. Klein on the paucity of antitrust research in econ « PublicOrgTheory | 16 April 2009 at 3:59 am
[…] those inclined toward organizational and economic wonkery: One might respond that antitrust is an economic policy issue, not a firm-strategy issue, and note […]
3.
Matt Holian | 20 April 2009 at 9:54 am
I don’t have answers to the questions Peter raises, but I thought I’d point out a nice book, edited by Jerry Ellig in 2001, that O&M readers might find interesting. Contributors include Langlois, Teece and others; chapter 2, by Jay Barney, is an exploratory essay on antitrust implications of the resource based view. The title is: Dynamic Competition and Public Policy: Technology, Innovation, and Antitrust Issues. The introduction can be downloaded for free at:
Click to access 9780521782500ws.pdf
4.
Peter Klein | 20 April 2009 at 12:07 pm
Matt, that is an excellent reference, which I’d forgotten about. Thanks.
5.
Dean Williamson | 21 April 2009 at 6:09 pm
Peter —
As I noted on your Facebook page: One reason the economics of organization doesn’t really seem to show up in antirust casework is that it suggests how vertical arrangments can be efficient. And attorneys _hate_ that. They don’t want to hear it. They want to go after people. They don’t make their names closing down investigations.
Vertical issues show up in language of “single-firm conduct” and “Section 2 [of the Sherman Act].” I think Herbert Hovenkamp (2005) did a great service when he observed that questions about “exclusionary conduct” or other such “vertical” practices have been debated for at least a century and remain controversial within the antitrust crowd.