Great Antidote Archive: Don Boudreaux on Antitrust Laws

Great Antidote host Juliette Sellgren is on vacation so we're digging into the archives during her absence.

By Owen Holzbach

In this episode of the Great Antidote, Don Boudreaux on Antitrust Laws, host Juliette Sellgren and Boudreaux discuss the history and impacts of antitrust legislation. This is the first of a two-part series on the Great Antidote. The second episode is Jennifer Huddleston on Big Tech and Antitrust.
This is Boudreaux’s second time on the podcast. The first time was, Don Boudreaux on Bad Policies People Love.

Don Boudreaux earned his PhD in economics from Auburn University in 1986 and his law degree from University of Virginia in 1992. He is a professor of economics at George Mason University.  His research interests include international trade, public choice, law and economics, and antitrust. During his second interview with Juliette Sellgren, Boudreaux discusses the history and impacts of antitrust legislation. Don Boudreaux defines antitrust legislation as legislation that limits the competitive capacity of large firms by breaking them up.

Before discussing antitrust, Juliette Sellgren asked Boudreaux for advice on what her generation should know. To that, Boudreaux notes that people ought to be weary of stated intentions and that good intentions do not necessarily lead to good outcomes.

Large firms, Boudreaux states, came into existence as a result of technological advances such as railroads and the telegraph, which pushed prices down as firms were able to reach a wider base compared to the dispersed economies prior to the innovations. The falling prices were not consistent with the view that these firms, namely those of the so-called Robber Barons, were monopolists.   

A large firm, in a free market, is maintained by continually providing value to customers. John D. Rockefeller was only able to have 98% of kerosene sales by continually providing high quality at low cost. Referencing a biography of Rockefeller entitled Titan: The Life of John D. Rockefeller, Sr. , Boudreaux states that it was his competitors, not his customers, who disliked him.   

The goal of the antitrust legislation was not to increase competition, but rather to limit the competition by increasing government power, according to Boudreaux. The legislation was the result, argues Boudreaux, of special interest producers who pushed for the legislation. While the legislation was presented to the public as a means of combating monopoly power, no such power existed at the time, Boudreaux argues, by referencing several economic historians.  Boudreaux states, 

The history of anti-trust is riddled with examples of how anti-trust is used by firms to compensate for weak market share. 

Boudreaux argues that antitrust legislation is not needed and advocates for immediately getting rid of it. Due to market competitiveness, if firms mistreat customers leading to inefficiency, competitors rush to the market to correct the inefficiency.   

With respect to Rockefeller, it was his ability to reduce inefficiencies by providing quality and low-price products to the consumer that enabled him to obtain such large market shares. Antitrust legislation has had the exact result that the legislation was intended: to limit competition while convincing the public that it promotes competition.  

In reference to the knowledge problem, Boudreaux maintains that only the market process can reveal the correct size of a firm. Antitrust laws reduce the ability for the market process to reveal information that is impossible to centralize. 

Additionally, Boudreaux shares his thoughts on what is the main source for the resurgence of antitrust in the modern-day, as well as something he has changed his mind about. With respect to the resurgence of antitrust in the modern-day, Boudreaux argues that envy and ignorance on the part of the public has led to greater suspicion of rich people and their businesses, and thus greater pushes for antitrust legislation. Boudreaux acknowledges that in college he believed that antitrust legislation was good because it boosts competition, but changed his mind when going deeper into the details.

12 Related Links:

Competition and Entrepreneurship
https://mises.org/library/competition-and-entrepreneurship-0

Michael Munger on Antitrust - EconTalk
https://www.econtalk.org/michael-munger-on-antitrust/

“Israel Kirzner’s Theory of Entrepreneurship - Austrian Economics with Steve Horwitz” - lecture by Steve Horwitz, Libertarianism.org, youtube
https://www.youtube.com/watch?v=Bu-i1q8LVvA

“James M. Buchanan: Antitrust and Politics as a Process” - lecture by James Buchanan, Libertarianism.org, youtube
https://www.youtube.com/watch?v=DkkyY6Wg0tA

“Profit and Loss” - Ludwig von Mises
https://mises.org/library/profit-and-loss-0

“Should Antitrust Be Used Against Amazon?” - EconLib
https://www.econlib.org/should-antitrust-be-used-against-amazon/

“Burt Folsom on Myth of the Robber Barons” - CSPAN
https://www.c-span.org/video/?294883-2/burt-folsom-myth-robber-barons

“Antitrust Crackdowns On Big Tech Won’t Help Consumers” - AIER
https://www.aier.org/article/antitrust-crackdowns-on-big-tech-wont-help-consumers/

“Milton Friedman Full Interview on Anti-Trust and Tech” - interview of Milton Friedman, National Taxpayers Union, youtube
https://www.youtube.com/watch?v=mlwxdyLnMXM

“The Purpose of Antitrust” - Foundation for Economic Education
https://fee.org/articles/the-purposes-of-antitrust/

“Essential Schumpeter: Creative Destruction” - Fraser Institute, youtube
https://www.youtube.com/watch?v=l-soJGRgAAQ

“Law Legislation and Liberty: Hayek’s Completed Trilogy” - Foundation for Economic Education
https://fee.org/articles/law-legislation-and-liberty-hayeks-completed-trilogy/

5 Questions for people to explore:

What are the incentive structures that enable antitrust legislation to be implemented?

Would Hayek consider antitrust to be legislation or law?

How would a Buchanan and Tullock constitutional system handle antitrust legislation?

When was antitrust legislation first theorized and why?

How are people in the modern day influenced by antitrust?