 One of the interesting things about breaking through in the freedom philosophy or libertarianism is and maybe you all have some of the same experiences but you know you learn the basic principles in the basic paradigm but all of a sudden you hit up against an issue and you struggle with it and you say wait a minute now what about roads or what about education what happens here and and then all of a sudden when you when you think it through or you read a book you go ah and it all tumbles into place and you say wow man that the paradigm really is consistent after all and I and one of the one of these common areas where this happens I think is in antitrust the antitrust area you know the the myths of the robber barons and and big business in the 1800s and and how standard oil monopolize the oil refinery business and how this is one area of peaceful activity in one area of business activity there where we really need government well when I came up against this stumbling block struggled with it trying to figure it out on my own and then I discovered the books of Dominic Armentano books like the myth of antitrust and antitrust and monopoly and there it was I mean everything just tumbled right into place Armentano is probably the libertarian the freedom movements most recognized expert in the area of antitrust and for the reasons for repealing antitrust legislation I met Dom some eight nine years ago when he was a member of the board of trustees at the foundation for economic education he did us a big honor five years ago by becoming a founding member of the board of trustees of the future freedom foundation he's the author of several books he taught for many many years economics at the university of Hartford where he recently took an early retirement and moved down to Florida his articles and reviews have appeared in many many scholarly journals as well as such newspapers as the Wall Street Journal the New York Times the London Financial Times public choice and antitrust bulletin the title of Dom's talk is the case for repealing antitrust laws Walter Williams can take his jacket off I guess I can I'm very happy to be here I noticed the flyer says halting the destruction of liberty I thought we were here to reverse the trends and so I would I thought bumper was the most radical random most radical organization that's why I joined it but seems to me what we have to do is reverse the trends in liberty we have to halt and reverse and that's why I'm here to speak about repealing seems to me that's what you get into when you start talking about repealing legislation let me start as I normally do by giving a historical perspective on the antitrust laws I think that there are two general theories about antitrust law or as Harold Demisets once said there are two beliefs about monopoly two very different beliefs about antitrust and monopoly I think the first belief we're very familiar with and this is the proto-Marxian belief that in a free market business organizations will either grow internally to come to monopolize a market or will merge with each other to monopolize a market or that business organizations will conspire and collude to restrain trade to fix prices to reduce output and generally to lower consumer welfare and that competition which presumably we depend on to promote the interest of consumers will be reduced perhaps even eliminated so that you start with a free market you allow the competitive process or the free market to work but then it ends up destroying itself that there is a flaw presumably in market theory and to fix that flaw you have to have government regulation so even if you don't start with government regulation you end up bringing government back to protect competition to promote perhaps even to promote competition to prevent firms from merging to prevent one firm from dominating a market to prevent firms from conspiring to stop firms from engaging in tying agreements to stop firms from price discriminating to stop firms from engaging in resale price maintenance all alleged business practices that harm consumer welfare now what government policy is that well that's anti-trust policy that's anti-trust policy a hundred years ago this year the first major anti-trust case went to the Supreme Court involving the American sugar refining company so we've had anti-trust law at the federal level for a very very long period of time Sherman act was passed in 1890 and the first major suit was settled at the Supreme Court level in 1895 interestingly by the way although I'll talk about cases later interestingly the American sugar refining company which was the first major American corporation indicted under federal anti-trust law and had 98% of the market won its case in 1895 Supreme Court declaring that its activities were not interstate commerce and therefore did not come under the provisions of the of the anti-trust law and what's interesting about the American sugar refining company is what happened to the monopoly position what happened to the monopoly position there was a free market relatively free market there was a firm that had 98% of the market there was a firm that lost its anti-trust case wasn't broken up by the government wasn't splintered into its component parts and yet two three four five six seven years later there was no monopoly in the sugar market in the United States that sugar prices continued to fall after 1895 right into the into the next century so anyone that tells you that there's proof in the anti-trust cases that you need anti-trust regulation to promote competition or to save consumers start with the first case start with the sugar case and ask them what happened to the old sugar trust and why didn't the sugar trust dominate the sugar market and raise sugar prices and make exorbitant profit from then on because the government lost its case that's that's the oldest so-called public interest theory of anti-trust policy that in the public interest in the consumers interest you need anti-trust law because the market the competitive market has a fatal flaw there are a lot of people that believe that theory a lot of economists believe that a lot of attorneys believe that that that public interest perspective has had wide support for years for 90 years almost uninterrupted it had wide support a little skepticism about that theory in the 1980s and I'll get to that in a minute but the public interest theory of anti-trust is still firmly in place if we took a trip three or four miles from here and went down to the antitrust division of the Justice Department or started poking around at the Federal Trade Commission we would find many many people many many attorneys perhaps even most of the economists there who would say that got to worry about monopoly power got to worry about mergers need quote vigorous enforcement of antitrust law certainly we have a new assistant attorney general man Benjamin who believes in antitrust with a vengeance she has beefed up the antitrust division there are a hundred more attorneys and paralegals there now than there were two years ago a hundred more so we're gonna as you most of you know get some vigorous antitrust activity again in the 1990s there's an alternative theory of antitrust law I still think very definitely the minority vision of antitrust and that's that there is no free market problem at all and you don't need government regulation to to deal with with a non-existent problem that antitrust law exists because private interests can use the law to prevent to restrict and to restrain competition the very opposite the very opposite of the public interest perspective that antitrust law is protectionist of the existing market structure that firms use antitrust against other firms not because the other firms are engaging in monopolistic practices why the heck would a competitor sue another firm that's engaged in a monopolistic practice why wouldn't that competitor simply enjoy the advantages of that monopolistic practice what we mean by a monopolistic practice in economics is a restraint of output and a higher price if I were a competitor and firm X was doing that I would enjoy the advantages of that I wouldn't sue that firm under the antitrust law what percentage would there be in that all almost all the firms that sue other firms are complaining not about monopoly power but about the lack of it they're complaining about competition they're typically suing a more efficient organization for doing more efficient things in the market as far as the consumers are concerned that's what they're upset about it turns interesting in the recently settled Microsoft case the first the criticism of Microsoft and the criticism of the consent decree that the Justice Department silent Microsoft didn't come from the users it came from the competitors most of the competitors said you know the government didn't go far enough they wanted Microsoft broken up they wanted a wall put in between the applications and the complaints were from the competitors notably IBM in that case not from the not from the users this is very typical 95 I always tell my students 95% of all antitrust action is one firm suing another firm only 5% of the cases they're brought historically are brought by the government those may be public interest cases although they don't have a public interest consequence as I'll show you when we when we do some case histories in a minute but certainly the bulk of antitrust has nothing to do with the public interest it's one firm suing another normally complaining about some practice which has an efficiency consequence that injures the plaintiff so there's two very different theories about what antitrust is all about public interest and private interest or sometimes called the public choice theory of antitrust now most of us most of the real serious critics I think of antitrust policy subscribe to the to the latter vision that that's what the antitrust is all about and I think there's some historical evidence in fact that that is what it is about that if you if you research the origins of antitrust law state antitrust law you start you should start there and even the federal law that even though there might have been public interest rhetoric that the bulk of the real push for antitrust legislation at the state and federal level was in fact from disgruntled competitors who were anxious to stymie and restrict the activities of the larger in some cases larger more efficient firms and the best example of that of course would be in the petroleum industry and the standard oil company the public interest perspective on antitrust dominated people thinking about antitrust between 1890 and roughly 1975 there was very little criticism of antitrust policy now you would think in the libertarian movement even in the Austrian economics movement there would have been criticism severe criticism of antitrust policy not so not so even even such luminaries as Ludwig von Mises and Frederick Hayek are ambiguous with respect to their position on antitrust law now you would expect that ambiguity with let's say Chicago school economists and who have always been ambiguous about antitrust policy but you would not expect it from people like Hayek and yet if you read the Constitution of Liberty and you read what Hayek has to say about antitrust policy you don't get the feeling that he's a critic at all you get the feeling that in fact he thinks that's a legitimate governmental policy so antitrust policy enjoyed wide bipartisan support from the liberals from the middle of the road from the conservatives generally people like George Stigler Nobel Prize winner I'm told you know late in his life he started to rethink his views on antitrust but I find nothing's in the literature that would lead me to believe that he ever gave up his belief that antitrust is necessary to maintain competition in a free society now beginning in the in the in the 70s there were critical articles published about antitrust enforcement some were very theoretical and a lot of casework was done and beginning as I say roughly in 1975 you had a revisionist movement and I think it had some effect I think it had some effect I think it had effect for example on the thinking of some people in the administrative agencies certainly when Ronald Reagan came in he appointed people that were sympathetic to the anti antitrust vision that if you really want to have a competitive free market economy you need less antitrust not more antitrust William Baxter was one of those people he was a UC I'm sorry Stanford law professor and certainly held that position he became the assistant train general of the United States the first important thing he did in the antitrust area was drop the IBM case you had over at the Federal Trade Commission Jim Miller who was again a very anti antitruster you also had judges particularly at the district court level being being reeducated if you will about antitrust policy about antitrust theory and about antitrust policy so you had in the 1980s a deregulation in the antitrust area you had many many fewer private cases brought and you had you had fewer federal cases brought and antitrust went into a decline for eight years 1980 to 1988 in fact I thought that was the end of it I thought that was the end of it I wasn't quite sure it was the end of it I wrote a book for Kato it came out in 84 where I argued the law should be repealed in fact that's been my position since 1972 fact the book was called antitrust policy the case for repeal and I warned the Chicago school people and and other critics of antitrust that maybe we ought to kill it before it comes back again at some later point and I was reassured constantly that this would never happen that the theoretical arguments against antitrust policy were now understood by everybody that our Mantenno the war was over we don't have to stick you know a wooden stake in the heart of antitrust it will it will never come back well sure as hell it has come back so we had a decline for eight years there was a law during the Bush administration but certainly since Clinton and since Janet Reno and Anne Bingham and antitrust policy is back with a vengeance we have all sorts of cases we have all sorts of subpoenas we have an ongoing case involving GE and the beers right now and a whole slew of so-called consent decrees which I want to speak about later so antitrust is busy again the private antitrust bar couldn't be happier they've got big smiles on their face in fact the Wall Street Journal reported that Anne Bingham and said to a group of private antitrust attorneys I'm going to make sure your kids have enough money to go to college and that that's about it now you understand in blatant if that's an accurate quote what the heck antitrust is all about I'm going to make sure your kids go go to college now my position as I stated is that antitrust laws should be repealed let me speak briefly about the case for repeal I think the case for repeal can be broken down into three areas I think one area is certainly a moral argument and even though I'm an economist I'm going to make a moral argument against antitrust I think there's a theoretical case against antitrust any antitrust policy and I think there's a so-called empirical or case argument against antitrust policy so let me start with the so-called moral argument against antitrust policy I think the moral argument is a fairly straightforward one and you either accept it or you don't and of course I'm speaking to a fairly friendly audience as most of us would recognize the purpose and function of law of appropriate law of good law is to protect people's rights to protect property rights to protect individual rights that's the purpose of law so if you have a law that doesn't protect property rights that doesn't protect individual rights the right to make decisions with respect to the use of your own life in your own property then you've got bad law then you've got a moral law antitrust law by its very nature interferes with peaceful exchange it interferes with individual property rights if a and b who own in the individually two different firms decide that they're going to produce a product together or charge the same prices or not compete or price discriminate or make tying agreements with each other that activity although some economists may may find it and we'll deal with this in a minute anti-competitive that activity is peaceful activity it does not involve a violation of rights these are agreements these are agreements and by definition agreements are voluntary to interfere with voluntary agreements is to violate the rights of the individual business people involved so when you tell me I can't fix my prices when you tell me I can't price discriminate or I can't merge or violating my rights to do things that are peaceful it's like telling me that I can't marry whom I want to or I can't do the research that I want to or I can't meet with colleagues and discuss antitrust policy you know if intellectuals faced regulations that told them that they couldn't do research or they couldn't or their speaking fees would be regulated or that their correspondence would be monitored they'd scream like heck and say that's immoral you can't do that government you're violating my rights yet those same intellectuals in the antitrust area never and I mean never recognize the gross violations of substantive rights that occur in the antitrust area all the time so there are substantive rights violations involved in having and enforcing any any antitrust policy think about all the provisions of the antitrust laws conspiring to fix prices is making an agreement merging is making an agreement price discriminating is charging prices to a lower or higher than you charge to be those are those are voluntary agreements a tying contract is an agreement that says I'll sell you a condition that you buy B you don't have to buy a and B for me but if you buy a you must buy B those are agreements people are free to enter into them or not enter into them so when the laws regulate that activity they regulate agreements and therefore are inherently violent of people's rights so I think there's a strong moral case although very few economists will attempt to make it a strong moral case against any antitrust law there's also a procedural moral issue that that what I've just referred to I will call a substantive moral issues there's also a procedural moral issue and the procedural moral issue is every businessman out there in the economy doesn't really know what the heck is illegal from day today you don't know when or under what conditions you are violating the law you live in some sense in gross uncertainty we almost all almost always find out what's illegal after the fact after the case when the court drops the ruling down and rationalizes it in some way because you charge prices that were too high or that were the same as everybody else or with it or that were too low so there's tremendous uncertainty in the antitrust area in fact this is why for the most part most firms say the heck with it you want us to do something we'll do it you want us to sign an agreement a consent decree we'll sign it you want us to raise our price firms that are charged with price discriminating are almost always charging prices too low for the government so they go to the government so you want us to raise our prices all right we'll do it we're not gonna we're not gonna we're not gonna spend three or four million dollars and fight you in court not knowing whether we're gonna win or lose and if we lose anyway we're gonna have to raise our price you want us to raise our price we'll raise it so there's this procedural if you will immorality there is no rule of law not really in the antitrust area it's made every day it used to be made every day and that would be another reason to oppose antitrust so regardless of the alleged efficiency of antitrust law we'll get to that in a minute I don't think it is efficient but regardless of the alleged efficiency it's immoral it's immoral law it interferes with rights and it's and it's ambiguous in the extreme and therefore should be repealed on the on those grounds alone now I know this is not an economics class and I will not get terribly technical with you about either theory or cases but certainly the case against antitrust depends not on the moral argument for most people for us it might but not for most people when I'm talking to colleagues I'm not going to get into the moral difficulties of antitrust law they don't they simply don't understand or if they do there they don't care what they want to know about is theory and practice theory and practice well let's talk a little bit about monopoly theory I think that's where you have to start in the wealth of nations Adam Smith talks about monopoly and most of the time almost all the time he's talking about monopoly in the wealth of nations he's talking about government legally restricting entry exit and or competition in the marketplace creating government creating monopoly or near monopoly positions for certain individuals for certain families for certain firms the playing card monopoly the male monopoly in America that was a grant that was a grant a monopoly grant from the crown to the needle family to the Thomas Neil family the Thomas Neil family in the colonial period had the legal right to carry the mail no one else had that right and Smith said I'm against monopoly how can monopoly be in the interest of the consumers how can granting a privilege to a family or to a firm and prohibiting free entry into the market possibly give you the competitive price give you a fair price now how do you get rid of that kind of monopoly you don't either a make the grants of privilege or if you've made them you resend them so deregulation in the wealth of nations deregulation and this was of course true in the 1970s and 80s deregulation is the way to a free market the regulations exist you deregulate by the way this would also apply to antitrust policy if antitrust policy is regulation then you deregulate that's how you get to a free market if you want to free market and mergers deregulate get rid of the federal trade commission get rid of the justice the park got their authority to bring legal suit against a merger so there is a theory of monopoly in Smith there is a theory of monopoly in classical economics most of it spins around the idea that government is the problem only government can after all legally restrict entry and if you want competition or I'm sorry if you want a free market you just remove government regulation now what about antitrust policy did Adam Smith think antitrust policy was necessary you've now let's say deregulated you now have a free market do you need antitrust policy to protect the free market we get back to my public interest theory no no interestingly Adam Smith talks about businessmen frequently getting together to fix prices the most famous quote from the wealth of nations is Smith's bitter commentary on how businessmen are always colluding to to fix prices and restraining competition the very next line the very next sentence which most economists have never read is that Smith says I would make no law against it because he says I can't think of a law against those agreements that quote would be consistent with liberty and justice what a great libertarian line I can't think of a law I'm a paraphrasing can't think of a law that would be consistent with liberty and justice so no we don't need an antitrust law so one theory of monopoly is antitrust is irrelevant you don't need antitrust what you need is to deregulate the economy and then you will have a free market but what about the second theory remember I started off the talk with Dems Harold Demsitz who's a UCLA economist Harold Demsitz statement that there are two beliefs about monopoly what about the so the theory of monopoly well the other theory of monopoly is the so-called free market theory forget about government regulation couldn't in fact a firm come to have a monopoly position in the market and there have been firms historically I gave you an example that's at the start of the talk there have been firms that have had high market shares we're talking about monopoly begs a lot of questions we have to define the relevant market we have to define the nature of the product we have to get into discussions about whether we're talking about a domestic market or in the national market but put those aside for the moment couldn't the firm come to have 98% of a market 100% of a market American Sugar Refining did Alcoa did aluminum company of America had for all intensive purposes a monopoly in the in the production of primary ingot aluminum for 50 years not just for a day or two for 50 years nobody except Alcoa produced and sold in the United States primary ingot aluminum now what's the argument there well the argument there can I think of something like this and all of this is to be done in depth we're not going to do it here how did the firm obtain its monopoly and how does the firm maintain its monopoly those are relevant questions look if I'm the government and I take firm a and I give firm a monopoly and protect from me from competition that's how the firm got its monopoly in other words the market did not justify or rationalize that market share that's important it's important to say that's important to understand that on the other hand if I'm Alcoa and I have invested tremendous amounts of capital in new technology and I have pioneered all sorts of innovation or activity that have reduced cost dramatically and reduce the price the product and it's that process that competitor process that keeps other firms from being able to make agreements with consumers that's a very different story look I thought we were supposed to be interested in consumer welfare well let's pay attention to the consumers if I've got that kind of a monopoly I haven't done anything wrong and that's what of course Alcoa did when Alcoa sold aluminum in 1888 they sold it for five dollars an ingot pound when they sold it in 1937 and the government was all over them in 1937 they were selling it for 22 cents an ingot pound and when the president of the firm was put on the stand he was asked to explain the monopoly he said well we've reduced our cost and we reduced our prices and we don't have anybody that wants to compete with us there are bigger firms Henry Ford wants to produce aluminum he'd rather buy it from us though because he doesn't think he can make any money at 22 cents a pound Henry Ford was smart he shouldn't have competed with Alcoa and he didn't so it makes a difference how you get the monopoly and how you maintain it if a firm is inefficient it will not either gain the monopoly position and then we have a non-issue or it will lose its its market position and then you again you don't need any antitrust case if Alcoa had been inefficient they would never have gained their high market share and B if they had been inefficient they would have lost it so what's the what's the antitrust policy for what do we need antitrust for no antitrust was used against Alcoa because Alcoa was a an efficient a large efficient firm and it was harassed for 13 years as have many firms been harassed the list is long but if we're talking about near monopoly positions that's that's probably the case you would want to look at by the way Alcoa was never a monopoly I went through graduate school thinking that Alcoa was a good monopoly but they were never a monopoly they had hundreds of competitors and you have to read the district court decision to find that out there were hundreds of firms that sold an identical product it wasn't called primary in good aluminum was called secondary in good aluminum but it was a absolutely chemically identical to primer so the government the government had defined the market so that Alcoa was the only firm but if you would define the market rationally and including included goods that were perfect substitutes for Alcoa's product you would have included these hundreds of other firms and then what would Alcoa's market share have been a hundred percent no 33 percent they would never have been taken to court with a 33 percent market share but that was their real market share sometimes law professors don't let their students read the district courts cases gotta read the district court gotta read the trial court cases that's where the stuff is supreme courts over in the clouds philosophizing about this and that you've got to get into the district court case and here a judge say as he said in Alcoa there are hundreds of other competitors Alcoa doesn't have a monopoly share with the house the government talking about that judge found Alcoa innocent of a hundred and fifty-two charges a hundred and fifty two to know that the government lost that case at the district court level and they won on appeal well how about a monopoly though that isn't efficient how about a monopoly that raises prices and makes a lot of money well the argument there as most of you know is well if that happens they're gonna have competitors that monopoly profits are going to attract firms into the market and customers are going to be anxious to make agreements with competitors and there ain't going to be any monopoly now there's a time period there and we could get into a debate about whether it's quote more efficient to have anti-trust policy move against the inefficient monopoly or whether we should let the market take apart inefficient monopoly my study of the evidence is don't use government that the market is is efficient at taking apart inefficiency how about collusion well this is a whole nother area but in some ways it's not because the issue is the same the issue is monopoly because after all that's what the colluters are trying to do firm a and firm b although they don't merge let's say to make a monopoly or trying to make a monopoly price by colluding so you have the same problems with collusion that you have with monopoly only more so because if you've got independent firms trying to fix prices you've always got the problem of cheating you've always got the problem of cheating and enforcing the agreement my study of the history of antitrust cases in the price fixing area is that businessmen cheat thank goodness that they're concerned for their own self-interest and the self interest of the firm leads them to attempt to mislead their competitor that they're charging the monopoly price but grant the discount cut the price and do more business as long as hopefully that the competitor doesn't discover that but of course the competitor does these agreements almost always come apart unless they're enforced unless there's legal enforceability private cartel agreements really don't work i think there's good theoretical evidence that they don't and i think there's good empirical evidence that they don't work Doug Ginsburg who is a judge in a reply to an article i wrote said well when i was at the justice department we found all kinds of price fixing agreements and they lasted a very long period of time here's our montano saying in this article that price fixing agreements don't last that's not the issue judge ginsburg the issue is not did they last the issue is did they work were they effective was competition was trade restrained was the market monopolized where the monopoly price is achieved not did businessmen make agreements break agreements make agreements break agreements hey they do that what happened prior to antitrust law look go back into the pre 1890 period could you make a conspiracy a price fixing agreement with your competitor of course you could was it illegal no did they work no the best evidence that we can have a world without the antitrust law and have it be competitive is to go back to the pre 1890 period there's been a lot of research done in that period by tom de lorenzo and others which would indicate that that was an extremely competitive period despite the fact that you could make price fixing agreements railroads made them all the time broke them all the time steel companies made them all the time broke them all the time most of my work has been in in cases when i started teaching at the university of harford they handed me an antitrust course and i hadn't done a lot of antitrust work as a as a student i'd had one graduate course in antitrust and i had to find a textbook and i i think there were only two or three then textbooks that you could use in the antitrust area and they were all the same and what they essentially said is uh you know we need antitrust law and the proof is in the cases standard oil american tobacco alcoa u.s. steel the proof is in the cases that firms really do abuse their power and the and the proof for that the evidence for that is in the antitrust cases the government brought these cases broke these firms apart because they were doing they were doing bad things as far as consumers were concerned and that's pretty much where i started but when i had to teach the course i thought i'd do a little work and go and actually read some of these cases rather than trust the secondary source i'd go read the case i remember going over to state capital in connecticut many many years ago and i said i want to see the standard oil trial brief and the and the law library almost died i mean no one had ever asked him for the standard oil trial brief he says way up in the attic you know 10 000 pages long connecticut was one of the i think there's there were seven libraries at the time that had the standard oil trial record so i got into the antitrust cases i started with sugar the sugar case which is the first major case i spent a lot of time with the petroleum ministry in the standard oil company i got very into the tobacco industry the history of that industry fascinating history in the american tobacco company the rise of that firm i studied the steel industry these are all major american industries and there are major monopoly cases in every one of them and of course aluminum and instead of finding that in free markets and these markets were relatively free i mean you can never say absolutely free and there's always some regulation some tariff but these markets were relatively free the petroleum industry is a good example relatively free market between 1860 and 1911 well standard oil able to monopolize that market and raise prices absolutely not absolutely not where's the evidence that they did that in 1911 when they were broken up there were 147 petroleum refiners in the united states standard oil of new jersey was one of them there 146 other firms their market share at that point 1911 was about 64 percent it had been in steady decline for about 19 years almost all the history the histories that are done of the antitrust cases are done by attorneys they're done by lawyers they stay away from the specific economic evidence they stay away from price evidence they stay away from output evidence they stay away from numbers of competitors evidence so when i wrote the midst of antitrust in 1972 i wrote it as an economist around that evidence and what i was finding i thought was remarkable because i couldn't find it in any other text that in fact the major firms that that had lost their monopoly cases hadn't lost them because they'd restrain trade there was no evidence in the case that they had they had expanded their outputs dramatically they had lowered prices costs and prices dramatically they had innovated and in fact that's probably what got them in trouble what could be more immoral if you're talking about morality than to bring illegal action against the firm that does those kinds of things the only thing more immoral probably is businessmen not getting up and saying hey you're punishing us for our virtues i wish i could say businessmen are brave and and support me and others in this area they don't my my most hostile audiences typically are business audiences cowardly when it comes to that and yet they they shouldn't they shouldn't be ashamed of their of business history generally because there's nothing in the major antitrust cases that would lead you to believe that free market free market monopoly is a serious problem that requires antitrust regulation well let me let me wrap this up so you can get some questions the first part of my talk was historical the second part is morality theory and cases the third part is just to talk a little bit about the future of antitrust we're going to see more antitrust policy we're going to see a uh an activist policy on the part of the clinton administration i i think we're gonna we're gonna go beyond that and what i mean by that is there are certain areas of the economy that are quote immune from antitrust law then two major areas of immunity are insurance and baseball now you already know the baseball story almost everybody although it didn't pass almost everybody in congress believes that that's an outmoded exemption certainly the justification that was given in 1922 for the baseball exemption from the antitrust law doesn't make any sense that it's not interstate commerce of course it's interstate commerce that's not the reason why you want to exempt base professional baseball from antitrust law you want to exempt professional baseball and insurance from antitrust law because of all the reasons i've spoken to you tonight about because antitrust enforcement doesn't make any theoretical or empirical sense and you don't want to apply bad law to areas that have had not had that application the application of antitrust laws to the insurance and she would be absolutely disastrous for consumers now the antitrust bar is looking at chops they can't wait there'd be hundreds of suits thousands of suits perhaps if the antitrust laws were applied to the insurance industry they're 3,500 insurance companies they do all kinds of things that look like quote they violate the antitrust law there'd be a feeding frenzy so of course the private antitrust attorneys can't wait but doesn't make any any theoretical or empirical sense to apply the laws there no if you've got an exemption great keep it now having said that what's happening the industry is giving it up they're giving up the fight they're giving up the fight they've maintained a pretty good fight from 1945 when they got the mccarran act which exempts them from antitrust law until the present but they're giving up the fight so i think if we're looking through the 1990s i think what's going to happen is the insurance industry is going to lose its antitrust exemption exemption and i'm and i'm quite sure baseball will too so the two major areas of exemption probably will will go so not only will we get more antitrust out of the federal trade commission and the justice department we will also get i think the congress moving not to repeal antitrust law which is what i want but to expand the antitrust law very discouraging for someone like myself who's been in the field for many many years very discouraging uh to see people actually talking about expanding antitrust law when there's nothing in theory nothing in practice and certainly nothing in in in any moral argument that would lead you to believe that that we need it and yet it's a hard nut to crack even my own father i can't convince i can't convince my own father that we should do away the antitrust law most of us have probably had this experience we know something is absolutely wrong we articulate it as best we can we write thousands and thousands of pages but within our own family within our own family there's a shaking of the head old beliefs die hard and frankly i'm not optimistic that antitrust will ever be abolished i favor the abolishment of it i want to not just halt the decline of liberty but reverse it but frankly i'm at a loss to know at this point what the strategy is other than more of the same what the strategy is for getting that reversal and maybe we can deal with that in the question answer period thank you very much uh what's the status of antitrust laws in foreign countries and how do you compete against companies overseas companies who don't have to comply with antitrust laws excellent question uh some firms complain that they have less freedom in america than firms have in other countries uh and that the antitrust laws domestically hurt them in competition with with foreign firms i think there's some truth to that most countries have antitrust law the americans really pioneered antitrust law most countries adopted antitrust law but it's not simply enforces vigorously in most countries in japan they have an elaborate antitrust structure but for the most part i think i can safely say this is ignored so that firms are allowed to do things in japan that they're not allowed to do here and i think those things are efficient things and i think uh therefore foreign firms everything else equal would have a marginal efficiency advantage because of domestic antitrust law now i don't think if you repealed antitrust law that you would change uh you know there'd be a dramatic change in competitiveness that's not what i'm saying i think it's a marginal factor though it's a marginal negative fact i didn't hear you mention anything about the at&t breakup would you say a few words about that well it's hard to say a few words about that that's an interesting case that's an interesting case my general position has to be i would not have favored the legal breakup of american telephone and telegraph uh i think the bulk of the advantages economic advantages that have flowed from that breakup legal breakup could have been achieved would have been achieved through deregulation of telecommunications and in fact i think the evidence is is that that that the dramatic deregulation of telecommunications has produced a dramatic dramatic advantages for consumers i think the bulk of those advantages would have been achieved without the breakup uh on the other hand at&t was not a free market firm i mean we have to understand that that if we had to pick out one firm that had quote enjoyed the advantages of protectionism legal protectionism longer than perhaps in any other firm you would have picked out at&t so in some sense there's some you're gonna have to forgive me for this i mean in some sense there's some justice in in in doing that at&t i mean they were a strong advocate of government regulation very hostile to free markets and uh in in some sense there's a there's a a a radical kind of fairness in the fact that they got broken up but no i would not have brought a suit against them certainly there have been major you know economies and efficiencies that flowed from the breakup but as i said i think they would have flowed from deregulation rather than uh they would have been achieved uh that way i would have been i would have preferred to have them achieve that way could you comment on trademark laws patent laws and copyright laws and also when will the airlines uh get us back into being a uh regulated industry i wrote an article for the let me come in on the second part of that and remind me about the first part of the question i wrote an article for the wall street journal a number of years ago where i said all right we're deregulating the air carrier industry and that's great we should deregulate this industry get the civil non-export out of the way let them free market price and so forth but but if you really want to create a free market you not only have to give firms the right to compete you have to give them the right to cooperate everybody talks about competition almost no one talks about cooperation look these are as far as i am concerned left hand right hand positions and i and i argued in that article and we got a all sorts of flak i'm surprised journal published it i argued in that article that at the same time you deregulate the air carriers you have to give them the right to cooperate took if you want to use the term collude because what what i what i argued there is you're going to get tremendous price instability in this industry and you're going to lose the bulk of the carriers and then what's going to happen the push for regulations going to happen and someone's going to come along and say well the free market doesn't work that ain't the free market people that's not the free market free market is cooperation and open markets so we open the markets but did not allow and do not allow the firms to cooperate in fact we've had major illegal harassment of the air carriers by the government at the same time they're losing nine billion dollars more money than they earned from 1938 to the president they've lost in the last four years at the same time they've lost massive amounts of money the government's been suing them for a legionary and i trust violations absolutely crazy so i i i that that's an excellent question and we're going to lose our our free allegedly free market air carrier industry unless although it's very controversial unless we allow the firms to engage in some price fixing uh... that may not be the best of all worlds but it's better than having the cab come back in and start regulating rates and roots again i don't think we want to go back to that the first part of the question dealt with patents and copyrights i think copyrights are are consistent with property rights and belong in a certainly belong in a free market uh... and i think patents can be i think patent law can be changed to be consistent with uh... with what most of us would accept as as a as a legitimate property right a patent is a is a is a property right that's the way we should say it now what it does of course what patent law does is prohibit the so-called independent second discoverer from having his rights recognized and i think what i i think that ought to be changed at some point so i would not throw the baby out with the bathwater i don't think we want to throw patent law out completely i think we want to make patent law more like copyright law and recognized everyone's independent right to discovery and uh... and allow that to be protected allow that to be legitimate property right uh... doctor um first i want to say that i can certainly sympathize with your relationship with your father my mom still thinks that linden larouche is a libertarian you've got more problems than i do um my question is we're not the anti trust laws a reaction and maybe a predictable if wrong headed reaction to earlier limited liability licensing corporate franchising type legislation and would not the repeal of the anti trust make much more sense of simultaneously we tried to repeal those never heard that question before i don't i don't know the answer to that i certainly would not want to repeal limited liability law why would you want to do that after all we're talking about limited liability for shareholders not for the corporations corporations have full liability only the shareholders have limited liability so i'm not sure i would want to necessarily engage in in uh... in uh... well i i agree that there are market ways to achieve the result but i don't i don't think it's a rights violating uh... i wouldn't call it a privilege frankly i think i think that i think limited liability can and if you read bob hesson's book and that's the corporation certainly limited liability can be and has been achieved in the market the government comes along and sort of recognizes the market limitation of liability just like as bob says in his book the government comes along and recognizes marriage so i don't think limited liability is is is is necessarily a privilege and i really don't see the connection well well if you're talking about licensing the way i'm talking about it surely i'm against licensing i'm against all occupational licensing all government licensing well could be some of that if you accept the public interest theory could be some of that but if you accept my alternate theory the private interest theory the so called public choice theory then that would not have played a role no i think i think i think there was some of that certainly uh in 1890 we as you'll recall the the congress passed the mckinley tariff act which which created monopoly privilege for business and in fact some people say that the the passage of the antitrust law was to uh you know what's it was to make the republicans who supported that the tariff act looked like they were against monopoly so yeah there's certainly there's certainly something to be said for that that there was a reaction to privilege to the tariff privilege the licensing privilege sure dom you just opened an idea to me if is there any law against a japanese baseball team and a japanese insurance company coming in here if this place is going to get antitrust they come in here and it wouldn't be under our would they didn't we have a lot of japanese baseball oh no firms that operate here regardless of whether they're japanese or not are subject to american antitrust law especially an especially well the insurance company would not be subject to antitrust law but would be subject to all kinds of other law and there's other law that affects the insurance industry it's a state regulated industry so they'd have to get a license from let's say the state of new york to operate they'd have to meet certain capital requirements and so forth i don't i don't control the selection well bear with me just a moment then you may have a turn um is your source of pessimism against repeal of the antitrust laws based on uh the businessman's refusal to fight them or due to the perhaps a bias of the court actually the courts recently have been reasonably good on antitrust issues they're not for repeal don't get me wrong but the justice department in the last five years has lost i think something like 11 out of 13 cases now that's absolutely unprecedented and if you went back to the 50s and 60s even on into the early 70s they won most of their cases so as i said in my talk i think there's been a lot of re-education particularly at the district court and the pellet court level and robber borke's probably more responsible for this than anyone else uh because borke's the antitrust book is you know is is is widely read still the antitrust paradox so it wouldn't be the courts there's there's no political percentage in it i mean there's no political percentage in any senator or any representative speaking out against the antitrust law from a cost-benefit perspective it just doesn't make any sense and you and we understand this you can't therefore expect them to do it and certainly the agencies are very interested in expanding their power and as i say the antitrust bar has been sitting around for a number of years with literally nothing to do there and they're terribly excited about doing antitrust efforts so that's why i'm pessimistic i mean i think i understand public choice theory and i think i understand where the cost and benefits are and unless the american public somehow can see through this and you throw out you know all the bad guys and put in all the good guys it ain't going to happen if i could press a button and antitrust would you know could disappear i'd press the button they've always told my class is that but the point is there is no there is no such button it can't be pushed because it doesn't exist we've made some progress in antitrust policy i don't think we'll get the real dumb stupid cases that we've had in the past we'll get new dumb stupid cases they'll be they'll be slightly smaller slightly more intelligent at the margin but it won't go it probably won't go away other questions well you just answered part of my question but i wanted to preface my question with a quote by walter williams since he referred to him earlier he addressed his first semester undergraduate microeconomics class following way after the first midterm he said if you pass this midterm with a c or better you know more than anybody on capitol hill about economics and along those lines what i wanted to ask you was do you think that congressman have read or heard of your book it's such a hard hitting factual book and it's in the title it's so evident what the book's about it's not immersed in a in a libertarian book about 50 other items and so i wonder have you been called to speak before congress in any of these issues do you think it's really a matter of ignorance only or you know that it really is a you know conspiracy i don't think it's i don't think it's ignorant so i'm going to have to disagree with walter i really would disagree with walter i don't think it's ignorance at all i think i think people understand how things work i think senator kennedy for example knows that and i trust law really doesn't work robert rike the secretary of labor re read the work of nations extremely hostile to any antitrust policy at all like he was at the university of harford about a year ago and it was a small group of us and i i asked him specifically i said would you abolish the antitrust law he said sure antitrust laws are relevant it may have had some relevance in the old days he believed that that's not correct either by the way but he said certainly irrelevant in a in a world market with international competition and trade barriers going down uh no i don't think these people are ignorant at all i i don't think there's any political percentage in doing it there's no political percentage in taking that position why would senator kennedy take that position even though he know he might know and i'm almost sure he does know that that things are all didn't raise prices well i've had some exposure the book certainly has not been a best seller i think colleagues in the field perhaps know now of my work my case work it's a it's a it's a long gradual slow process but i'm not getting any younger other questions thank you very much