The Antitrust Paradigm: Restoring a Competitive Economy

"This is an important book. It’s sort of the opposite of Competition is Killing Us . Competition is Killing Us is a very polemical book which attacks competition policy. The Antitrust Paradigm is written by an insider who really believes in competition policy, but just thinks it needs to be made more effective. He doesn’t believe in changing things that much, he just thinks we need to make what we have much more effective. This book is very useful because it’s written by someone with an extremely detailed and very authoritative knowledge of competition law and how it operates. He’s in a great position to understand where it’s gone wrong and how it can be improved. He includes a lot of material on the history of antitrust, and on the political economy of antitrust. He hasn’t just got practical suggestions as to how the details of antitrust can be changed in principle, but also ideas on how you might get the political environment to change so that antitrust goes up the political agenda. He points out that it was in 1930s America that antitrust became strong. It happened then in America because of the political context. That strength in competition policy lasted for quite a long time. It led to quite major interventions, for example the breakup of AT&T. More recently, there was the decision to go against Microsoft. Proposing the break-up of Microsoft was admirably aggressive, although it didn’t happen in the end. But they went far enough to think about it. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . Starting around the 1970s, a group called the Chicago school of economics has successfully pushed back against that 1930s type of thinking and proposed, in effect, a weaker type of competition policy, which allows big companies to emerge. This book argues that it’s possible to reverse this, and get back to a stronger antitrust regime, provided that the political conditions are right. Arguably, we are now entering a period in which people are starting to question the benefits of these big companies. Economists and other groups have to be ready with good quality arguments and economic analysis, in order that that political attitude can be joined with strong economic analysis to then bring competition policy back to the stronger type of competition policy that we had back in the mid-20th century. It got weaker for a number of reasons. One was that the Chicago school of economists were very effective in their economic analysis. They had persuasive arguments based on coherent economic models. These arguments were, of course, welcomed by big business so that it was both well-founded and well funded. The existing practice at that time tended to argue that market share is what matters but these Chicago economists argued that small firms are inefficient and that we should welcome the rise of big firms because they’re more cost-efficient, and that can help the consumer. These arguments were quite coherent and convinced a lot of people. At the same time, there was a lot of lobbying going on from big business. There was also a political change. During the era of Reagan and Thatcher , the 1980s, the planets all came together in a way that allowed the antitrust regime to become weaker. That’s why Baker says that we might be in a period now where antitrust can become stronger again, because the conditions now are right for the arguments to go the other way. He’s telling that story. In fact, it’s a very compelling read. Wu’s book is certainly a better place to start for the general reader. He links competition to politics quite closely. He tells the story of how competition policy has changed over time, how it was once strong, in the 1950s, 60s and 70s, and became weaker and was weakened during the Reagan and Thatcher era and subsequently. It’s only in recent years that people have started to question it all again."