Orthodox Competition and Monopoly Theory Is Inherently Flawed and Misleading and Cannot Rationally Support Antitrust Policy; Antitrust Theory and History Are an Elaborate Mythology

This book is an attempt to analyze critically the theory and practice of an American sacred cow—the antitrust laws of the United States. Like all sacred cows, antitrust laws appear shrouded with an aura of authenticity and legitimacy. By and large, Americans still accept the view that antitrust has served to make the market economy more competitive and efficient, and that business monopoly would triumph in the absence of such legal prohibition.

Academic economists, for the most part, have created and sustained the public’s impression concerning monopoly and the antitrust laws. Two generations of economists, both liberal and conservative, have generally accepted antitrust as an important social force in maintaining competition and in limiting the difficulties commonly associated with monopoly power. Although some economists have disapproved of particular sections of the laws and particular enforcement procedures, and although a very few have called for repeal of specific antitrust statutes, the bulk of the academic economists have historically supported— and continue to support— antitrust and a vigorous enforcement policy. Indeed, some influential economists are committed to a substantial beefing up of antitrust enforcement, particularly in the price-fixing area, or alternatively, to additional legislation aimed at radically restructuring concentrated American industries. Despite the recent criticism, the antitrust philosophy is still a firmly entrenched part of the conventional wisdom of a mixed-enterprise system.

Yet importantly, this public and professional acceptance of the efficacy of antitrust depends upon important assumptions that are rarely made explicit or challenged. One assumption, for instance, is the belief that the standard theories of competition and monopoly developed by the economists are a correct perspective and can be applied meaningfully in the antitrust area. Another crucial assumption is the belief that antitrust history contains impressive empirical verification of the resource misallocations and monopolistic abuses suggested by the standard theoretical approach.

This study will maintain that neither of these important assumptions are valid. It will argue that orthodox competition and monopoly theory is inherently flawed and misleading and cannot rationally support antitrust policy. Further, it will demonstrate that the business organizations under indictment in the classic antitrust cases were expanding outputs, reducing prices, improving technology, and engaging generally in an intensely competitive process. It will conclude that both antitrust theory and history are an elaborate mythology with no solid foundation in either logic or fact.

--Dominick T. Armentano, introduction to Antitrust and Monopoly: Anatomy of a Policy Failure (New York: John Wiley and Sons, 1982), 2-3.