'The Myths of Anti-trust' 40th Anniversary

0:00My relationship with Dom is both personal and as a student and I want to cover both of those bases and I'm going to divide my talk into both of those things. It's not only 40 years of Myths of Antitrust, it's about 40 years, actually 41 since I met Dom as a freshman music student and he was my teacher, he was my mentor, he's my my friend and the person who got me really got me into this business and he did this by example and by willing to put some time and effort into what was at the time a music major at Hart School of Music at the University of Hartford and I publicly want to thank him for for for doing all that. Two things that I want to focus on in this section where he really influenced me, interesting stories I think.

1:02I learned a lot from Dom, courses that I've taught have been modeled after courses that he has taught me. I taught a course called World of Business at Campbell University which was for all intents and purposes his business and society course. and many other influences. Also I think the fact that I've always been drawn to policy analysis and have for most of my career worked in the think tank world is largely due to Dom's influence. Even though he spent an entire career as a professor, he always had at least one and a half feet in the world of policy analysis, writing papers for think tanks, publishing op-eds, confronting the media.

1:49He always, to me, seemed to be doing the kind of work that I do, except from the platform of being a university professor, and it is in this area that I felt he was always the most comfortable, and that really rubbed off on me. I always admired the fact that, maybe except for teaching, his passion has always been and as a Public Intellectual, but there's two, as I said, there's two things I want to focus on. I want to tell you a story. I was a freshman music student. I was a budding libertarian, very budding, barely poking my head out of the ground and I knew very little.

2:40I just knew I liked libertarianism. This was in 1971 and so I went into his office and introduced myself. I had read an article that he had written in the student newspaper and I said this guy sounds like a libertarian, I need to go meet him. So I did. I'd never met another libertarian before, ever. And so I went into his office. I had a long conversation with him and he listened to me and I listened to him. And as I was leaving his office he obviously became very aware of the fact that I didn't know very much, and he said, you need to learn your arguments or they're going to kill you.

3:26And I took that very seriously and I sort of walked out of his office with my tail between my legs, realizing I didn't know my arguments. And to this day, that phrase, you know how your mother tells you something when you're 12 or something and it just sort of sticks in the back of your head, right? To this day, that phrase sticks with me. I'm always thinking when I write an op-ed or a policy report, or go on the radio to debate some, you know, Lumi Soros-funded lefty in North Carolina, I'm always thinking, do I have my arguments down, because if I don't, they're going to kill me.

4:11And consequently, here I am, alive and well, and I want to thank Dom for that. The second thing is not really about a moment or anything in particular that he said to me, but just something I have absorbed from being around him so much and from reading literally everything he was writing during these, my formative years. He taught me how important it is that your writing actually communicate. He taught me how important writing to your fellow citizens as opposed to your colleagues in the department or even in your discipline really is. And that this means writing intelligently, clearly and succinctly and without jargon.

5:01In my line of work, this is incredibly important and Dom has always been really, really good at that. And I think because of Dom's influence in this area, my writing is much better than it otherwise would be. Whenever I talk to my students or even to my younger colleagues, and they're all younger now, about improving their writings, I tell them, read people who write well. That's the best way to learn to write well. And for me, probably the most One of the most important of those good writers that I have read over the years is Dom. Okay, I want to turn to the book and say a few things about that.

5:47I feel like Marco Rubio here. I'm going to talk about the second edition, antitrust and monopoly, because I think for Austrians, in many ways, this is the more important of the two editions. It is in the second edition where he makes, I think, an important contribution to Austrian theory. In particular, I want to focus on chapter two, which lays out his methodology. And this is material that really didn't appear in myths. It represents what I think is a methodology shift from the first book from being very much Schumpeterian to being more Kirznerian and in his theory of monopoly being very Rothbardian.

6:49And with this chapter, he moved his analysis firmly into what, at the time, was the new sort of Austrian paradigm. A lot happened between 1972 and 1982 in Austrian economics, and especially in Dom's area. He wrote in 1972, he wrote MIS, but the year after that came Kirzner's competition in entrepreneurship, and he mentioned that and in 1974 there was the South Royalton Conference which he went to and Hayek got the Nobel Prize in 75, there was the Hartford Conference which Dom ran and then in 76 there was the Windsor Castle Conference and out of that came the volume from New Directions in Austrian Economics, and he had his critique which was already discussed of Mises-Kirzner's monopoly theory and compared it to Rothbard and in that book he came down firmly, in that chapter he came down firmly in the Rothbardian camp.

8:04Now in this chapter he first gives a thoroughly subjectivist critique of the standard market and Failure Framework Based on Perfect Competition, and demonstrated why this cannot serve as a basis of thinking about antitrust policy or for any kind of meaningful description of the competitive process. But then he goes on to lay out an alternative welfare paradigm, which he got from Kirzner's Market Theory and the Price System, and looks at Kirzner's efficiency theory and then he also lays out an alternative Kirznerian theory of competition, which he calls entrepreneurial competition in the book and he actually lays out the theory of competition first and then sort of backs into the efficiency arguments for it. And I think from my own thinking about them, it's better for me to see them flow from the efficiency theory to the competition theory. But I actually want to read from the book and start with his discussion of efficiency. Now he just finishes sort of tearing down on the Standard Welfare Economics Paradigm and then he talks about an alternative view

9:34and he says a very different perspective on economic efficiency and resource allocation can be developed directly from a strict subjectivist approach to cost and utility. By the way, this is thoroughgoing praxeology, I think it's really interesting to see this. This approach would hold that individual human action is purposeful and aims at accomplishing The next step, the efficient accomplishment of ends in a social context requires that particular planned activities dovetail or coordinate with the planned activity of other market participants, yet, given the complex division of labor and the difficulty of obtaining accurate information, such as financial statements, Such a dovetailing is not automatic indeed. Mutually inconsistent plans must be anticipated.

10:33If market participants had perfect information, all plans would be fully coordinated and markets would be efficient by definition. The question of social efficiency is not how resources would be allocated if everyone had perfect information. The issue instead is an understanding of the process by which more accurate information is produced, transmitted and utilized such Research, Social Plan Coordination.

11:25Business Competition is always a dynamic process, not a given state of affairs in which suppliers continually strive to offer important alternatives to market participants. Unlike perfectly competitive world, competition is a process of discovering opportunities for profit and then adjusting market conditions so that these opportunities tend to be exploited. If there is any movement toward equilibrium, this process of discovery and market adjustment is that movement, and this is why it occurs. Competition is the equilibrating process, not the equilibrium condition, in which businessmen attempt, in the absence of perfect knowledge and homogeneous product, to more closely coordinate their supply plans with the anticipated plans of other market participants.

12:15So you can see how what he's doing is he's showing competition leads to social efficiency as described prior to that. So he sets up a parallel framework to the standard perfect competition, welfare economics perfect competition, perfect monopoly framework. Well, we haven't talked about monopoly yet, but what he does here, as I noted, he ties this to Rothbardian monopoly theory, which he needs to do because Kirzner's monopoly theory does not follow from Kirzner's own competition theory.

13:03Rudd's monopoly theory follows from Kirzner's competition theory. And Dom, I think, recognized that intuitively. And so under monopoly, he says, to reject the standard theory of monopoly power and resource misallocations, not to reject all such theories, if competition is a process in which entrepreneurs are free to offer more attractive opportunities to other market participants, then the power to arbitrarily restrict such offers and market adjustments can be defined as monopoly power. And since the adjustment process is inherent in the very working of the free market itself, the power to restrict entry and market adjustment must arise from outside the market.

13:55And then he goes on to say it's government franchises, it's patents, and so on. He says it's government privilege that creates monopoly, period, event, end of story, and the contribution here, which flows, I think, and he shows, flows directly from Kirznerian competition theory, is really an important insight that I don't think has been appreciated in the literature and so forth. in the literature and certainly wasn't up till that time, he built a bridge from Kirzner on competition to Rothbard on monopoly and that what actually flows from Kirzner's view is Rothbard's monopoly theory.

15:01Now let me say, at the time, and Dom can correct me, at the time, I don't think that that's consciously what he was doing. As I said, he was just thinking about the arguments. He was looking at Kirzner's theory and just going logically where it took him. But I think in retrospect that's exactly what he did. He was integrating certain ideas in Austrian economics that were in the literature at the time into a coherent narrative. And I think in terms of Austrian economics this was a very important contribution. So I'm going to leave it at that. I think I'm under my time. Should I dance? Okay, with that, I think whoever was next on the top. Thanks.