When the Sherman Act was passed in 1890, hardly any American economists supported it. A century later the antitrust record is generally acknowledged to include no undisputed successes and many evident failures. But for some reason most modern economists have actually become antitrust hawks, with large majorities of them in surveys conducted between 1976 and 1990 agreeing that "antitrust laws should be enforced vigorously to reduce monopoly power from its current level."⁴  How did this transformation occur? And what is the import of the fact that it did occur for the future of antitrust, and for the future of America?

Unfortunately, antitrust’s future looks much brighter than America’s. Antitrust is causing the rapid functional erosion of every critical aspect of our infrastructure – energy, transportation, telecommunications, education, health care, the stock market, even the mail. In these and many other areas, the failure of antitrust theory to grasp the nature of monopoly has had – and will continue to have – debilitating consequences. This failure is causing us to miss out on potentially huge benefits for consumers; indeed, it is causing benefits we once had to slip from our grasp. It is affecting industries both very old and brand new, both those at the fully regulated end of the spectrum and those on the still forming frontier where it is not yet clear how trustbusters will get their hooks in.

In addition to retarding or dismantling basic economic functionality, antitrust is also inserting a potentially fatal philosophical wedge between our free people and their Government. By cutting us loose from our anchors in freedom and property, antitrust has rendered pointless or worse the fervid debates over how to solve the infrastructure crises. Because almost everyone now accepts at least some form of antitrust virtually without question, those debates will continue to foster socialist solutions that will make matters worse. And they will at the same time continue to corrode our core beliefs by giving the false impression that those failing socialist policies are actually capitalist in nature and democratically chosen. Although I’m still not sure why the views of economists changed from negative to positive on antitrust during a century of antitrust failure, I suspect that the answer lies in the same processes that hoodwinked conservatives, which is the topic of this chapter.

Let me begin with a brief summary of my own views and how I came to them, so that – agree or not – you won’t add confusion about them to the general confusion I want to describe. First, I concur with many criticisms made of antitrust by conservatives. For example, I agree that these laws have been so inconsistently applied that their resulting arbitrariness is a major breach in the Rule of Law, perhaps to the point where they could be declared unconstitutionally vague. I also agree that the influence peddling associated with their administration is an unconscionable source of corruption and an irresistible inducement to Government expansion. I, too, recognize that antitrust is driven more by self-interest (of bureaucrats, inefficient competitors, legislators, etc.) than by the public interest its proponents claim. And I agree that our antitrust laws have consistently failed to accomplish even their own competition-enhancement goals. They should be repealed on that basis alone, much less if one also takes account of their massive and invariably negative unintended consequences.

But even as most conservatives level such seemingly withering criticisms at antitrust, the bulk of them are actually coming up with their own solutions, how they would reform the process, not eliminate it. Deep down, most have come to the conclusion that antitrust’s core prohibitions, such as those against price fixing cartels, constitute sound policy. As a result, their criticisms serve only to widen and deepen the support for antitrust. Where I part company with virtually all other conservatives is in my beliefs that 1) private monopolies and monopolization are good, not bad and 2), even if they weren’t, it is an intolerable violation of freedom to use Government coercion to prevent them. Antitrust could not conceivably do enough good to warrant the massive invasions of property and freedom its implementation requires. Continuing to pretend that this new socialism is actually capitalism will breed more cynicism and hypocrisy than our polity can bear.

A corollary to my views on monopoly and antitrust is that "deregulation" is the worst of the options generally acknowledged to be available to policymakers concerned about monopolies. The others – nationalization and rate-of-return regulation of utilities – are likely to produce better economic results than "competition" administered under antitrust. Moreover, they are less bureaucratic, less prone to develop elaborate rent-seeking patterns, less prone to corruption and, because the rules under which they operate are more clear, they are more consistent with the Rule of Law and Liberty. Perhaps most importantly, because they are explicitly socialist in form, their application does not require the pervasive confusion and hypocrisy that antitrust does.

I want to be clear that I am not advocating either of these options. I believe both are at least as inefficient and prone to corruption as their reputations would have it – and that’s pretty bad. But deregulation under antitrust oversight is far worse. Because of its arbitrary complexities, antitrust oversight opens the way to far more meddling by bureaucrats, lawyers, politicians, academics, courts and other players in the planning enterprise. It invites Government expansion on an order probably not seen since economists in National Socialist Germany fixed on the inevitability of monopolies as an excuse for the planners to take over. But we have actually one-upped the Nazis. By deciding that our natural monopolies can be deregulated under antitrust, we have opened the way for a far more pervasive and intrusive takeover, supported by the propaganda that says deregulation is a laissez faire approach that will make multi-firm competition as coordinated and efficient as a single firm monopoly.

Not only is the efficiency part impossible, but the laissez faire part is a lie. Oversight of the deregulation pipe dream involves many more people than regulation (or nationalization) did, including now teams of antitrust lawyers within each major firm. Indeed, if the planners have their way, all corporate employees will become part of the antitrust enforcement effort.⁵  In any case, massive numbers of our most intelligent people within the political, legal, academic and business professions now spend huge and rapidly increasing amounts of time on activities whose only real purpose is antitrust, all of it devoted to this entirely counterproductive and theoretically bankrupt exercise. The wasted or worse energy includes time devoted to devising antitrust-correct business strategies, launching legal and political defenses and offenses based on it, lobbying and advertising for law and rule changes, writing and reading articles and editorials on antitrust, the headlines of which are rapidly approaching more than half of all business news, demonizing and demagogue-ing our most successful and valuable businessmen, and corrupting the focus of academia toward foolish fields that are more harmful than any of the supposedly discredited Marxist, Communist, Socialist, Collectivist philosophies we have rejected. In fact, if you look closely, you will find that antitrust is the modern incarnation of those philosophies, and that its strongest advocates include those who seem surest that we have conclusively rejected them. As a means of co-opting capitalist energies to socialist ends, nothing more efficient has yet been devised by man than antitrust-based deregulation.

Antitrust does not appear as a significant topic in my writing until 1997. I came across it inadvertently, as I was trying to grapple with the surprising realization that what I saw as disastrous stock market regulation was actually quite consistent with antitrust. I had first assumed, along with other critics of the SEC’s National Market System (NMS), that stock market regulators had somehow misinterpreted competition policy. In other words, like almost everyone today, I subconsciously agreed with antitrust policy and, therefore, instinctively looked elsewhere for explanations of any problems I perceived. But the more I looked, the more I saw that the problems in the stock market – fragmentation, volatility, free-riding – had analogues in the other industries that were in the news. And the most consistent common element in the stories about all of them was antitrust. So I came to question antitrust itself. Although I am still hardly more than a dilettante on the topic, and only a casual observer of the industries it touches outside the stock market, it is easy enough to see from the similarities across troubled industries that something is seriously wrong with antitrust. It would be an extraordinary coincidence if the obvious correlation between the degree to which industries are in crisis and the degree to which competition policy is applied to them were accidental.

The clincher for me was discovering that the organizing principles of stock markets are primarily antitrust violations. That is, stock markets worldwide came into existence primarily to violate antitrust (albeit in many cases before its principles were turned into law). When I put this to one antitrust expert, he couldn’t imagine it, and averred that stock market cartels were not violations. This much I expected, but his explanation surprised me. As he described it in a series of e-mails, stock market cartels were not violations, because, since they were the only providers of their service (i.e., were monopolies), their output would not exist but for the agreements. Therefore, according to him, they increased output, rather than restrained it, and consequently could not be considered anticompetitive. This was an extreme extension, it seemed to me, of the standard argument that supply restraint and monopoly pricing go hand in hand. My expert didn’t try to argue that stock markets were not cartels, but merely that they were not harmful on account of the fact that their very existence increased output beyond what would exist without them. So far, he and I were in full agreement. But what about the fact that any output or pricing effects were achieved in the case of stock markets by that evil of evils: the collusive cartel – a "per se" violation?⁶  My expert was not concerned, because, even though the colluders may have come together in order to restrain output to raise price, the effect of their having done so was to increase output beyond what would exist without their market. Ergo, they were not anticompetitive. Furthermore – and here’s the flying leap of faith, legally – because they were not anticompetitive, they could not possibly be illegal, even though they might be price fixing cartels. I guess by that logic, all a price fixing cartel or a monopoly has to do is make sure that it has a 100% market share and it’s off the hook – so much for the per se rule against price fixing.

Cheap shots aside, I wish that my expert had come to my conclusion that the fact that stock markets were good things, even though in form they were basically per se antitrust violations, meant that antitrust had a fundamental flaw. But no such luck. Needless to say, this well meaning and very intelligent expert, well known and often quoted for his knowledge of how antitrust applies in the modern high-tech world, did not move me off my suspicion that antitrust was bunk. And the more I saw the damage it was doing to the stock market, the more I recognized its theories behind the crises in other important industries. And of course the better I understood those problems, the more I understood why stock market reforms weren’t working. They had all been causing problems for decades, not solving them – and there was no end in sight. Quite the contrary: All the experts now believe that reforms are necessary in one industry after another. They have become constitutionally incapable of recognizing that reliance on the process of re-forming is why we have the problems they are trying to reform. Surprisingly, I discovered that conservatives are just as susceptible to this philosophical snake oil as the most blatant socialists.

While the various "schools" argue the details, no one notices that the arguments about antitrust are only solidifying acceptance of its basic tenets. The Chicago School, the Harvard School, the Virginia School, even my favorite, the Austrian School, bat the issues around endlessly, never realizing that their arguments only give credibility to the notion that antitrust has been fully vetted and agreed on. They are like the schools in those karate movies which compete and sometimes underhandedly wage war on each other, but in the end leave the audience sure of only one thing: karate is cool. Even my own extreme anti-antitrust views have contributed to its acceptance. "Comment" letters I have written to the SEC excoriating NMS have been duly noted as part of the input that the Commission has taken into account when formulating policy. Thus, without refuting or even addressing any of my positions, regulators gain more credibility to pursue ever-greater intervention of the sort I criticize precisely because I criticized their interventions in the comment process.

In truth, I know that no one will ever conclusively prove that antitrust is good or bad or somewhere in between. But that is the strongest argument of all for getting rid of such an interventionist policy. Friedrich Hayek argued that capitalism and freedom were needed precisely because we cannot know enough about the future effects of our interventions to undertake major intrusions. He thought monopolies were fine, even very big ones.⁷  On the other hand, in the next breath he also articulates a case for using the power of the State to prevent "aimed discrimination," which sounds remarkably close to modern antitrust theory, such as that used to attack Microsoft and others. Would he recognize, were he still alive, the contradiction between his let-evolution-run view and the current case against Microsoft? Would he see the role played by aimed discrimination in promoting coordination in an economy, or as he preferred to call it, the "catallaxy"?⁸  After all, he preferred this new word because it better conveyed the complexity and interconnectedness of a society’s commercial activities, and the importance of coordination. Would the Nobel laureate who warned us not to go down the road to serfdom have failed to see that using Government coercion to prevent aimed discrimination would push us in exactly that direction?⁹

My point here is that even those most rigorous about freedom can often not resist the temptation to address through their own interventions the screw-ups of the previous ones. Even if there were, bubbling away in the basement of some IO research lab, incontrovertible proof that antitrust is idiocy, I doubt that it would be used to promote freedom by recommending repeal. The discoverer would instead probably turn the idea into a B2B, apply for patents, and use it on some electricity grid somewhere. Don’t laugh. That is roughly the story of how we got California’s deregulation plan. Power deregulation has been worked on since 1984 by, among others, some members of a think tank now called IFREE (the International Foundation for Research in Experimental Economics).¹⁰  I know of no other think tank with a more conservative philosophy, nor with a more creative approach to exposing the fallacies of State intervention. However, their desire to bring experimenting from the lab to the real world exhibited, it seems to me, the same disregard for the dangers of intervention that the policies they wanted to replace did.¹¹  Because their work was closely followed by other academics, and was credited with moving deregulation forward, especially outside the Unites States, their confidence probably helped convince the doubting-Thomases in California that it was worth a try.

While the IFREE scholars have been sharply critical of some elements of the California approach, they remain convinced that doing deregulation right can still work. If only they meant getting rid of all utility regulation, I would agree. But what I fear they do mean is that, if participants were only hitched up to their black box, and their property rights regime, rather than the ones California used, everything would be all right. I fear this because, even if their approach did "work," that would only further empower the antitrust bureaucracy and the top-down socialist approach to market design. Such an approach replaces normal innovation, competition and evolution with "industrial planning," a process that resembles nothing so much as a perpetual academic audition. However skilled the experts are at their professions, the fact that Government might be using their advice as policy input has nothing to do with freedom, true competition, or capitalism. Mussolini’s industrial planning advisors must have been very skilled to make the trains run on time, but it is hard to argue that freedom was thereby advanced, or that those advisors were in any sense conservative. As we have seen in the stock market, replacing a complex and intricately evolved industry with a computerized trading game is not necessarily an improvement. But it does empower the bureaucracy that designs and administers it.

Everyone talks about "the grid." But what is it? The term implies connections to others in a network. Although it seems possible for those others to combine, thus internalizing in a corporate sense whatever physical connections are necessary, no current proposal encourages such combinations, and certainly none would allow a single private owner or trust to connect them all up into a single entity. Instead, we tear our hair out arguing over how to do something else – anything else. Conservatives want "greater financial incentives for independent companies to own and operate power grids."¹²  Liberals say "[t]he only way to ensure that we have consumer-friendly policies is to have public control of the grid."¹³  Governor Davis wants to buy California’s grid for the people. But what grid are they talking about? If Enron can have its own grid, can I have one in my back yard, supplying my personal power needs and selling any excess from my "co-generator" back to some other grid? Does each state have a grid of its own? Each city? What are "regional grids," and how are the local grids connected (or not) to them? Why are there multi-state grids in the East and West? Why are they not connected (except poorly) to each other? Why does Texas have its own grid, and why has the Lone Star State’s historical policy been to remain un-connected to the other grids? Why does Texas have a power surplus, while the Eastern and Western grids are planning for blackouts? Why is the Los Angeles grid not part of the California grid – or is it? How did Los Angeles get to opt out of California’s deregulation plan, thus avoiding the blackouts faced by the rest of the state? How did the San Diego grid come to be controlled by a South Carolina company, allegedly enabling it to "shut production units [at San Diego Gas and Electric] in what [two ex-workers] said was an apparent effort to drive up electricity prices [for Californians]"?¹⁴  Can I sell power from my backyard grid to Governor Davis, too, just like Enron? I hear he’s paying top dollar.¹⁵  What is THE GRID?

Any such series of questions will pretty quickly lead to the insoluble politics of grid management, and one inescapable conclusion: "grid" is a socialist term. This gritty little word would hardly be needed or used if one entity owned all the power. It is relevant only in the context of political control of the production, pricing and allocation of electric power. And its use implies that planning experts will get us out of these perplexing power dilemmas. They don’t have much time: by 2008 electric power demand and supply are projected to grow by 19% and 32%, respectively, while the grid’s capacity to get the power where it is needed is projected to decline by 12%.¹⁶  But, not to worry. Scientists at the Electric Power Research Institute, a non-profit think tank funded by over 1,000 power companies responsible for over 90% of our power, are working on a "blueprint for a radically new conception of the energy grid." What is it? "Turning every car into a roll-your-own generator is just one potential expression of the most radical shift in the emerging business model for energy vending profiled in EPRI’s Roadmap: the transformation of passive energy users into freelance energy producers, paralleling developments in interactive media, peer-to-peer file sharing, and self-governance. By increasing a sense of ownership in the means of energy production . . ."¹⁷  Great news! My plan to sell energy to Governor Davis is getting better all the time; now I’m thinking I can even plug my car into my backyard grid at night so that I will have even more juice to sell him.¹⁸

Only problem is – I’m not sure I ever aspired to being an energy producer, freelance or otherwise. And I have no interest in having "a sense of ownership in the means of energy production." EPRI’s solution reminds me of one that’s been proposed for another industry that’s been bugging me. "Everyone knows about the horrors of modern air travel. What almost no one knows is how inventors, entrepreneurs, and government visionaries have teamed up to create new kinds of small planes that can take off and land almost anywhere. ‘Escape From Airline Hell’ the scenario might be called, and it’s coming soon to an airport near you."¹⁹  And, while the government visionaries who can’t seem to fix the air travel grid are busy dreaming up personal planes for me – with parachutes for the plane, no less – visionaries over in the SEC responsible for the stock market’s grid are coming up with ways for me to be a mini-marketmaker. That’s right; I, too, can sell the liquidity represented by my own trades back to Wall Street. All I need is an account at a firm like Cybertrader, whose ads imply that I can trade like Bruce Lee does karate, and I can make money as a day-trader with the big boys.

Well, I have news for all those Government visionaries: I don’t care if my personal plane does have its own parachute, or if I do have Bruce Lee’s trading system. I don’t want to be a pilot or a day-trader. And I definitely don’t want to be an electric power producer. Even if I did, I would still also want the standard versions of these services without having to become expert enough to co-generate into their grids. For the record, I also don’t want to have to become a telecom expert in order to find a phone service that works for me, or become a medical practices expert in order to find a doctor, or a technology expert in order to assemble my own PC operating system. While some people may want to do some of these things, the fact is that the breakdown of these network industries may force all of us to learn these skills – or do without an adequate level of their once standard services. It is a deregulatory mantra that choice is an unalloyed good, but that is just nonsense. Rather, the need to engage in unnecessary complexity necessitated by all of these competing choices is becoming one of the greatest frustrations of modern life.²⁰  Sure, co-generation is possible; Wired magazine says it dates to the Middle Ages. But power was supposed to be one of the standard benefits of modern civilization. What happened?

In a word: socialism. Somewhere along the way to the New Deal, the idea took hold that natural monopolies like electric power must be subjected to rate-of-return regulation. The idea was that natural monopolies would tend so strongly toward monopoly that mere antitrust oversight wouldn’t be able to keep the competitors apart. So, the thinking went, just let them consolidate into monopolies, but don’t let them gouge. By the latter decades of the 20^th century the debate between advocates of these two forms of interventionism gave the impression that antitrust was the closer to pure capitalism. Although this view is entirely false, the antitrust advocates got the ideological upper hand when they styled the imposition of their regime as "deregulation," and went trolling in the last decades of the 20^th century for industries that could be "freed" from regulation. So, just as antitrust threw in the towel on pure capitalism at the end of the 19^th century, and rate-of-return regulation threw in the towel on antitrust by the middle of the 20^th, deregulation threw in the towel on regulation by century’s end. Although each new phase represents a ratcheting up of regulation, the latest ratchet to deregulation has been devastating philosophically, because it falsely implies less regulation and greater freedom. And, just as the debate between antitrust hawks and doves gives ever greater credibility to antitrust, no matter how successful the doves’ arguments are at moving it away from the more draconian applications, the debate between "regulators" and "deregulators" serves primarily to justify ever increasing intervention.

So cowed by the enormity of the power problem are our leaders, and so confused are they when it comes to standing for freedom, that we are now set for the final ratchet. "Regulators Order Formation of Big Grids To Ease Bottlenecks in U.S. Energy Supply."²¹  Great: a national grid management system run by the Feds on the same model that is bankrupting California’s utilities, and will probably bankrupt California. Whether this phase is called "re-regulation" or "smart" deregulation, the name of the game here is to camouflage increasing intervention with phony free market rhetoric, to pretend that Government is only going to set the rules and provide the level playing field on which the "private" parties will interact. But this phony phraseology is hiding an ugly truth: in reality this is socialism dismantling our society. It has happened before, recently to Russia,²² and long ago to the Roman Empire.²³  Socialism’s MO is to use every infrastructure failure as justification for greater interventionism, which of course only produces greater failure. With this process under way, there is no chance whatsoever, no matter what the experts say, that consumers will ever again be happy with electric power service, or the service in any other deregulated industry. Nor will they be satisfied in any industry that goes straight to antitrust regulation without passing through a regulation phase, such as the various technology categories.

The experts will always be optimistic, of course, because instilling confidence in their planning is their path to political power. And their plans are always filled with such complexity that it is not possible to argue with them detail for detail. But listen to the philosophy and it is easy to see why they will fail. And you can also catch the circular reasoning that enables them to see failure as success and, thereby, justify more of it. Listen to Alfred Kahn, for example, President Carter’s deregulator of the airline industry and, like his boss, a detail man.²⁴  In a July, 2001 letter to the editor, this consummate expert on the industry and deregulation explains his delight at the Justice Department decision to appeal its loss of a predatory pricing suit against American Airlines. In essence he argues for stricter antitrust enforcement as the necessary condition for deregulation to work. Kahn continues to insist that there are only two ways to run the industry: regulation or deregulation (i.e., under antitrust).²⁵  Obviously Kahn prefers deregulation, apparently because he has bought the propaganda about it being the less regulatory option. It is impossible to argue with his expertise, and he makes a good case that American did engage in predatory behavior. But his blind assumption that too little competition is the problem, rather than too much, is frightening. Typical of today’s regulators and academics, he is absolutely incapable of seeing that worrying about such things as preventing predation or monopoly may be precisely why the industry, two decades after he deregulated it, has taken a shape that consumers find revolting. This is scary, because the evidence of industry failure is clear to everyone who flies, presumably including Professor Kahn. How can he miss it? The answer appears to be that he is so buried in competition argot and self-referential regulatory assumptions about the efficacy and efficiency of competition that he is blind to the misery it is causing. He is blind to the possibility that true efficiency and true competition might be better served by just letting the network monopoly form naturally.

Why is it that economists are the only consumers who can’t see that deregulation has been disastrous? Perhaps economists have a greater ability to be patient, to give competition a chance to solve any service disruption or confusion problems. In any case, consumers not steeped in competition theory are not so patient. They are more likely to see service declines as the consequence of any proximate Government action, like deregulation, and are less likely to be willing to wait for theory to produce results. I know many ordinary people (i.e., non-economists) who are frustrated not just with air travel, but with telephones and many other modern marvels, like computers and Internet service. Often they will spontaneously express outrage at the breakup of AT&T or anger at what the Government is doing, or not doing, with airlines. Funny thing, though, the economists I know generally think deregulation has been successful. They point to such facts as the decline in long distance phone rates or airline ticket prices as proof that the competition has been healthy. But hasn’t service gone down, too? They don’t see it. Their belief in competition and, if necessary, Government action to enforce it, apparently overrides any disappointment they might otherwise feel as consumers with the services they use.

But there is another funny thing: Those economists who supposedly believe in the importance of free markets to provide price signals don’t appear at all concerned that Government action may be the primary cause of suppressed or spiking or otherwise distorted prices in deregulated industries. Could these interventions be encouraging energy price pirates, or causing the frequently profitless operation and sometimes bankruptcies of utilities and airlines? No, of course not; that’s the way the free market works, don’t you see? If you get the impression that I think economists are being disingenuous when it comes to observing the industries they are expert about, that would be a reasonable assumption, but it would be wrong. The funniest thing of all is that I find economists to be entirely sincere in their evaluations of these situations. But this fact is also the scariest of all. It means that, like in a science fiction movie, economists appear to have been abducted by alien antitrust monsters that have re-wired their brains so that they can no longer see anything that does not confirm their positive views on antitrust.

The electric power industry is the most visible of today’s deregulation disasters, but its problems so far only include a few blackouts, price spikes and utility bankruptcies. Though bad enough already, things will get much worse when the consumer also has to deal seriously with the "opportunity" to "shop for power," as New York’s Con Ed urges in an advertisement.²⁶  It is hard to imagine that Con Ed actually thinks consumers will look forward to comparing power suppliers. In any case, the primary purpose of the ad, it seems, is to enable the utility to make clear that it has no responsibility for the price of power, only for its delivery, which, according to a big pie chart, only makes up 35% of the delivered price.

This is typical of every deregulated industry: responsibility for the overall product is diverse, confusing and influenced heavily by Government. In fact, if you were to apportion responsibility for the overall value propositions embodied by air travel, utilities, telephone service etc., you would probably come out with an amorphous Government role responsible for over 50% of the value, and perhaps over 90%, in all of them. This means that the "competition" intended to serve consumers has only small and shrinking portions of the consumer experience to play with. The rest is Government’s responsibility, and the consumer’s problem. And Government’s proportionate role grows with every new initiative by the planners to commons-ize the practices or competitive positions of the players. With every requirement that a phone company give "reasonable" access to its network to the competition, or that a software company allow its competitors’ products to be sold alongside its own – or disallowed from tying its own products together – Government’s role grows. Whether the role is achieved by behavioral mandates affecting "private" competitors, or, when that fails to produce a sufficiently "public interest" attitude, nationalization of "essential facilities," the heavy hand of Government controls increasingly dominant portions of the value proposition in every major product or service. This marginalizes the value to the consumer of any "competition" that can be trumped up, and puts meaningful service improvements permanently beyond the reach of anyone. Air travel congestion problems, for example, now appear insoluble except through "national consensus" on how to address the issues.²⁷

Thus it is that antitrust treats competition itself as a commons. Just as we need rules to prevent fishermen (in the classic example) from over-fishing the sea until all the fish are gone, we need antitrust to preserve our competition resource. This kind of thinking goes much deeper than the ordinary it’s-too-important-to-be-left-to-the-private-market rationale, which sees important industries referred to by such commons-like terms as "national asset" or "essential facility" in order to authorize regulators’ ministrations. Here, the process of competition, itself, in each industry and generally, is the commons. Without antitrust, the competitors would combine or kill each other off. In one sense, this analysis is accurate, at least for network industries. Natural monopolies are called what they are precisely because this would, indeed, occur most of the time. What the antitrust theorists are missing, however, is that such a result is integral to normal Darwinian competition. That is, such consolidating competition is integral to the process by which the economic infrastructure molds and remolds itself in constant response to what consumers want. Preventing such competition can only bring disorganization and disastrous service to consumers.

Taking air travel again as an example, the basics of flying also include getting your ticket through a travel agent or the Internet (or shopping around enough to know when it’s safe to get it directly from an airline), getting to and being in airports, relying on unappetizing food in the air and on the ground, getting your luggage through the maze of often incompatible luggage handling services, getting the air traffic control system not to bottleneck your flight, and hoping it won’t crash.²⁸  Your carrier has almost no control over most of these services, and little financial incentive to improve the ones it does control. In fact, quite the opposite: Your carrier will benefit in the degree to which it lets other carriers do the heavy lifting on designing, test-marketing and providing any common services. And on services that would be theirs alone initially, such as roomier seats, olives in salads, better safety maintenance, or better ads about safety maintenance, competitors would soon copy any successful ones, making the airlines that spent the bucks up front feel like fools, and their shareholders the poorer as their competitors get a free ride on their R&D expenditures. After all, most of the value proposition in the air travel experience is an un-differentiable commodity: Every airline is pretty much the same when it comes to time in the air, and they all get you from one place to another. Not only does this mean that it will do you no good to blame your particular carrier for a problem, but it means that none of its competitors have any incentive to do any better, no matter what their ads say. Any improvements will be copied by competitors, and will be attributed by consumers to the general field, anyway, rather than to the individual company that spent the money to experiment with the improvement. Loyalty to any of the competitors under these conditions is fleeting and, ultimately, absurd. So why would anyone but an economist expect deregulation to improve service? They wouldn’t.

And then there are the difficulties of coordinating any particular industry’s service with those of the other industries of the catallaxy. Just add to the problems described above for airlines the impossible task of improving service when the industry is local, regional, national, and international in scope, providing infinite opportunities for parochial rivalries among regulatory jurisdictions to fragment the overall network. In electric power, for example, there are a large number of competing jurisdictions controlling the grid(s), particularly because there are also a large number of competing inputs to its product, such as coal, oil, natural gas, nuclear, solar, wind etc., many of which are also subject separately to utility regulation or antitrust, and can come from near or far. And those inputs also have other potential uses that compete with electric power generation. Furthermore, just as they have many competing inputs to their product, electric power generators also have many competing users of their product, such as those now lobbying Sacramento for special treatment on blackouts.²⁹  And power is just one component of the energy industry, every other element of which is also in constant crisis due to the same interventionist policies that plague power.

Apparently, antitrust economists have concluded en masse that converting the bulk of the responsibility for basic services into a competition commons is a viable plan. But what are they thinking? Marxist planners might imagine they could sort through such tangles, but we’re talking here about free-market capitalists. The very philosophy they espouse has as its central tenet the impossibility of the planning they are engaged in. As far as I can see, the antitrust-alien-abduction explanation is the only realistic contender. There is just no other way to explain how people who believe in limited Government and freedom could possibly conclude that letting Government be responsible for the bulk of service in the most important industries, let alone having them all coordinate efficiently with each other, is either a good idea, or consistent with freedom. But here it is. Almost all economists appear to buy into the notion that Government should commons-ize almost all the big industries through antitrust.³⁰  Although they think they are promoting competition, they are actually destroying it, at least in a Darwinian sense. Their "competitions" are actually more akin to intramural volleyball tournaments, or to forcing the world’s armies to break up into a hundred thousand soccer teams – one struggles to come up with a sufficiently derisive analogy to capture the utter foolishness of the exercise.

One sign of the ridiculousness of antitrust is how the most respected antitrust leaders puff up in full self-righteous regalia to announce – or denounce, as the case may be – diametrically opposite interpretations of the laws. A great example occurred in the wake of the failed GE/Honeywell merger, which was approved by the U.S., but blocked by the E.U. Amidst all the finger pointing across the Atlantic, on our side of it only Laura Tyson (former chief economic advisor to President Clinton, and dean of the Haas School of Business at UC Berkeley) recognized that both Mario Monti’s position and ours were based on "reasonable legal and economic arguments."³¹  Ms. Tyson then goes on to call for international harmonization of antitrust laws, a position taken now by both Clinton and Bush antitrust chiefs, and a seemingly reasonable and even urgent one, given that 80 countries have now copied our idea and have their own versions of such laws. But how in the world will we achieve global harmonization when we can’t even achieve it here between the various federal and state antitrust authorities, or from one administration to the next?

And even if we could adopt a single view, that would just give greater confidence to the planners in their hubris. The negative effects of antitrust described above would exist even if there were a single approach that everyone agreed on, because it is not primarily the flawed application of antitrust theory that is the problem, but its foolishness to begin with. It is critical to realize this. Antitrust must be evaluated on its merits and rejected outright for cause. Not because it is inconsistent in application. Not because there are disputes about it. Not because bureaucrats are self-interested or even corrupt. We must reject it because, even in its purest form, it is bad policy. Unless we do this, the debates over how to reform it will do nothing but strengthen adherence to it, without ever resolving their conflicts. Indeed, as we will see below, the irresolvable and inevitably proliferating conflicts over interpretation provide the primary fuel for the juggernaut. While every antitrust school, and especially the conservatives in them, revel in pointing out the inconsistencies, they all implicitly have an ideal interpretation. In spite of, or more correctly, because of, the endless striving for these false ideals, antitrust and the Government growth it sustains can only increase until it destroys our society.

The only way to truly drive a stake through the heart of a socialism like antitrust is for a free people to resolve firmly to adhere to libertarian principles and discover that those principles are inconsistent with it no matter what the theorists say. Such resolve must be strong enough to reject even policies that, as far as we can tell, would improve our lives, if we discover that they would violate such principles as freedom, property, or the Rule of Law. To remain free, we simply must be willing to forego potential improvements, even those that no one can see any problems with. Now, I believe that freedom will produce the most satisfactory society anyway, and that doing without potential improvements that are inconsistent with it will not really result in any loss. I also believe that America was uniquely founded on that belief and, if she is to survive, will need to return to it. I will explore some explicit ideas toward that end in the next chapter. Next, however, let’s look more closely into some of the antitrust theories that best illustrate both the violation of freedom required for their implementation and the theoretical fallacies underlying their failures in practice.

In the current environment, it is not surprising that all major U.S. businesses support both political parties and their elected officials in rough proportion to their legislative and regulatory clout. Apparently, the political, regulatory and academic cognoscenti, as well as the leaders of the businesses affected by them, all seem willing to accept a little corruption as the price of innovation. They have even invented a term for it – "rent-seeking" – that is at the same time unfathomable to laymen and suggestive of legitimate, if hidden, economic purpose. No sophisticated modern person would suggest that in the real world it could, or even should, be eliminated. And everyone understands with a wink why the biggest political contributions come from the likes of the drug, energy, and airline industries. Meanwhile, it’s not a scandal but only news that House Commerce Committee Chairman Billy Tauzin "has become the man to see for corporate chieftains in Washington. And a bevy of his friends and former staffers are building careers based on their connections to him."⁵⁸

Does anyone really imagine that consumers will be better off for all this Government involvement? Actually, yes. The bureaucrats, the vast majority of academics, and almost all politicians believe fervently that such Government involvement in property rights as antitrust and patent law is essential to the efficient functioning of capitalism. And so do the businessmen who benefit from the monopolies bestowed by these busybodies. To them, this is the way a capitalist democracy is supposed to work. Sure, some of them – the "conservatives" among them – may talk a good free market story. But look closely and you will find that they are actually the ones putting in the last nail. Their arguments about how the lure of owning intellectual property is critical to the willingness of inventors to invent, scientists to inquire, singers to sing, etc., and their blind acceptance of a connection between "competition" and innovation – leaves freedom with no defenders at all. Where’d they go? They have abandoned the field in pursuit of rent. In some instances, the rent-seekers include even those who are most articulate in their denunciations of rent-seeking.

Their actions and in-actions validate the cynical view that sees accommodation to the parasitic tendencies of Government as inevitable, just something we have to do to get our property protected. In this view, neither private markets nor Government are always best at every task. One must look case by case to determine the best mix for any given function, and always recognize that there is bound to be interaction between political and economic processes in any major endeavor. Bureaucrats and rent-seeking, in other words, are just the way it is. This view is often associated with the "Public Choice" school, sometimes called the Virginia school, since one of its founders is Virginia’s George Mason University professor James Buchanan, who won the 1986 Nobel Prize in Economics. While the conservative wing of Public Choice sometimes argues that rent-seeking and the self-interest of bureaucrats have so poisoned the application of antitrust that it should be abandoned, they seldom attack the core principles of antitrust, itself. Their failure to do so implies that, for all they know, antitrust’s goals may be valid, but merely unattainable in a rent-seeking world. Their calls for abandoning it, therefore, based only on such practical concerns as the lack of empirically demonstrable value, the presence of empirically demonstrable harm, and the probable continuation of both, leave others more optimistic about Government with the impression that these flaws can be cured. Since even the most ardent anti-antitrusters in Public Choice seldom question antitrust either on theoretical or violation-of-freedom grounds, the overall effect of their criticism, once again, is to strengthen antitrust by giving the impression that it has been thoroughly vetted by vigorous debate.

Public Choice advocates, especially including conservatives, seem happy enough to join these debates, apparently unaware that such "public" arguments among the academic and political elite over policy are the essence of modern socialism. Consider the following excerpt from an online book about Public Choice: