Do intellectual property rights spur innovation, as advocates claim? I suspect not, at least not compared to the amount of innovation that would exist under a natural property rights regime. Not only would there be more innovation under natural property rights, but there would also be a far greater chance that the innovations would be better targeted toward real needs, and a much smaller chance that they would have harmful unintended consequences. While the economic and legal theories underlying the current intellectual property bureaucracies enjoy wide acceptance, even from conservatives, their only real-life effect is to enable a parasitic State to feed off an otherwise healthy society. While the bureaucrats distribute a variety of protected monopoly positions in the form of patents, copyrights, operating licenses and rule sets favoring one company or another, there is little reason to think any of this improves innovation, efficiency or any other public interest. For example, patents probably retard innovation by preventing further invention in and around the general field controlled by the patent.⁴⁶  In any case, they distort invention in the direction of a State-devised industrial policy, beefing up boondoggles, and starving useful inventions of the capital going to the boondoggles. The most useful inventions, of course, are those that spring from the creative minds of entrepreneurs and scientists looking to get rich by finding and filling actual human needs. It is a socialist fantasy to imagine that Government help in this process can do anything but retard and distort the result.

Consider the taxpayer-funded fraud known as the biotech business. The field is riddled with phony "nonprofits" getting Government grants to develop drugs on which their for-profit siblings seek patents.⁴⁷  The theory behind both the Government (taxpayer) largesse and the patents is that these will enable us to speed up the finding of drugs to cure the world’s diseases. Leaving aside the obvious potential for fraud lurking behind such "grantsmanship," and accepting the urgency of the need to improve health, we still must ask one fundamental question. Is this the best way to deploy the social resources available to promote health care innovation represented by such expenditures as the $27 billion NIH budget (2003 projection), or the massive chunks of Medicare and Medicaid going to purchase the patented products created by the NIH effort? The drug companies say patents are critical to their willingness and ability to fund discoveries.⁴⁸  But does it really work that way? Thirty years of the "war on cancer," and $8 billion of NIH funding later, no progress has been made on basic cancer rates. Indeed, it is just possible that the heavy Government involvement is the reason we have made so little progress. ⁴⁹

There is even mounting evidence that the madcap rush to new drugs may be contributing to some of the problems the patent rush is trying to solve. For example, a significant increase in allergies and asthma in recent years is attributed by some to "immunization" through vaccines.⁵⁰  In addition, cystic fibrosis, multiple sclerosis and many other newly burgeoning and unsolved maladies, including many manifestations of cancer, itself, appear to be related to malfunctions of quality control processes that govern cell division and protein expression, especially when these relate to the marshalling of immune responses. Since these are the likely unintended consequences of attacking every disease with a patented drug to boost, supplement or supplant our immune system, it is altogether possible that the patent rush approach to curing disease is what is making us sick. In any case, the medical miracles touted in the drug companies’ ads and "breakthrough" research articles are often leavened with the reality of disappointment. Twelve years after the cystic fibrosis gene was discovered with much fanfare, there is still no cure.⁵¹  As for cancer, one promising breakthrough after another has been announced over the years and we don’t appear any closer to a cure.⁵² The latest "targeted" approach may finally be the answer, but that’s what we thought about the rest. In fact, only weeks after the announcement of the "breakthrough" hailed as so exciting that the FDA pulled out all the stops rushing it to approval, it was reported that the targeted cancers were already mutating around the treatment.⁵³

Of course scientific exploration always relies on an uncertain combination of skill and luck. So I wouldn’t go so far as to imply that no breakthroughs are achievable through the patent approach, or that its elimination would magically double the cure rate. No one can say for sure what the effect of such a switch would be. But it is worth having a fresh look at some of the signs we can see in the hopes that they may point to some answers. We can see, for example, that every politician is in favor of some form of free prescription drugs for the elderly. ("Free," of course, means paid for by the taxpayer.) We can see that drug companies are always among the top political contributors. We know that over-prescription of antibiotics has led to so many mutations that we may soon have no effective treatments for some major once curable diseases.⁵⁴  We know that prescription drug sales rose 123% in the last five years, that drug ads are taking over our TV screens, and that the elderly – the biggest market for these drugs – may be overmedicated.⁵⁵

Are they overmedicated? Although it seems highly likely to me that they are, I won’t argue the point here. I will say, however, that all of the financial incentives are pushing in that direction – and point to patents as the source of the problem, if it does exist. In fact, given the pervasive and powerful financial incentives that inevitably flow from the patent approach to innovation, it would be extraordinary if overmedication were not the rule, rather than the exception. Of course, overmedication could range from just a little bit too much in the way of unnecessary medication, to the point where the excess is so egregious that medications are, on balance, doing more harm than good. In view of the accelerating speed with which biotech companies are forming around the patent-seeking, Government-funded research devoted to medical intervention, I suspect we are bound to reach that point, if we haven’t already. That is, we are bound to reach the point at which our whole modern medical arsenal, with all its wonders, does more harm to its patients than good for them. And, regardless of whether or when we reach that point, the question still remains: Is this the best way to deploy the massive portions of our national income and capital devoted to medical processes? Patents, after all, are promoted as a means of inducing innovation through financial incentives. Surely those who make that argument would recognize that, if the same system gives financial incentives to overmedicate the elderly, a probable effect will be the overmedication of the elderly. If that system gives incentives for drug companies to buy political influence, drug companies will buy political influence. If it gives incentives for the nation’s medical budgets to grow like Topsy, they will grow like Topsy. And if it gives incentives for disease mutations, we will see disease mutations.

And while we’re on the topic of incentives, keep in mind the fact that patents achieve their incentive effects because they are monopolies, sole seller privileges granted – in this case – by Government. In other words – and it is worth restating this point for emphasis – it is Government’s deliberate policy to use monopolies as incentives. Forget for a moment whether those incentives lead to good or bad effects, and just focus on the monopoly incentive itself. Just as Government attempts to incent certain behaviors via monopoly grants, every argument used in justification of that approach would apply as well to the potential opportunity to achieve private monopoly positions. That these monopolies are "granted" solely at the discretion of consumers of the monopoly’s product, that they are revocable whenever their tastes change, that they cannot be listed in a company’s intellectual property portfolio as assets – none of these differences between monopolies won in the market and monopolies granted by Government change the fact that both are very valuable and, therefore, that the incentives provided by both are very powerful. And, while it would be difficult to say which is more valuable, either potentially or empirically, it is obvious from the fact that private monopolies have created quite a few mega-billionaires that the incentives driving private monopolization are extremely powerful, too. In view of these incentives, it is ridiculous to think that the creativity driving the song writer, the scientist or the entrepreneur can only be motivated by the lure of patents and copyrights. There are many places where such creative and inventive talents can give decisive advantages to businesses seeking network monopolies. Therefore, there are many structures one can imagine in which such talents will be rewarded as they aid in the task of improving the services or competitive position of an aspiring network monopolist. While it is impossible to say whether individual inventors or artists would make more or less under a natural approach, it is virtually certain that the amount they make would bear a closer resemblance to the value of their contributions to society.

In contrast, the way it works now is that the antitrust and intellectual property laws work in tandem to empower the governing elite’s control of individual initiative. They take away what Government deems to be bad monopolies, like Standard Oil, AT&T and Microsoft, and dole out what Government deems to be good monopolies, like Prozac and one-click shopping. This undermines potential by, first of all, putting many of the most necessary functions of our infrastructure into the hands of inherently inefficient bureaucracies. The bureaucrats then attempt to manage innovation under their auspices by doling out intellectual property.

In consequence, we have a reward system for creativity and invention that is arbitrary at best, because it depends on the arbitrary (or worse) result of influence mongering among politicians, bureaucrats, and privileged companies. The rewards flowing in this system invariably fail to reach large numbers of creators of potentially useful ideas, while bestowing egregiously huge benefits on some of the most laughable charlatans. The patent protected prominence of some drug companies springs to mind, such as those who spend millions singing to us on TV about allergy drugs that don’t really do anything,⁵⁶ or diet drugs that, unfortunately, do. And what about the music companies whose copyrighted vitriol does such damage to the moral fabric of society? Next time you see one of their gangster "artists" emerging from court on the evening news, consider the fact that the copyright system they defend so strenuously against the likes of Napster doesn’t begin to reward artists until they have sold one million CDs.⁵⁷  Because the overwhelming majority of artists do not achieve that level of sales, there is nothing in it for the companies to spend much promoting those artists who can’t achieve blockbuster status. Who are the potential blockbusters? You’re seeing them on the evening news. This is just one example of how a system that creates incentives via grants of Government privilege can produce counterproductive distortions compared to the reputation-based rewards system that would emerge naturally if private monopolists were freely allowed to search out the potential networks.

With such a mission in mind, the policy-making elite must view freedom as only a potential means to a social welfare end, expendable if results don’t measure up. And with such a mission in mind, theory is just a tool to approximate what might be worth testing, first in the lab, then on the public. According to this modus operandi, public debate – not private creativity, competition and natural selection – is the best path to innovation and efficient institutions.

I first came across this nonsensical notion when I participated in the SEC’s "comment period" process. As I learned to my dismay, not only does this process destroy innovation, but it also produces lousy institutions. Comment periods and other forms of public debate are only the most visible part of the rent-seeking frenzy by which Government processes extinguish freedom. But, irony of ironies, everyone involved, including all of Wall Street’s presumed conservatives, participated fully in this process with nary a peep about its socialist character. At regulatory conferences you could almost hear them calling each other "comrade" as they praised themselves and each other for joining the debates and exhorted others to do so, too. The haughty presumption that they were entitled to deference for their good intentions merely because they aired their opinions in public debate was breathtaking. Numerous times I heard senior officials at important financial institutions like large mutual funds berate any who failed to participate with implied threats like "If you don’t make yourselves heard, you’ll get what you deserve." And I never heard any hint of skepticism that the coercive measures that would spring from these debates would lack legitimacy due to the obviously socialist character of the process.

It is another fine irony that Public Choice, a school that contains some of the most hard-nosed critics of Government’s failures due to rent-seeking, pushes a process that is tailor made both for neutralizing their own criticisms and for expanding and perpetuating rent-seeking. But there is a Catch-22 in their prescriptions: imposing on people "what we think they want" can never be compatible with individual dignity and freedom and, therefore – assuming that people do want freedom – will always fail on its own terms. The fact that Public Choice recognizes the self-interest of bureaucrats and tries, with this in mind, to devise institutions that give us what we want in spite of these limitations is distressing. It is no different in terms of freedom than the old Marxist slogan "to each according to his needs." In fact, it’s worse. Because it realistically includes acknowledgement of the flaws in Government processes, it is much harder to dismiss as ineffective in giving us what we want. Think of it as a modern form of the "voluntary" slavery of feudal times in which villeins or serfs "accepted" bondage in return for being taken care of.

The Public Choice view is also consistent with that which sees bureaucrats as an extension of those processes in primitive slave cultures by which the powerful forced the weak to produce food and other benefits for them. And it is consistent with the views of those cultural evolutionists who cite the habit of early civilizations to both enslave conquered peoples and to allow only as much freedom or consumption for their own people as was consistent with the exercise and maintenance of their leaders’ power. Jared Diamond, for example, sees the appearance of ancient "bureaucrats" as one sign that a civilization has reached a significant level of development.⁶⁰  And William McNeil describes the powerful roles played in human social evolution by the parasite twins: "micro-parasites," such as germs and blood-sucking bugs, and "macro-parasites," such as ruling classes that enslave or control others with their armies and Governments.⁶¹  Given the rent-seeking machinations of today’s bureaucrats, lawyers, politicians and businessmen, it is anything but inconsistent to view our own process as an example of what these brutally realistic observers have described.

Realistic and historically accurate as these views may be, the American experiment in individual freedom and limited Government was meant to be a step beyond such methods. Unless our Founders had in mind an elaborate deception by which we would more readily accept tyranny if we could be fooled into believing it was freedom,⁶² we really did and do believe in every individual’s right to be protected by law against the arbitrary exercise of Government power. To this end, the most important right, in a practical sense, is the right to property. The question, however, is how do we define "property"? And, more important, who defines it? Is the concept of property essentially innate, inhering in the individual’s actions and natural relationships with his surroundings and other people in a way that can be universally recognized? Or is it something that Government must define? I believe and hope it is the former, and have come across several libertarian articulations of natural property rights that work for me. Murray Rothbard, for example, says individuals should be able to do whatever does not physically harm anyone else, or threaten to do so.⁶³  Such naturally free individuals can do what they will to better their condition and may thereby accumulate their own property as a result of whatever commercial arrangements and contracts they can devise. Property originally comes into existence in the following way: Starting with the paradigmatic example of land, a person can occupy land that is not owned or occupied by anyone else and establish his right to it as property through the sweat of his brow, such as by building a house or tilling the soil. Thereafter it becomes his property to use, not use, or sell to someone else. No person or Government may take such property away from the rightful owner, or use it without his permission. The authority to apply coercion to enforce such rights, like the rights themselves, would derive from universally recognizable common law principles, and could be exercised by private enforcement agencies (in Rothbard’s vision) or by a Government that is constitutionally bound to respect those common law provisions (in my vision).

Conventional conservative wisdom, in contrast, holds that property rights come from the State. In this view, without giving the State authority to define, articulate and enforce property rights, they would not exist, and man’s progress to date would turn to sand. Government not only has the right to define and enforce property rights, in this view Government implicitly owns all property or potential property until it is moved by grant, license, auction or otherwise into private hands. Rothbard’s squatters would not be able to establish ownership by his first-productive-use principle, but would have to somehow get it from Government.

Comparing first-use squatting versus Government-directed distribution as means of originating property and moving it to private hands, few people today would think of the former as legitimate, while most would assume that the latter is just the way the world works. We don’t, after all, have much recent experience of either method when it comes to originating property in land, which still provides the prime example for most people of the concept of property. But Rothbard’s squatting is not the occupy-to-steal strategy you read about in which indigents might claim a right to someone else’s property because they moved in while he was away. Rothbard would call that theft. Perhaps to get past the assumption that squatting is less than legitimate, Rothbard, like Mises, gives examples of Robinson Crusoe to establish that there was a time when land was so abundant that no one cared to own it.⁶⁴  While I found his examples convincing, others may consider them unrealistic or irrelevant to current property rights theory. But there is today a massive example of the squatting principle in action, namely, monopolization. All monopoly formation involves the creation of products, services, processes, alliances or other network formation activities that constitute new, first use property – or would, if Government took a natural law approach to monopolization activities. The sole seller position established through monopolization would create property in the unique connections, pathways or markets that did not exist before, or at least did not exist in exactly the way that the monopolist has created.

Obviously, Government does not recognize monopolization as a valid technique to establish property rights to a monopoly or anything else, even less so than it would recognize property in land to someone who began farming or mining on a Government plot. One way to understand Government’s antipathy to private monopoly is to recognize the threat it presents to the Government prerogative over property. And one way to see why we would be better off if Government did not have a property prerogative is to see how it has always screwed up the role. From the distribution of land in the American West in the 19^th century, which was never successful and is now being reversed,⁶⁵ to the distribution of spectrum via flubbed auctions today,⁶⁶ there is no evidence that Government can handle a property role effectively. Yet even as the role expands from physical property to intangible property, we rely more than ever on Government to define and enforce property rights. And conservatives are often at the forefront of those justifying this role. ⁶⁷

One thing I’ll grant: If Government is doing the defining, then it may be that Government also has to do the enforcing. But three problems will gather increasing force if we continue to do it this way: 1) the amount of potential property will be less, 2) the proportion of it that can be protected will be less, and 3) Government will increasingly be seen as a wedge between our actual and potential property, which will lead to massive dissatisfaction and potentially revolution. Under a Government definition regime, the natural desire of the governing elite for greater control will move definitions toward those which require ever greater coercion to enforce. In contrast, natural definitions would allow the creation of far more proprietary capital, such as the ideas behind both the network monopolies and the intellectual property of the Information Age. Indeed, whole new categories of property would emerge as more complex social and economic systems evolve. The longer the Government definition regime is retained, the more acute the conflict between these two potential methods will become. Eventually, enforcing Government-defined property claims will become nearly impossible, even with intolerable coercion. And the gap between our potential and our reality, both individually and as a nation, will become ever more palpable. The combination of these two factors – intolerable coercion and a sense of shortfall relative to potential – will, unless reversed, lead to an illegitimacy crisis for our Government.

England, where the property rights we have now were largely developed, faced such illegitimacy crises repeatedly during the last millennium, often resolving them in the direction of natural definitions. In fact, the very concept of property, from its origins in ancient Greece on down, emerged only as individuals wrested control of the definition of property from kings and the State. Only by establishing the right to control definitions through such common law milestones as Magna Carta⁶⁸ were we freed of the arbitrary power of the State. There was much backsliding, though, as the crown sought to exploit definitional loopholes and worm its way back into exercising arbitrary control over property.⁶⁹  And by no means were definitional conflicts always resolved in favor of individual rights. Quite the contrary, especially in Russia, which was 600 years or so behind England in their development.⁷⁰  This was not surprising, coming as they did from a tradition in which the czar technically owned not only all the land, but also owned his people and their personal items.

But give rent-seeking its due. Freedom got under way only when the top nobles wanted to take advantage of a weak king (or such exigencies as his need for money to wage war) to win special rights for themselves. The nobles in no way intended to extend rights down to the lower classes, much less to slaves, villeins or serfs – indeed their rent-seeking coalitions would certainly have collapsed at the very mention of such democratic heresies. But, though the original nobles sought only their own property, later on the same logic by which they got theirs would inevitably be read to include all those lower classes they originally meant to exclude.⁷¹

Hanging onto our gains hasn’t been made any easier by philosophers like Thomas Hobbes who argued that whatever rights we had wrested from the State wouldn’t be enforceable without the State’s coercive powers. And the legitimizer of Leviathan has many descendents among today’s conservatives. The good news is that there is now virtual unanimity among philosophers and most governments that everyone should be able own property. The bad news is that, with all groups now entitled to it, rent-seeking has shifted to defining what property is, and everybody wants to get into the act. So Leviathan is back in business, mediating the conflicts between group interests as property definitions change. This, of course, is exactly what they should not do in a society that respects the Rule of Law, which – if it means anything – means that the rules should be the same for all, and very nearly for all time.⁷²  But today’s rules regarding property are very different for different groups of people as a result of rent-seeking, and they are constantly in flux as society moves beyond land, physical objects and financial assets to the intellectual property of the Information Age.

Just a few examples: How do we decide whether "scientists" should be allowed to "discuss" (exchange papers about) encryption technologies, knowledge of which could be used to circumvent copyrights of recorded songs. How about "non-scientists"? Does the First Amendment protect coded "songs" or "poems" whose intent is to spread computer instructions to hack the encryption protection of copyrighted songs or movies? How do we enforce copyrights to songs that are "shared" on Napster by teenagers who clearly have not taken seriously their parents’ admonitions to respect the property of others? (These kids respond without compunction (What-a-ya-gonna-do?) to ads from multibillion-dollar computer companies (Apple) to "rip, mix, burn." Do they think their parents don’t know that "rip" means "steal"?) What do we do about it if all these kids can evade attempts by Napster to comply with a judge’s ban on their swapping practices by inventing word twists that hide the actual titles they are swapping? What if they use decentralized swapping methods that, unlike Napster, can’t be shut down anyway? How do we decide how long patents should last on AIDS drugs, as opposed to, say, arthritis drugs, or allergy drugs, or one-click shopping methods for the Internet? How do we decide under what conditions compulsory licensing of patented drugs in foreign countries with rampant health problems is appropriate? Would compulsory licensing ever be appropriate for one-click shopping? If it works for drugs, why not? If we decide it isn’t appropriate, either in some cases, or at all, what if we can’t stop it? Should it matter if the patients most in need of the latest medicines are old? Or poor? Does it matter? How do we determine whether a copyright that now protects the descendents of Margaret Mitchell are violated by a modern parody of Gone With the Wind which makes liberal use of the original’s text to imply criticism of Mitchell’s attitude about blacks. Should the race of either author matter? Does it?

It should be clear to even the most casual observer that "property" is bound to become arbitrary, conditional, and ultimately meaningless as a defense of individual freedom under these circumstances. Number one, technology and globalization are making it easier and easier to evade our State-enforced protections. Number two, with the allocation of property obviously the result of effectively arbitrary decisions, then we must blame the State for any unfair results of that allocation, and we must permit petitions for redress of any alleged unfairness. This gives "inequality" a voice. Thus, inequalities – real or imagined – both within rich nations like ours, and between ours and Third World countries, force us to justify the application of our principles regarding property in the face of their increasingly untenable allocation consequences. Those consequences range from the seemingly trivial denial of our children’s "right" to free music to the denial of health care "rights" to disease sufferers around the world. Conservative hard-liners scoff at such concerns and insist on tougher sanctions for infringement. But that just won’t work. Once the allocation of property is obviously based on arbitrary decisions, it is impossible to maintain the moral authority to enforce property rights with any legitimacy. And once that happens, the coercion applied to enforce them anyway comes more and more to resemble the raw power of a police state.

The seemingly trivial infringements of our children are not nearly as harmless as they might seem. In fact, their attitudes are already shared by large swaths of the digital elite. And the fact that the fastest growing website to date is a non-public company based on piracy gives little hope that moral suasion can put the genie back in the bottle. The more enduring lesson is likely to be that issues like this are decided not on principle but on the basis of who has Leviathan’s ear. The notion that your property is yours, that you can deny its use to others or the State, has become a quaint concept that our youth will only learn about in history books (and probably not there either, because Leviathan writes them). As in czarist Russia, increasingly in today’s America, you keep your property only at the pleasure of the State.

In fact, the great American road to riches itself now entails submitting to all manner of processes prescribed by the State. The more Leviathan gets to define our opportunities, to box in our actions and monitor our movements, the more dependent on him we become for the opportunities we have, and the more conditional on his good graces our "property" becomes. Trade secrets based on original inventions must be filed with the patent office for all to see (assuming we want to realize any property value from them). Contracts, discussions and e-mail are potential evidence of wrongful conduct, and Leviathan retains the right to subpoena them. Businessmen are wary of talking about the most fundamental aspects of their businesses, like price, because their employees, lawyers, competitors or others may rat on them for price fixing to get amnesty for themselves.⁷³  Even the richest and seemingly most powerful are back to begging for bread, seeking Leviathan’s favor by filing forms, participating in public debates, and informing on competitors.

Thus, Scott McNealy, CEO of Sun Microsystems, and an avowed libertarian, lectures reporters on "economics 101," by which he means antitrust theory, while begging for some of Microsoft’s market. Why? Because, as Leviathan whispers in his ear, "Bill Gates has been harming competitors – like Sun Microsystems, don’t you see?" And, dutiful servant that he is, McNealy rallies groups of Bill Gates wannabes and Microsoft competitors, like Oracle’s CEO Larry Ellison. And the crowd pleases Leviathan greatly by demanding that the Royal Guards tie up Microsoft like Gulliver in Lilliput. Ellison even sends investigators to comb through Microsoft’s trash looking for material with which to inform on his competitor. A truly libertarian approach, such as Rothbard’s, that would only bar physical harm, is lost on McNealy and Ellison. While the Rothbard approach would allow for a natural route to a universally accepted definition of property, the McNealy "libertarianism" involves heavy Government interpretation, definition, and coercion – not to mention informing on your fellow businessmen – which inevitably leads to arbitrariness. But which view did our Founders favor?

The Framers of our Constitution were anything but clear on the matter, in spite of a Herculean and courageous effort to be clear. The famous words in the Declaration of Independence laid out the principles: we have "unalienable Rights . . . [to] Life, Liberty, and the Pursuit of Happiness." Did they choose the "Pursuit of Happiness" formulation, instead of the more common "life, liberty and property" phrase or John Locke’s original "life, liberty and estates" because they were unsure that property or estates belonged in that hallowed pantheon of unalienable rights? Or was the change due to a more general or even prophetic understanding that the word "property" did not convey enough protection for freedom? In any case, Adam Smith, who published The Wealth of Nations in the same year (1776), writes eloquently on how a man’s capital derives from his own labor, deployed however he wishes, provided his actions do not injure anyone else.⁷⁴  Smith also tied the accumulation of property and capital to the Government-protected right of the individual to pursue his own interest.⁷⁵  Obviously, Smith and Rothbard are pretty much in synch on the matter.

Unfortunately, in spite of the Framers’ heroic efforts, their Declaration and Constitution did not prevent modern America from adopting the McNealy/Ellison interpretation. For all we know, at least some of them may even have intended that interpretation in the next line: "That to secure these Rights, Governments are instituted among men, deriving their just Powers from the Consent of the Governed." In any case, it is increasingly difficult today for individuals to know what their property rights are, and Government is increasingly involved at every turn in defining them, and redefining them, and redefining them, and redefining them. In this environment, not only are many forms of intangible property, such as intellectual property, coming undone, but so is physical property, such as land.⁷⁶  This is clearly not what the Framers had in mind. Nonetheless, it is not only what the likes of McNealy and Ellison vociferously espouse, but it is also the evident philosophy of their antagonists, such as Bill Gates. In the antitrust duels, it is difficult to tell which side is doing more damage to freedom: those who challenge monopolists, or the monopolists and their conservative seconds. I believe it is the latter.

The most effective legitimizers of antitrust are businesses. This seems ironic, since they and their hired guns always seem to be involved in bitter arguments with bureaucrats. But the fact is that all of them are, or hope to be, successful at the rent-seeking game. And questioning the legitimacy of rent-seeking is, to say the least, not good rent-seeking strategy. So the public sees a highly contentious, adversarial process, laden with hyperbole delivered by the best lawyers, lobbyists and PR firms, not to mention occasional cameo appearances by the nation’s wealthiest businessmen and its most prominent elected officials.⁷⁷  Nonetheless, the ongoing act of engagement in this battle constitutes the most compelling endorsement possible of the competition theories that give rise to it. In spite of appearances, there is no philosophical disagreement about the legitimacy and basic purpose of antitrust, regardless of the vehemence of arguments over fine points or the outcome of any particular cases. That is because the arguments are almost always only over details, technicalities, interpretations, precedents and other legal minutiae. Why? Because it is these minutiae that determine success or failure for the client businesses, first in the legal/regulatory sphere, and then – for those who have won a rent-seeking advantage – in the "marketplace." Such arguments over antitrust details can have no other effect than to validate its basic principles, ever more firmly establishing Government’s reign over the innovation process. That conservatives cannot drop out of the courtroom long enough to point this out is why freedom has so little chance anymore. Everyone has been co-opted.

From Bill Gates on down, every argument proffered in defense of Microsoft in its ongoing antitrust trials is to the effect that the company is not a monopoly and never attempted to become one. Not only its own attorneys, but legions of supposedly conservative academics from right wing think tanks, "independent" institutes and elsewhere who came out to defend this most visible symbol of capitalism, all of them, without exception, agreed essentially with Gates. No one argued that it’s their right to be a monopoly if they want to. No one said that – provided they didn’t physically harm or threaten to physically harm anyone – they were fully within their rights as free Americans to engage in any monopolization or anticompetitive tactics of their choosing. They didn’t argue their right to do these things, because even the slightest hint that they were aware that they might have knowingly engaged in them would imply antitrust guilt – and the loss of billions. So instead they made fools of themselves trying to prove they didn’t do what all of America knew they were doing.

Of course being willing to make a fool of oneself is par for the course in a rent-seeking world; with so much money at stake it is far from a bad legal strategy to adopt the assumptions of the judge, no matter what you think. So neither side would dream of basing its case on the illegitimacy of antitrust. With that question off the table, the arguments in court all boil down to: You Are a Monopoly. Am Not a Monopoly. Are. Am not. Are. Not. Are. Not. Of course, being a monopoly is not in itself illegal. Plaintiffs then have to prove monopolization. But this, too, boils down to: Did. Didn’t. Did. Didn’t. There are no bright lines here, which is why antitrust is such a great gig for lawyers and academics squaring off against each other. Liberals generally attack all monopolies, while conservatives try to get them off the hook. But that doesn’t matter. It doesn’t matter who takes what sides in these debates. Nor does it matter who is correct as a matter of law, or who wins. What matters is that the very existence of the arguments only solidifies the impression that antitrust is valid, if properly applied. Since the losing side at least will always argue that any particular application could be improved upon, the theoretical dream of proper application will always remain. So everyone continues to agree on the theoretical validity of antitrust. Everyone can believe that, if only the other side would drop their stupid arguments – or be overruled by a wiser court – perfect application would result.

Both sides always agree, in other words, that deliberately pursuing monopoly is evil. The plaintiff argues that the defendant pursued monopoly; the defendant denies it. Both have adopted the right strategy, because the alternative (questioning the legitimacy of antitrust) has zero probability of success, while the standard approach almost always has a roughly even chance of winning the case, and a nearly certain chance of improving the career prospects of those arguing it. The case has a 50/50 chance of success, because, given the arbitrariness of antitrust application, there are always thousands of people who will agree that the accused is guilty, and there are always thousands of people who will agree that the accused is innocent. With nothing but shifting political winds to ultimately decide after all the appeals are exhausted, whether the accused is guilty or innocent, even the most expert have little better than a 50/50 chance of guessing the outcome. And those totally ignorant of the law or the issues don’t have much worse of a chance; such is the gaming potential of arbitrary justice.

The most visible evidence that this arbitrariness is the reality in antitrust prosecutions is the spinmeisters trying to sway public opinion on the courthouse steps before and after all trial sessions and related events. If the law were clear – that is, if the Rule of Law governed antitrust matters – this would not be so. The law would determine the outcome, not public opinion. You would not be guilty if Democrats are in power, but innocent if Republicans are in office; guilty if the public mood is to soak the rich, but innocent if the mood favors stock market wealth. If the Rule of Law governed, you would not see so many reversals on appeal, nor would you see expectations of a Microsoft breakup change radically as the White House changes hands. You would not see different courts reaching radically different conclusions on such matters as what market shares constitute monopoly power, on whether Herfindahl indexes (a statistical measure of market concentration) should be used in the determination, or on whether a 10-year versus a 5-year lease for shoe manufacturing equipment is allowable. That such arbitrariness has always been the reality in antitrust cases proves beyond question that antitrust is inconsistent with the very concept of property, which from the beginning has meant ownership not subject to the arbitrary whims of the crown or State. That billions regularly change hands based only on the shifting fancies of a policy that, in Robert Bork’s phrase, is "at war with itself" is, at best, amusing. As to why the careers of those arguing the cases are almost certainly enhanced by accepting antitrust? What else can they do? Unless they accept it, they have no careers. If they accept it, they have a reasonable chance of winning half the time, whether they are any good or not. And every case they argue further establishes their credibility to argue one side or the other of future cases.

But, however good the universality of the denial defense is for attorneys’ careers, win or lose it has the effect of preventing any future claim that it is your right to do what you are denying you did. Moreover, no one else can either. In a typical case, plaintiffs (usually some combination of competitors, ambitious bureaucrats and lawyers) will accuse a monopolist of, say, "predatory pricing." The monopolist will deny he did any such thing, hoping there are no smoking guns in his e-mails, and marshal academic expert witnesses to demonstrate the great difficulty of making the tactic work, anyway. Regardless of whether the academic arguments make economic or legal sense, and regardless of whether they do or do not sway the court or the public, the one thing proved beyond any doubt is this: If the accused monopolist did engage in predatory pricing, he would be guilty. Therefore, neither he nor anyone else better try it. Of course, in practice, they do try it again, in fact over and over. But they become more sophisticated at figuring out which kinds of predation are less likely to be detected by the gendarmes, and they become ever more creative at the fine art of disingenuous denial. The situation rewards those who can engage in predation without getting caught, the crafty, the liars. It also rewards those whose antitrust teams and legal lobbying crew can trip up the less sophisticated liars among their competitors. The situation hinders those who would more simply turn their creative energies toward the honest task of competing hard for the consumer’s dollar by fashioning whatever business arrangements would serve that end.

This scenario is repeated ad infinitum across all the categories and nuances of potentially anticompetitive behavior. Not only is predatory pricing blocked, but so are many kinds of discrimination that are deemed predatory (or anticompetitive, or monopolistic – the categories tend to blend), such as getting your customers or suppliers to not deal with your competitors as a condition of buying from or selling to you. Similarly, market division (I won’t invade your turf, if you don’t invade mine), collusion with competitors for almost any purpose (such as fixing prices or boycotting new technologies), and deliberately attempting to get, protect or extend a monopoly by any of the above or other means are prohibited. And many more esoteric offenses, such as various forms of "tying" or "bundling," are frequently off limits, too, sometimes per se, and sometimes only if they can be shown to be harmfully anticompetitive under a "rule of reason." That determination as well as the final outcome at trial will often depend on whether the court accepts the defendant’s terminology or the plaintiff’s. Rather than "tying" or "bundling," for example, Microsoft likes to speak of "integration," which has a nice politically correct sound to it. Its opponents, in contrast, are now calling it "bolting," which rhymes nicely with "revolting."⁷⁸

This call is particularly hard to make, because – integrated or bolted – the end product is both incredibly attractive to many consumers and incredibly useful for anyone who wants to get, protect or extend a monopoly. Which of these motives drives Bill Gates? Serving consumers or monopolizing? With the entire legal profession’s attention riveted, and much of the rest of the nation’s besides, on the answer to that question, no one bothers to ask the only question that should matter to anyone concerned either about freedom or about business efficiency: Who cares? While some find it amusing or even career-enhancing to watch Bill Gates squirm under a David Boies cross-examination, or even more so to watch him try to counter the impression elicited by Mr. Boies that he is a disingenuous, predatory monopolist by singing "Twinkle, Twinkle, Little Star" for Barbara Walters (just as he does for his young daughter), the whole charade on all sides is distracting at best. Why aren’t we rejoicing that it is so hard to tell the difference between serving consumers and monopolization? (The lawyers, of course, are rejoicing, but that’s because their careers depend on teasing out the difference.) This should be a slam-dunk for any modern day Adam Smith to demonstrate how the invisible hand works such wonders, how having many such self-interested predators around can work to the benefit of all. Hasn’t it occurred to anyone that the difficulty of distinguishing between these two is a sign that antitrust is flawed to the core, that here and perhaps in many other ways we are skewering those whose activities we should be commending?

The answer is that, while there are a few around who occasionally point out such things, so strong is the intellectual undertow generated by the denial defense, that even their voices are drowned out by the din of arguments shaped by the antitrust bar. In fact, the occasional glimpses of clarity are as often as not drowned out by the very visionaries who offer them as they struggle to gain credibility by taking up the conservative side of the denial defense. The situation has naturally set up a virtually infinite and still proliferating number of booby traps that catch and render even the most cogent insights irrelevant. The way it works is the following. Since many of the potential violations are related and often substitutes for each other, the permutations and combinations with which regulators can assemble a case are virtually infinite. And, since guilt or innocence frequently turns on such nebulous issues as whether the accused did or did not know what he was doing when he did (or didn’t) do it, you can get sometimes the most ridiculously disingenuous denials and situations where the mood of the public or the court can make a big difference.⁷⁹  All of this affords both prosecutors more flexibility in bringing cases and defendants more flexibility to mount creative denials. The combination creates endless expansion of the varieties of arguments between hang-em-high liberals and get-em-off-the-hook conservatives. With so much real money on the line, the legal and academic professions tend to reward those who can make relevant arguments for any ongoing or future cases. Even conservatives who may be highly suspicious of the whole process, therefore, cannot have their ideas considered unless they get a toehold in the debate through some get-em-off-the-hook argument. Given the poor theorizing that led to antitrust in the first place, and the century of inconsistent application, any well-fed conservative can find at least some holes in every prosecutor’s arguments. Still, as I said earlier, it is only the existence of these arguments that really matters, not who wins or loses. And the fact that they exist can only serve to strengthen the acceptance of antitrust. While the conservatives do gain their toeholds, any real freedom-based insights are so buried under get-em-off-the-hook arguments that the impact is to further empower antitrust, regardless of their content or cogency.

When ardent anti-antitrusters like Dominick T. Armentano argue, for example, that cartels are almost impossible to hold together,⁸⁰ or that tying agreements may not work,⁸¹ the effect of these arguments is to underscore the impression that, if a monopolist could hold a cartel together, or could use tying to extend dominance from one product to another, doing so would be illegal, and perhaps appropriately so. So you can add these practices to the aforementioned predatory pricing as potential monopolization techniques that have become off limits precisely because of conservative arguments meant to help monopolists accused of them. Many of Armentano’s arguments are based upon showing how difficult it is to monopolize, usually to imply that the things the laws are trying to prevent don’t really happen much anyway. This kind of argument leaves conservatives completely exposed to the danger that, if monopolists ever do show up wanting to do all those things the conservatives have said are not worth the effort, the bureaucrats could hoist them on their own petard. As luck would have it, this is just what has happened.

While conservatives can hardly be blamed for trying to help monopolists where they can, they are now finding that the requisite focus on practical rather than principled criticism, on crafting aids for the denial defense rather than standing up for freedom, has painted them into a corner. Having now made the case that monopolies are so difficult to establish as to be not worth pursuing, along comes the Information Age and network effects, creating, in the words of a New York Times headline, a Land of Monopolies – and trouble.⁸²  In a moment we will see how conservatives now find themselves locked in to positions that are wrong on science, wrong on economics, and wrong on the law. (This is a fine irony, given conservatives’ view that network effects and lock-in don’t really exist.) Even if one grants their arguments as they may have applied to the Old World, the very pillars of their case make it imperative to bolster antitrust now. Before moving on to the network effect economy, let’s briefly survey the state of play in antitrust debate.

That the antitrust laws were being inconsistently or incorrectly applied to the point that we might be better off without them was a position very nearly taken by Robert Bork in The Antitrust Paradox. In the end, his criticisms only served to help resolve some inconsistencies, such as that "efficient" combinations should not be barred, if they benefited consumers. Thus, his criticisms had the effect of solidifying support for antitrust even more than had he not made them. Bork is a noted conservative, of course; in fact, one of the best examples of orthodox conservatism you can find. He is also one of the best examples of orthodox antitrust views. As far as I can tell, he agrees in all material respects with Clinton Justice Department officials like Joel Klein and Janet Reno, as well as with fellow Chicago Schooler Richard Posner, an early advocate of deregulation. Deregulation is what you might call the "strong form" of antitrust, relying so much on the presumed robustness of antitrust theory that its advocates are confident they can even force "competition" on natural monopolies. Thus, on antitrust, the conservative Chicago position and the liberal view are one and the same and constitute, in effect, today’s orthodox antitrust view.

But let’s not forget the other schools mentioned earlier. Although their positions often seem to blend, or at least the conservatives in them seem to hold positions from several at once, the main contributions today are as follows. The Public Choice school criticizes the self-interest of bureaucrats, while sometimes participating in the bureaucratic process to devise more efficient structures. They are skeptical, based on the empirical evidence, that antitrust produces any benefits. Nonetheless, they hope that the institutions produced by open and honest debate will improve matters. Whether such improvements are labeled as reforms or as replacements of antitrust, they would clearly often be imposed from above, which would involve Government coercion. The Harvard School, which has been described as made up of "structuralists and their game theory descendents"⁸³ also would, it appears, impose deregulation schemes perhaps designed in the lab. In any case, they are advising many foreign countries on how to set up efficient antitrust structures, which presumably might include decentralized electronic trading systems, like those used in electric power deregulation here. Finally, the Austrian School, while the most philosophically pure on freedom, is – perhaps for that reason – seldom mentioned in today’s antitrust debates.⁸⁴  Unfortunately, dismissing their guidance is made easier by the fact that many of their clearest voices – Mises, Hayek, Leoni, Rothbard – are no longer with us. This sad fact facilitates the cherry picking of their views by today’s denial defense teams, seeking out, say, monopoly descriptions that can be turned into monopolization-is-difficult-and-therefore-not-worth-the-time arguments, rather than defenses of freedom that could have been used to justify monopolization outright. As described above in the discussion of Armentano, even a small amount of attention paid to an argument’s denial defense utility can dilute and pollute its defense-of-freedom potential.

All of these schools are generally viewed as conservative, and all of them are inadvertently undermining the cause of freedom by implicitly endorsing antitrust’s core principles. Liberals who support antitrust may be meddlesome, but they are not particularly damaging to freedom, since they are always in favor of intervention and, therefore, have limited intellectual credibility in the debate. Dealing with knee-jerk liberals from Marx on down is not the problem. The Trojan horse is the problem. As long as conservatives are arguing only over technicalities rather than principle, the overall effect is to strengthen antitrust. And as long as they grant its premises – even if only to gain traction for their get-em-off-the-hook arguments – they hammer home more firmly than any liberal could the impression that those premises are valid. Conservatives do the most damage to freedom, because they are the ones who would be expected to raise a note of caution over principle, if one were justified. Their failure to do so provides strong support to the assumption that Government intervention to restrain at least some kinds of monopolies is a good idea. And that’s all the justification the bureaucrats need to erect the entire antitrust edifice.

Not only are conservatives who accept antitrust more damaging to freedom than liberals are, but the more libertarian a given conservative is, the more damaging are any antitrust arguments he makes – regardless of content – if they fail to simply reject antitrust as a violation of property and freedom. Take Jim DeLong, for example, a commentator for the Competitive Enterprise Institute who is regularly acerbic on antitrust, and the author of Property Matters, a fine expose of how liberals, environmentalists and other socialists are undermining property rights. But when summarizing the Appeals Court "victory" for Microsoft, he allows that "part of the opinion annoys those of us who think that the current antitrust doctrine about monopoly is in sad disrepair."⁸⁵  What else could the reader conclude but that DeLong – arch conservative and antitrust critic extraordinaire – believes antitrust can be repaired and, therefore, implicitly believes in antitrust? Precisely because he has made such incisive critiques of antitrust, DeLong’s always implicit and sometimes explicit acceptance of its core principles is devastating for freedom.

DeLong is probably as good a place as any to bring up the final straw for conservatives: the QWERTY Confusion. Here is how he sums up the issue:

Or take Clyde Wayne Crews, current director of technology studies at the libertarian Cato Institute and, like DeLong, a commentator for the Competitive Enterprise Institute:

And here is how Liebowitz and Margolis put it in several passages from Winners, Losers and Microsoft, the book that most comprehensively lays out the conservative view on lock-in:

I hope after the earlier discussion that the reader can recognize the argument over lock-in as just another example of a denial defense debate, an argument between hang-em-high liberals and get-em-off-the-hook conservatives. Observe, for example, that – regardless of who is right on the science or the law – the effect of arguing that QWERTY is a myth is that, if any wannabe monopolist could ride network effects to durable lock-in, he would be guilty, or at least would have a much harder time proving his innocence. This is really just a more all-encompassing version of the predation arguments. In those, as you will recall, conservatives claim that predation doesn’t work or isn’t worth the time, in the hopes of persuading the court of the foolishness of the Government’s case. But, win or lose, the effect of having made such an argument is to more firmly outlaw whichever predatory practice their client had been accused of – or any future client might be accused of.

Because network effects and lock-in, if valid concepts, make all kinds of predation easier to pursue, and more likely to pay predators for their time and effort, the theory in one fell swoop threatens to hoist all the previous get-em-off-the-hook arguers on their own petard. No wonder they are trying so hard to "debunk" it, "demolish" it, or declare it to be a "myth." And no wonder they all seem so anxious to confirm the success of each others’ debunking, demolishing and de-mything. All the circular congratulation seems necessary because, if lock-in is real, predatory pricing to bump off a new competitor with temporary discounts so you can make more later, for example, will work quite well. So would bolting a free browser to your dominant operating system to kill off a competing platform. So would muscling OEMs to carry your OS exclusively so as to give an advantage to your applications software products. And so would bundling as many of those applications as possible into your OS so that the whole world of PC computing will have to march to your standard. Given the potential of lock-in theory to place previous and planned practices of Microsoft in a harsh monopolizing light, it is no wonder that the company backs the QWERTY-is-a-myth view.

Perhaps that’s why the company has had Liebowitz and Margolis on the payroll as consultants at times during the ‘90s,⁸⁹ and has been a funding sponsor of The Independent Institute, which published Winners, Losers and Microsoft. The company also secretly paid for full-page ads, nominally taken out by The Independent Institute, in which 240 academics signed onto the company’s view without knowing it was funding the ad,⁹⁰ an embarrassing episode uncovered later by the trash-digging efforts of Larry Ellison’s anti-Microsoft squad. The ads, the book and the QWERTY-is-a-myth theory were all meant to influence the court of Judge Thomas Penfield Jackson, who, in the end, was not impressed. Nor were the seven Appeals Court justices the case went to next who, whatever they thought of Judge Jackson’s talking out of court, confirmed his monopolization conclusions.

The problem with this argument, legally, is that there is no mention of it in the antitrust laws. Nowhere does it say that monopolization is OK, provided your monopoly won’t last very long, or if it is only one monopoly in a series of them that share the market sequentially. As much as academics would no doubt jump at the chance to develop statistical guidelines for networkyness or seriality to determine when we could excuse monopolization, the Hail Mary nature of the Microsoft strategy can easily be seen in a few not altogether tongue-in-cheek restatements of it: Antitrust was and is based on sound theory, but now it is no longer needed, except to go after old companies. Or how about this: The reason antitrust is no longer needed is that companies are doing much more now of what we needed the law for before. Or this: The same process that made monopolies bad in the old days is now making them good. And why? Because there is so much more of that violative behavior now. And how about this one: Monopolization is happening so fast and furiously now that trustbusters needn’t worry about it anymore. All of these strange implied statements of QWERTY-is-a-myth doctrine are inevitable consequences of the denial defense in this case. By adopting this particular version, Microsoft forced itself into the weird position of having to argue that it was not a monopoly based on standards that don’t exist yet, while supporting that assertion with a tacit admission that it is a monopoly by today’s standards. And the fact that it was only through tacit admissions or "independent" third parties that the case could be made or the m-word mentioned was the cause of much hilarious disingenuousness on the part of Microsoft witnesses, and probably the most important factor that soured the public, the press, and Judge Jackson on the company. Having exhausted good will and credibility by denying that it was a monopoly, when its own arguments admitted by implication that it was, it was easy enough to convict the company on monopolization charges.

The problem with the argument economically is that all monopolies are temporary. At best, the serial monopoly distinction is a matter of degree, not kind – and an arbitrary one at that. How, for example, could we say that a 2-year monopoly is OK, but one that lasts 3 years gets hit. At best these kinds of approaches to making the distinction required by the Microsoft argument would just add another dimension by which arbitrary bureaucrats could decide which are the good monopolies and which are the bad ones. And it would certainly ratchet up the hypocrisy and cynicism. How would you feel, for example, if companies that are obviously monopolizing like crazy got a pass, while trustbusters ticketed the slowpokes? That would be like having a traffic cop write you up for going 75 in a 60, while just watching as others zoomed by at over 100. So far, anyway, Judge Jackson and the seven justices of the DC Appeals Court have at least provisionally rejected Microsoft’s logic, and have sounded more confused than persuaded by it.⁹¹

The final problem with QWERTY-is-a-myth is that it is almost certainly wrong on the science. I say this only partly because Liebowitz and Margolis seem forced, at least in their less guarded moments, to admit the truth of network effects, monopolization and lock-in even as they are devising denial defense arguments against them.⁹²  But the bigger hole in their case becomes visible when they try to argue, as part of the overall effort to minimize monopolization, that network effects do not result in lock-in, when what they really mean is that the lock-in is so brief that it shouldn’t really matter. This may sound like a minor quibble, but it has major implications for the credibility and viability of their scientific and legal arguments. The way they phrase the issue enables them to make bold statements that there are no examples of harmful lock-in. While this is true, it is not because lock-in does not exist, as they argue, but because it does. There are plenty of ways that improvements can occur in spite of, and even because of, lock-in. Again, this is not just a quibble.

The authors may not know it, but their way of putting the issue is inconsistent with these concepts that they appear to understand and, at least in the case of network effects, explicitly acknowledge believing in. In the first place, network effects and potential lock-in are inseparable. In tautological fashion, the network effect process inherently includes the possibility of multiple equilibriums and, therefore, inherently includes the possibility of randomly locking in to one of them. Randomness here precludes any certainty that the locked in technology is the best one of the multiple choices. And lock-in means that there will be at least some stickyness giving an advantage to a technology that is locked in over one that is not. How do Liebowitz and Margolis expect this blind process, of which there are many examples outside the economic realm,⁹³ to distinguish between technologies so that it would only lock in the good ones? Of course, there could be no such agent or force. Thus, it is inherently inconsistent with these concepts to expect consumer preferences or efficiency to immediately dissolve lock-in of an inferior technology. And it is absurd to conclude that, when the monopoly does turn over, the replacement will always and immediately be the very best of all possibilities. But both of these highly improbable outcomes would need to be proved to be always true if the Liebowitz/Margolis view on lock-in were valid. That would be tantamount to saying that these processes they acknowledge the existence of – don’t really exist after all. So instead they say that they do exist, but don’t really have the effects that their existence tautologically implies.

It may be worth observing that myths can be instructive, regardless of how much truth is behind them, as the mythologies of early civilizations, and maybe some religions today, demonstrate. The QWERTY story is particularly instructive, because, if it were true that it was deliberately designed to make typing harder (to prevent fast typists from making the keys stick, as the story goes), it would be a dynamite example of tipping and lock-in. Obviously, its lesson value is the reason it was so quickly accepted by network effect theorists, and perhaps why they may have done less basic fact-checking than Liebowitz and Margolis did. And any carelessness in this regard certainly would make it the perfect straw man for Liebowitz and Margolis to knock down. But what do the overblown claims of self-interested touters of alternative keyboard arrangements like August Dvorak, the Navy or Apple have to do with lock-in? While much of the authors’ detail-digging is directed to exposing the not particularly startling fact that salesmen will be salesmen, the leap made from there to the conclusion that QWERTY is not locked in is in no way supported by the exposé. Although the authors do demonstrate that QWERTY is probably about as good as any other arrangement and, therefore, is not an example of bad technology lock-in, the same evidence they marshal to make that claim actually confirms that QWERTY is locked in. If, as one study they quote – approvingly, because it helps make their case that QWERTY isn’t inferior – says, "the layout of the keys makes surprisingly little difference," the fact that QWERTY has endured in the face of touters looking to topple it confirms lock-in. Particularly so, since those touters have been fully able to make use of the QWERTY myth in their pitches. In other words, the same widespread awareness of QWERTY’s probable faults was used mercilessly by all the touters in their attempts to replace it. Yet QWERTY still stands and, according to Liebowitz’ and Margolis’ account, has never been seriously challenged. Based on the evidence they present, QWERTY is probably somewhere near the top of possible arrangements from an ergonomic efficiency standpoint, but even they don’t claim it is the best. Because of its dominant position, however, it is virtually impossible to fully test or credibly introduce any alternative.

The authors boldly claim that their opponents’ inability to prove that Dvorak is superior to QWERTY debunks the myth. It doesn’t. Debunking requires a much harder test, one which they don’t even attempt to meet. It requires proving that QWERTY is superior. They must not just show that there is not sufficient evidence to prove Dvorak is superior (which they do), but they must also show that there is sufficient evidence to prove that QWERTY is superior. And not just to Dvorak, but to all the other potential keyboard arrangements. (Brian Arthur puts the number of possible arrangements at 40-factorial, or 10 to the 48^th.) I am not suggesting the authors should have tried to meet such a tough test. In fact, it will almost always be impossible to show that any given technology is superior to the nearly infinite alternatives that could conceivably replace it. But for that same reason, their challenge to the "QWERTY aficionados" to come up with a "single piece of support for the theory"⁹⁴ is a red herring. No one can ever prove that any technology, used or unused, incumbent or challenger is superior. There are simply too many complexities in every environment, too many times when an inefficiency from one perspective is an efficiency from another, too many unanticipated changes, unanticipated uses, unintended consequences. Speculations regarding the relative efficiencies of technology alternatives make for interesting discussion, and occasionally create exciting opportunities for capital to chase. But any "conclusions" reached are inherently tentative and, therefore, say nothing about the truth or falsehood of lock-in theory.

An important corollary of this thought is that all incumbent technologies, products or institutions are less than perfect; there is always something better out there. Thus it may be true, trivially, when Brian Arthur says, "The 1950s programming language FORTRAN, the U.S. color television system and the QWERTY typewriter keyboard are demonstrably inferior structures that seem to be locked in," but so what? Every technology can be improved and is, therefore, "demonstrably inferior." And every incumbent technology has some stickyness or lock-in to it. But that is no reason to connect the two thoughts, as Arthur does, to build a case for Government intervention to break up lock-in situations. In fact, the opposite is true: Capital chasing new lock-in opportunities is certainly the best driver of the dissolution of old ones. The last thing we should do if we want to foster efficient turnover of locked in technologies is to get Government involved in removing the lock-in incentive. Especially since by thus emasculating capital we would be left with no choice but to let Government planners make all the selections for us.

The implication here for Liebowitz, Margolis and Microsoft is that they have their strategy exactly backwards. Network effects and lock-in do exist and that is why Microsoft managed to lead the greatest economic advance in the history of civilization. And it is because they do exist that greater antitrust intervention is a bad idea. Rather than trying to attack Klein, Arthur & Co. on the basics of law and science – a fool’s errand if ever there was one – a straightforward defense based on the value of monopolization might have had some chance of allowing them to continue in the same direction. On the current track, in contrast, the denial defense is blocking any chance that they will be able to pull that trick again. While Wintel worked wonders, nothing on the drawing board now, nor anything else they might dream up, has any chance of doing something similar in the future. Not Hailstorm, not dot-Net, and not any further bundling into the OS or browser or any other platform. That is because the denial defense has prevented Microsoft from honestly defending its monopolization. And its disingenuous denials have alerted the company’s friends and the Feds to that monopolization, causing the former to lose sympathy for the company,⁹⁵ and giving the latter a roadmap to violations. Therefore, if any of their new initiatives do begin to succeed like the old, they will get re-busted.

If Liebowitz and Margolis would still like an example of lock-in, how’s this: The Denial Defense. I don’t believe any other approach, such as the honest defense of monopolization I have recommended here, was considered, either by Microsoft, or by any other company I have read about who was accused of antitrust violations. Why? Because all the players are locked in to the Denial Defense. Without adhering to it, the lawyers and academics would have no careers; the politicians would not be able to fulminate and fluster over greed and unfairness and, thus, would not get elected; the state attornies general would not get on the evening news and have a shot at becoming governors or senators; the companies would not have a shot at their Billion Dollar Pot-o’-Rent; and the bureaucrats would have to fold up their tent and go home. So it is no wonder that alternative strategies are never considered and the Denial Defense and antitrust generally become ever more locked in.

As to whether the socialism it represents is the most efficient organizing institution that we as a society could adopt, well, after what I’ve said here, I guess I can’t claim I can prove there is a better alternative. But I can say unequivocally that, as a matter of political choice, we Americans believe there is a better alternative, and we have long since decided to go with it. Sure, there are eighty countries out there now with antitrust laws. Fine. By all means, let one hundred socialisms bloom; just let them bloom somewhere else. For better or worse, America was founded on freedom. It is simply not a competitive option for this country in the 21^st century to abandon its principles, even if socialism is a better idea. Even if antitrust and deregulation could in some sense "work" economically, the loss of freedom required for their implementation is terminally inconsistent with who we think we are as a people. And even if freedom is flawed, or is somehow no longer viable in a country as mature and rich as ours, we still have no choice but to reaffirm our commitment to it. It should be obvious that I don’t think freedom is flawed. And it is clear that the majority of Americans agree, if for no other reason than that the political popularity of deregulation stems from the promise in the word that its implementation is an uptick for freedom. Of course, a freedom that could admit such a corrosive Trojan horse into its inner sanctum would indeed be flawed. I do hope, however, that there is a way to reaffirm our commitment to freedom, to expose and banish the traitor in our midst, and to move forward in a principled way that would make our Founders proud.

If it turns out in the end that freedom is not long-term viable after all, well, c’est la vie. At least we would have given it our best shot according to our deepest moral beliefs and traditions. Freedom is the one unique thing we Americans do better and more powerfully than anyone else. Socialisms are a dime a dozen in today’s world. If we went down fighting for freedom, that is to say, organizing our economic and social lives again according to Individual Liberty and the Rule of Law, I think most Americans would accept that, however sadly. But if we go down because we can’t resist those politically correct socialisms so popular everywhere else, well that would truly be a tragedy for a country founded on freedom. And what the hell: Even if we do have to turn to socialism eventually, at least we’ll have a lot of experimental versions to choose from. But for now there is no reason not to give freedom another chance.

Repealing all antitrust laws is the most important step this country could take in the direction of freedom. Given the political and philosophical lock-in of these excuses for intervention, however, I have little hope that any debate over repeal could do anything but further lock them in. That is because they would inevitably be debated on the merits, the pros and cons vis-a-vis efficiency, fairness etc. of each element of the antitrust corpus that would be removed by repeal. And, like every other argument over the details of antitrust, such debates would only strengthen its grip. The only chance, as I see it, to overcome inertia here is to go over the heads of the bureaucrats and others who are locked in to antitrust by creating a legal or constitutional ban on the kind of intrusive Government coercion the implementation of antitrust requires. Such a ban would inevitably have major effects not just on antitrust but on Government generally – largely by drastically shrinking its size and scope – and would thus be challenged furiously by all who administer and receive Government benefits. I believe the needed restraint is consistent, however, not only with what people want as individuals, but with the kind of nation our Founders envisioned. What I have in mind is discussed next in robinhood.gov.

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