DOJ Dedicated to Disproving Liberty & Justice
Carl Shapiro, the "deputy assistant attorney general for economics" at the Justice Department's Antitrust Division, recently gave a lecture on how more antitrust enforcement can help remedy our current economic malaise. Most of his lecture is a boilerplate retelling of antitrust mythology -- including the laugher that antitrust isn't really regulation since it doesn't actually dictate economic outcomes, which of course is a lie -- but this reference to Adam Smith caught my attention.
[N]otwithstanding great advances in the field of behavioral economics, I have seen nothing in the past year that would cause me to depart from the tried and true working assumption in antitrust economics that for-profit firms generally seek to maximize profits and that this quest usually benefits the public in a myriad of ways. Adam Smith's teaching in this respect remains as valid as ever. But I hasten to add that this does not by any means imply profit-maximizing firms are always acting in the public interest, Adam Smith's famous invisible hand notwithstanding. Indeed, much of industrial organization economics involves the study of markets in which firms have market power, where Adam Smith understood full well that business interests often depart from those of the public. Recall his famous statement: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
Now, this Smith quote is commonly cited by members of the antitrust oligarchy in support of their violent activities. But there's another sentence after that one which is often forgotten. To Shapiro's partial credit, he acknowledges this in a footnote:
The Antitrust Division is dedicated to disproving the sentence immediately following this famous one by Adam Smith: "It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice."
Of course, the history of antitrust -- which came long after Smith departed the scene -- has only served to prove him correct. Shapiro's own argument is a circular rationalization of violence. He claims there's a divergence between "business interests" and the "public interest," and that antitrust justly protects the latter at the expense of the former. But the public interest (or for that matter, "business interests") doesn't exist except in the minds of state officials like Shapiro. He's not arguing for the protection of any individual's rights; he's simply labeling some businesses as public enemies and demanding the confiscation of their property. As Smith said, that's not "consistent with liberty and justice."
What Shapiro is really dedicated to disproving is the idea that government exists to promote liberty and justice -- that it really exists to empower people like him to make decisions for the rest of us without our consent. And I have to concede, he's certainly proven that case beyond a reasonable doubt.
Comments (6)
Inquisitor
"[N]otwithstanding great advances in the field of behavioral economics, "
Cryptic. Sounds like he is misinterpreting them...
Published: May 18, 2009 11:18 AM
Francisco Torres
[N]otwithstanding great advances in the field of behavioral economics,
I have heard this concept mentioned many times and saw the critique by David Gordon of the creepily-titled "Free Market Madness: Why Human Nature Is At Odds With Economics — And Why It Matters", and Tibor R. Machan's critique of the concept back in 2001, but so far I have not seen a good critique on what I believe is a crackpot idea, based on unsound premises. And one is surely needed, now that the concept of Behavioral Economics seems to be the rage in Mordor, DC, as it has been made mandatory reading for many a bureaucrat in Il Duce's Administration.
Not only is the fact that some state worshipers have found YET ANOTHER justification for their depredations upon our liberties (another one being the Great Theory by Keynes), this one has a veneer of "scientific" credibility as it is chuck-full-o-statistics and controlled studies. Now I have seen some of these studies and I find them to be question-begging, but I am not a professional economists or a statistician.
Published: May 18, 2009 12:51 PM
Michael A. Clem
Another thing about that Adam Smith quote: so what? There's always "talk" about conspiring, but such conspiracies rarely get anywhere as far as action, and even when they do, it's unsustainable. The Invisible Hand works in spite of evil, greedy businessmen's intentions, not because of their intentions.
Published: May 18, 2009 1:54 PM
Ron
I have a friend who insists that "people will tend to collude in order to prevent others from benefiting." He's your basic cynic, so to him it's not about profitability or greed, but just about people wanting to screw other people over. This is his best argument for "predatory pricing", so arguing incentives gets me nowhere.
It is in this instance that I remember the "so what" argument...yes, it might happen, but so what? If Company A engages in predatory pricing to drive Company B out of the market, consumers win by virtue of the lower prices during the "price war". If Company B goes bust, at which point Company A tries to jack up prices, Company C, D, and E will simply set up shop and reap the profits associated with the higher prices...until competition drives them back down again.
The second sentence from Smith is the basic follow-up argument...that regulation can't prevent collusion. In fact, economics will punish it, while regulation will tend to encourage it. This is something people often forget...that laws are generally ineffective at preventing crimes from being committed. Those who wish to take advantage of others will do so regardless of the law.
Published: May 18, 2009 2:34 PM
Franklin
There is a failure in your friend's logic, Ron, though don't expect most statists or left-leaning apologists to recognize the subtlety.
Your friend believes that "people will tend to collude in order to prevent others from benefiting," yet he shrinks from leveling same cynicism toward the so-called "colluders."
Replace the words "collude" and "benefiting" with "compete" and "profiting," respectively.
As soon as a leftist attempts to employ the greed or selfishness argument, especially in a group scenario, the conundrum boomerangs into their path.
Published: May 18, 2009 3:54 PM
Ken
This conversation takes place a lot in college classrooms, with respect to grade curves. Back when I was getting my MBA, I took an economics class as a core requirement. One evening during a break in the class, a student said something to the professor along the lines of "what if we all agreed to just do enough to get a B on the exam?" I was in the group with the professor, and I said, "Well, you'd probably make it easier, on balance, for me to get an A."
Professor looked at me, looked at the other guy, and said, "See, that's why cartels break down in the real world."
(Postscript: In the end, alas, I ended up with an A minus. Another hour or two studying for the final probably would have gotten me the A.)
Published: May 18, 2009 4:32 PM