WEBVTT NOTE 'The Myths of Anti-trust' 40th Anniversary 1 00:00:00.000 --> 00:00:04.440 My relationship with Dom is both personal and as a student and I want to cover both 2 00:00:04.440 --> 00:00:09.320 of those bases and I'm going to divide my talk into both of those things. 3 00:00:09.320 --> 00:00:15.040 It's not only 40 years of Myths of Antitrust, it's about 40 years, actually 41 since I 4 00:00:15.040 --> 00:00:26.040 met Dom as a freshman music student and he was my teacher, he was my mentor, he's my 5 00:00:26.040 --> 00:00:32.440 my friend and the person who got me really got me into this business and he 6 00:00:32.440 --> 00:00:38.040 did this by example and by willing to put some time and effort into what was at 7 00:00:38.040 --> 00:00:42.520 the time a music major at Hart School of Music at the University of Hartford and 8 00:00:42.520 --> 00:00:51.240 I publicly want to thank him for for for doing all that. Two things that I want to 9 00:00:51.240 --> 00:01:02.520 focus on in this section where he really influenced me, interesting stories I think. 10 00:01:02.520 --> 00:01:08.040 I learned a lot from Dom, courses that I've taught have been modeled after courses that 11 00:01:08.040 --> 00:01:09.040 he has taught me. 12 00:01:09.040 --> 00:01:14.360 I taught a course called World of Business at Campbell University which was for all intents 13 00:01:14.360 --> 00:01:19.840 and purposes his business and society course. 14 00:01:19.840 --> 00:01:23.680 and many other influences. 15 00:01:23.680 --> 00:01:30.320 Also I think the fact that I've always been drawn to policy analysis and have for most 16 00:01:30.320 --> 00:01:35.360 of my career worked in the think tank world is largely due to Dom's influence. 17 00:01:35.360 --> 00:01:40.960 Even though he spent an entire career as a professor, he always had at least one and 18 00:01:40.960 --> 00:01:46.200 a half feet in the world of policy analysis, writing papers for think tanks, publishing 19 00:01:46.200 --> 00:01:49.820 op-eds, confronting the media. 20 00:01:49.820 --> 00:01:55.980 He always, to me, seemed to be doing the kind of work that I do, except from the platform 21 00:01:55.980 --> 00:02:06.460 of being a university professor, and it is in this area that I felt he was always the 22 00:02:06.460 --> 00:02:13.020 most comfortable, and that really rubbed off on me. 23 00:02:13.020 --> 00:02:18.140 I always admired the fact that, maybe except for teaching, his passion has always been 24 00:02:18.140 --> 00:02:25.460 and as a Public Intellectual, but there's two, as I said, there's two things I want 25 00:02:25.460 --> 00:02:26.460 to focus on. 26 00:02:26.460 --> 00:02:28.620 I want to tell you a story. 27 00:02:28.620 --> 00:02:30.740 I was a freshman music student. 28 00:02:30.740 --> 00:02:38.940 I was a budding libertarian, very budding, barely poking my head out of the ground and 29 00:02:38.940 --> 00:02:40.180 I knew very little. 30 00:02:40.180 --> 00:02:42.380 I just knew I liked libertarianism. 31 00:02:42.380 --> 00:02:47.260 This was in 1971 and so I went into his office and introduced myself. 32 00:02:47.260 --> 00:02:53.100 I had read an article that he had written in the student newspaper and I said this guy 33 00:02:53.100 --> 00:02:55.580 sounds like a libertarian, I need to go meet him. 34 00:02:55.580 --> 00:02:56.580 So I did. 35 00:02:56.580 --> 00:03:01.700 I'd never met another libertarian before, ever. 36 00:03:01.700 --> 00:03:02.700 And so I went into his office. 37 00:03:02.700 --> 00:03:10.140 I had a long conversation with him and he listened to me and I listened to him. 38 00:03:10.140 --> 00:03:16.700 And as I was leaving his office he obviously became very aware of the fact that I didn't 39 00:03:16.700 --> 00:03:26.420 know very much, and he said, you need to learn your arguments or they're going to kill you. 40 00:03:26.420 --> 00:03:32.100 And I took that very seriously and I sort of walked out of his office with my tail between 41 00:03:32.100 --> 00:03:36.580 my legs, realizing I didn't know my arguments. 42 00:03:36.580 --> 00:03:41.540 And to this day, that phrase, you know how your mother tells you something when you're 43 00:03:41.540 --> 00:03:46.260 12 or something and it just sort of sticks in the back of your head, right? 44 00:03:46.260 --> 00:03:51.540 To this day, that phrase sticks with me. 45 00:03:51.540 --> 00:03:57.140 I'm always thinking when I write an op-ed or a policy report, or go on the radio to 46 00:03:57.140 --> 00:04:05.420 debate some, you know, Lumi Soros-funded lefty in North Carolina, I'm always thinking, 47 00:04:05.420 --> 00:04:11.660 do I have my arguments down, because if I don't, they're going to kill me. 48 00:04:11.660 --> 00:04:20.560 And consequently, here I am, alive and well, and I want to thank Dom for that. 49 00:04:20.560 --> 00:04:25.800 The second thing is not really about a moment or anything in particular that he said to me, 50 00:04:25.800 --> 00:04:32.200 but just something I have absorbed from being around him so much and from reading literally 51 00:04:32.200 --> 00:04:38.280 everything he was writing during these, my formative years. 52 00:04:38.280 --> 00:04:43.840 He taught me how important it is that your writing actually communicate. 53 00:04:43.840 --> 00:04:49.640 He taught me how important writing to your fellow citizens as opposed to your colleagues 54 00:04:49.640 --> 00:04:54.760 in the department or even in your discipline really is. 55 00:04:54.760 --> 00:05:01.240 And that this means writing intelligently, clearly and succinctly and without jargon. 56 00:05:01.240 --> 00:05:08.200 In my line of work, this is incredibly important and Dom has always been really, really good 57 00:05:08.200 --> 00:05:13.960 at that. And I think because of Dom's influence in this area, my writing is much better than 58 00:05:13.960 --> 00:05:18.960 it otherwise would be. Whenever I talk to my students or even to my younger colleagues, 59 00:05:18.960 --> 00:05:25.520 and they're all younger now, about improving their writings, I tell them, read people who 60 00:05:25.520 --> 00:05:29.880 write well. That's the best way to learn to write well. And for me, probably the most 61 00:05:29.880 --> 00:05:35.880 One of the most important of those good writers that I have read over the years is Dom. 62 00:05:35.880 --> 00:05:42.880 Okay, I want to turn to the book and say a few things about that. 63 00:05:47.880 --> 00:05:50.880 I feel like Marco Rubio here. 64 00:05:50.880 --> 00:06:04.720 I'm going to talk about the second edition, antitrust and monopoly, because I think for 65 00:06:04.720 --> 00:06:11.920 Austrians, in many ways, this is the more important of the two editions. 66 00:06:11.920 --> 00:06:17.640 It is in the second edition where he makes, I think, an important contribution to Austrian 67 00:06:17.640 --> 00:06:19.560 theory. 68 00:06:19.560 --> 00:06:24.600 In particular, I want to focus on chapter two, which lays out his methodology. 69 00:06:24.600 --> 00:06:29.000 And this is material that really didn't appear in myths. 70 00:06:29.000 --> 00:06:35.900 It represents what I think is a methodology shift from the first book from being very 71 00:06:35.900 --> 00:06:49.540 much Schumpeterian to being more Kirznerian and in his theory of monopoly being very Rothbardian. 72 00:06:49.540 --> 00:06:56.340 And with this chapter, he moved his analysis firmly into what, at the time, was the new 73 00:06:56.340 --> 00:07:00.940 sort of Austrian paradigm. 74 00:07:00.940 --> 00:07:08.300 A lot happened between 1972 and 1982 in Austrian economics, and especially in Dom's area. 75 00:07:08.300 --> 00:07:15.140 He wrote in 1972, he wrote MIS, but the year after that came Kirzner's competition in entrepreneurship, 76 00:07:15.140 --> 00:07:26.740 and he mentioned that and in 1974 there was the South Royalton Conference which he went 77 00:07:26.740 --> 00:07:37.620 to and Hayek got the Nobel Prize in 75, there was the Hartford Conference which Dom ran 78 00:07:37.620 --> 00:07:43.520 and then in 76 there was the Windsor Castle Conference and out of that came the volume 79 00:07:43.520 --> 00:07:48.280 from New Directions in Austrian Economics, and he had his critique which was already 80 00:07:48.280 --> 00:07:57.160 discussed of Mises-Kirzner's monopoly theory and compared it to Rothbard and in that book 81 00:07:57.160 --> 00:08:04.960 he came down firmly, in that chapter he came down firmly in the Rothbardian camp. 82 00:08:04.960 --> 00:08:10.680 Now in this chapter he first gives a thoroughly subjectivist critique of the standard market 83 00:08:10.680 --> 00:08:29.680 and Failure Framework Based on Perfect Competition, and demonstrated why this cannot serve as a basis of thinking about antitrust policy or for any kind of meaningful description of the competitive process. 84 00:08:29.680 --> 00:08:38.680 But then he goes on to lay out an alternative welfare paradigm, which he got from Kirzner's Market Theory and the Price System, 85 00:08:38.680 --> 00:08:49.840 and looks at Kirzner's efficiency theory and then he also lays out an alternative Kirznerian 86 00:08:49.840 --> 00:08:58.360 theory of competition, which he calls entrepreneurial competition in the book and he actually lays 87 00:08:58.360 --> 00:09:03.760 out the theory of competition first and then sort of backs into the efficiency arguments 88 00:09:03.760 --> 00:09:13.560 for it. And I think from my own thinking about them, it's better for me to see them flow 89 00:09:13.560 --> 00:09:18.800 from the efficiency theory to the competition theory. But I actually want to read from the 90 00:09:18.800 --> 00:09:28.280 book and start with his discussion of efficiency. Now he just finishes sort of tearing down 91 00:09:28.280 --> 00:09:34.640 on the Standard Welfare Economics Paradigm and then he talks about an alternative view 92 00:09:34.640 --> 00:09:40.000 and he says a very different perspective on economic efficiency and resource allocation 93 00:09:40.000 --> 00:09:45.400 can be developed directly from a strict subjectivist approach to cost and utility. 94 00:09:45.400 --> 00:09:53.260 By the way, this is thoroughgoing praxeology, I think it's really interesting to see this. 95 00:09:53.260 --> 00:09:57.940 This approach would hold that individual human action is purposeful and aims at accomplishing 96 00:09:57.940 --> 00:10:27.940 The next step, the efficient accomplishment of ends in a social context requires that particular planned activities dovetail or coordinate with the planned activity of other market participants, yet, given the complex division of labor and the difficulty of obtaining accurate information, such as financial statements, 97 00:10:27.940 --> 00:10:33.820 Such a dovetailing is not automatic indeed. Mutually inconsistent plans must be anticipated. 98 00:10:33.820 --> 00:10:38.740 If market participants had perfect information, all plans would be fully coordinated and markets 99 00:10:38.740 --> 00:10:45.060 would be efficient by definition. The question of social efficiency is not how resources 100 00:10:45.060 --> 00:10:50.540 would be allocated if everyone had perfect information. The issue instead is an understanding 101 00:10:50.540 --> 00:10:55.340 of the process by which more accurate information is produced, transmitted and utilized such 102 00:10:55.340 --> 00:11:25.340 Research, Social Plan Coordination. 103 00:11:25.340 --> 00:11:42.340 Business Competition is always a dynamic process, not a given state of affairs in which suppliers continually strive to offer important alternatives to market participants. 104 00:11:42.340 --> 00:11:53.340 Unlike perfectly competitive world, competition is a process of discovering opportunities for profit and then adjusting market conditions so that these opportunities tend to be exploited. 105 00:11:53.340 --> 00:12:01.340 If there is any movement toward equilibrium, this process of discovery and market adjustment is that movement, and this is why it occurs. 106 00:12:01.340 --> 00:12:15.340 Competition is the equilibrating process, not the equilibrium condition, in which businessmen attempt, in the absence of perfect knowledge and homogeneous product, to more closely coordinate their supply plans with the anticipated plans of other market participants. 107 00:12:15.340 --> 00:12:25.340 So you can see how what he's doing is he's showing competition leads to social efficiency as described prior to that. 108 00:12:25.340 --> 00:12:34.340 So he sets up a parallel framework to the standard perfect competition, welfare economics perfect competition, perfect monopoly framework. 109 00:12:34.340 --> 00:12:41.580 Well, we haven't talked about monopoly yet, but what he does here, as I noted, he ties 110 00:12:41.580 --> 00:12:56.140 this to Rothbardian monopoly theory, which he needs to do because Kirzner's monopoly 111 00:12:56.140 --> 00:13:03.340 theory does not follow from Kirzner's own competition theory. 112 00:13:03.340 --> 00:13:09.460 Rudd's monopoly theory follows from Kirzner's competition theory. 113 00:13:09.460 --> 00:13:14.540 And Dom, I think, recognized that intuitively. 114 00:13:14.540 --> 00:13:26.540 And so under monopoly, he says, to reject the standard theory of monopoly power and 115 00:13:26.540 --> 00:13:32.220 resource misallocations, not to reject all such theories, if competition is a process 116 00:13:32.220 --> 00:13:37.220 in which entrepreneurs are free to offer more attractive opportunities to other market participants, 117 00:13:37.220 --> 00:13:44.220 then the power to arbitrarily restrict such offers and market adjustments can be defined as monopoly power. 118 00:13:44.220 --> 00:13:50.220 And since the adjustment process is inherent in the very working of the free market itself, 119 00:13:50.220 --> 00:13:55.220 the power to restrict entry and market adjustment must arise from outside the market. 120 00:13:55.220 --> 00:14:01.220 And then he goes on to say it's government franchises, it's patents, and so on. 121 00:14:01.220 --> 00:14:29.220 He says it's government privilege that creates monopoly, period, event, end of story, and the contribution here, which flows, I think, and he shows, flows directly from Kirznerian competition theory, is really an important insight that I don't think has been appreciated in the literature and so forth. 122 00:14:29.220 --> 00:14:37.780 in the literature and certainly wasn't up till that time, he built a bridge from Kirzner 123 00:14:37.780 --> 00:14:54.640 on competition to Rothbard on monopoly and that what actually flows from Kirzner's view 124 00:14:54.640 --> 00:15:01.680 is Rothbard's monopoly theory. 125 00:15:01.680 --> 00:15:07.320 Now let me say, at the time, and Dom can correct me, at the time, I don't think that that's 126 00:15:07.320 --> 00:15:08.800 consciously what he was doing. 127 00:15:08.800 --> 00:15:12.480 As I said, he was just thinking about the arguments. 128 00:15:12.480 --> 00:15:19.600 He was looking at Kirzner's theory and just going logically where it took him. 129 00:15:19.600 --> 00:15:24.680 But I think in retrospect that's exactly what he did. 130 00:15:24.680 --> 00:15:29.640 He was integrating certain ideas in Austrian economics that were in the literature at the 131 00:15:29.640 --> 00:15:33.660 time into a coherent narrative. 132 00:15:33.660 --> 00:15:39.440 And I think in terms of Austrian economics this was a very important contribution. 133 00:15:39.440 --> 00:15:40.560 So I'm going to leave it at that. 134 00:15:40.560 --> 00:15:42.560 I think I'm under my time. 135 00:15:42.560 --> 00:15:46.000 Should I dance? 136 00:15:46.000 --> 00:15:56.000 Okay, with that, I think whoever was next on the top. Thanks.