Antitrust Regulation Assumes Bureaucrats Know the “Correct” Amount of Competition
After a dead period for much of the twenty-first century, a particular tool at the hands of the state has been dominating recent news cycles: antitrust law. This legal ability to fine, prevent, and “break up” different profit-maximizing tactics of economic actors is once more being favored by its wielder, the Federal Trade Commission. Last month it filed a complaint against Facebook due to its previous acquisitions and size, despite a federal court striking down a previous lawsuit a few months ago. And just this Tuesday, the Federal Trade Commission filed a complaint against the merger of biotechnology companies Illumina and GRAIL, although the value of the acquisition stands at less than 0.01 percent of Facebook’s market cap.
Indeed, antitrust has reasserted itself in economic policy, and under supposedly good intentions. Regulators and lawyers in the field tout that, by prohibiting mergers and breaking up companies, antitrust law can lead to lower prices, increased innovation, and overall more efficiency. Above all, claims like these are guided by an overt assumption of knowledge: that experts, or indeed anyone, can know in advance what is ideal and better. But this isn’t the case.
Such assumptions suffer from the problem that Friedrich Hayek calls a “pretence of knowledge.” That is, antitrust experts think they know what’s best for a market ahead of time more than they actually know. This is because the aspects and conditions of a market that serves the consumer best aren’t known in advance, but instead, as Hayek argues, can only be discovered through the process of competition. By exploring both the guideposts of antitrust as well as Hayek’s critique of it, we’ll see that the latter’s implication holds serious repercussions for today’s use, and abuse, of antitrust law.
Antitrust and the “Perfect Competition Model”
Why do lawyers and economists at the Federal Trade Commission hold this pretense of knowledge? Mainly through their adherence to mainstream economic models that attempt to predict beneficial economic outcomes but at the expense of making vastly unrealistic assumptions. There’s no b
Article from Mises Wire