Over at his blog, our old TLF colleague Tim Lee has been discussing the AT&T – T-Mobile merger and the ways libertarians should think about antitrust more generally. In his latest post, he pushes back against a brief comment I posted on a previous essay. You can head over to his site and read that exchange and then see my latest comment. But I thought I would also post it here for those interested.
Tim… My thinking on antitrust is very much shaped by the choice between ex ante vs. ex post regulation. How much faith should we place in sector-specific regulators to get things right through preemptive, prophylactic regulation versus allowing things to play out and then — on the rare occasions when intolerable monopolies over essential goods develop — letting antitrust regulators devise a remedy?
More than any other economic value, I care about experimentation. I am completely under the sway of the Austrian School of thinking about markets and competition as an ongoing experiment, an evolutionary journey, a discovery process. How are we to know if intolerable monopolies over essential goods will actually develop unless we let things play out?
As I argued in my critiques of the Lessig/Zittrain/Wu school of thinking, we need to be a bit more humble and have a little faith that ongoing experimentation and discovery will help us evolve into a better equilibrium. It’s during what some regard as a market’s darkest hour when some of the most exciting forms of disruptive technologies and innovation are developing. [I’ve elaborated more on this point in this lengthy discussion about Gary Reback’s recent book on antitrust.]
Viewed in that light, opting for ex post antitrust regulation, therefore, is an easy choice compared to the misguided micro-management associated with preemptive regulatory strikes. The entire history of FCC common carriage regulation and “public interest” mandates teach us that. It also teaches how bureaucracies become hopeless entrenched, inefficient, and prone to capture.
Now, having said all that, it must be noted that antitrust law itself is a form of economic regulation and has its own set of problems. And you’re correct to note that there “has long been a tension in the libertarian approach to antitrust law.” I can appreciate many of the arguments made by antitrust abolitionists. (There’s a certain madness to antitrust law best captured by R.W. Grant’s classic story, “Tom Smith and His Incredible Bread Machine.”) Nonetheless, it’s important to be realistic and acknowledge that antitrust likely isn’t going away and that perhaps it shouldn’t if it’s existence can help us avoid what I regard as the nightmare scenario I described above: preemptive, sectoral, technology-specific, command-and-control oriented regulation.
Of course, some antitrust law can be preemptive without having all that baggage. And that’s essentially what I think you are endorsing here for AT&T – T-Mobile. You want the feds to “just say No” and be done with it. You’re assuming that’s sensible and efficient solution when I wouldn’t regard either of those things as a given. Again, I’d like to let experimentation continue and see how things turn out.
I also do not understand your conclusion that “The federal government has a responsibility to clean up its own messes, as it did with the Ma Bell breakup in 1984, and it will hopefully do by blocking the AT&T/T-Mobile merger.” These two situations are completely unique. As I noted in that old history of how the original AT&T monopoly came about, there was nothing “natural” about it. It was government guided at almost every junction. Not so for the new AT&T. While we don’t have a perfectly free market in communications services today, AT&T competes more aggressively — and is generally more antagonistic toward government intervention — than it ever has been before. Moreover, having lived through the tail end of the old Bell System, I can remember the days of having to use a crappy rotary dial phone in just one color and being told to be happy about it. Today, by contrast, competition is robust and innovation is thriving. I’ve never used an AT&T phone and I don’t plan to because of the many excellent smartphone alternatives at my disposal.
It’s a new world and one that keeps getting better regardless of who owns what. Have a little faith, my friend.
But give me a call if things get bad. You have my Skype number after all!