Defending Imperfect Markets

I have both run data centers and developed and implemented software on multiple operating systems. Having only one operating system to deal with is a whole lot more efficient and economical. In that respect, Microsoft may have a natural monopoly in operating systems.

However, they have clearly engaged in non-competitive activities in other areas. For that, they should have been and were prosecuted. I don’t think the Austrian school would have let them get away with it either.

I am hesitant for the government taking Microsoft to task for purely pragmatic reasons. The process is too slow in an economic milieu where change is unrelenting and dynamic. Also, lawyers are not required to address every problem afflicting American society. Why not shame Bill Gates and his cronies for their despicable predatory and immoral behavior?

Because they have no shame.

I speak only for myself, of course, but as someone who devoted most of the late 80’s to studying economics in the NYU Austrian program before going off to do something else with my life.

One question from me: Are you asking whether the Austrian school would advocate leaving Microsoft alone, or whether Microsoft should be left alone? (Or, for that matter, whether most Austrian economists would advocate leaving Microsoft alone, even though Austrian economics is ambiguous on the matter? The answer to this is, I think, almost assuredly yes.)

Anyway, I don’t think any of my erstwhile colleagues in the NYU Austrian program would consider Austrian economics as categorically rejecting anti-trust legislation. The problem is that by misconceiving the fundamental economic problem as “how to get to the perfectly competitive equilibrium” point instead of “how to discover what the perfectly competitive equilibrium point is,” most anti-trust enthusiasts over-estimate the potential for government action to improve matters. But that doesn’t logically mean that constructive government action is impossible.

I doubt that many Austrian economists would fight too hard against forbidding naked price fixing contracts between entities in industries with large fixed to variable cost ratios, unless it was part of an argument based on in inability of the anti-trust litigators to constrain themselves to that arena.

Personally, when I look at the Microsoft situation I don’t see anything that the government can do that is likely to improve matters. I see a lot that it can do, and even has done, that does active harm (most notably, making the definition of the components of an operating system a regulatory matter rather than a market matter). I also see a bunch of economic fallacies in Judge Jackson’s decision, such as treating the low Linux market share as evidence that it isn’t a Windows competitor, rather than that, at that moment, Windows did a much better job than Linux at satisfying consumer desires.

I definitely arrive at that conclusion with an Austrian mindset.