David R. Henderson  

Walter Block's Reductio ad Absurdum

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Hey, Kevin Durant, quit being a ball hog; pass it to Lebron.

I was thinking of writing a post about the absurdity of the recent EU antitrust case against Google, but Walter Block beat me to it with a reductio ad absurdum.

In response to a request from a reader, Walter wrote the following:

The anti trust authorities should fine team sports members (soccer, basketball, football) for passing the ball to their own team members rather than competitors. They should for a portion of the time (that portion to be determined by economists, using econometrics, in a full employment initiative for dismal scientists and statisticians) pass the ball to members of the competing team. After all, that would only be fair. Passing to one's own team members is an unfair use of monopoly power (when it is in their possession, they are "monopolizing" the ball). Let's take a look at the statistics. The leaders in the NBA for assists, and in the NFL for passes completed, should be fined. That'll teach 'em to favor their own team-mates over their competitors. Hey, fair is fair. Obama missed a bet when he didn't appoint me to head up the anti trust division of the so-called department of justice.


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COMMENTS (9 to date)
Joseph K writes:

I tend to agree with you that probably a lot of antitrust actions are ineffective or harmful, but I'm not sure if this analogy works. Walter Block's argument is an argument by analogy.

The disanalogy in the two cases is between their respective purposes. In the case of playing basketball, the purpose is to entertain the audience, which is best promoted by having both teams work as hard as they can, within the rules, to win. Or if you think the purpose is to determine the better team, it's the same. But in the case of private companies in the marketplace, presumably their purpose is to promote the interests of consumers. That end is often not best promoted by being monopolistic (sometimes it is, sometimes it isn't).

The sad fact is that I don't think the EU authorities are trying to promote the interest of consumers, and I think the problem with most antitrust cases is that they don't further the interests of consumers. But I don't think the analogy demonstrates that.

David R. Henderson writes:

@Joseph K,
But in the case of private companies in the marketplace, presumably their purpose is to promote the interests of consumers.
Here we disagree. The working assumption most economists make, at least, is that private companies’ goal is to make money. Now it’s true that there’s a very strong correlation between making money and serving the interests of consumers. But the bottom-line goal is to make money.

bill Drissel writes:

> private companies’ goal is to make money

Dr H,
If economists would talk to entrepreneurs more, I think they'd learn that the goal is to cooperate with and serve customers. They'd also find out that making a profit is seen as a cruel burden four or five times a year.
Regards,
Bill Drissel
Frisco, TX

Matt writes:

Mr. Drissel,
If certain econlog commenters would talk to residual claimants more, I think they’d learn that the goal is to maximize returns. They’d also find out that the entrepreneurial discovery processes necessary to do so in a market economy are seen as a cruel burden 365 days a year.

Michael Makovi writes:

@ David Henderson, RE:

"Here we disagree. The working assumption most economists make, at least, is that private companies’ goal is to make money."

Indeed. Consumer sovereignty is a nice concept when used to summarize the end-state outcome of markets. Similar to e.g. equilibrium.

But consumer sovereignty becomes an extremely dangerous and harmful idea when we use to intervene and disrupt the dynamic market process. Just as static equilibrium is a dangerous idea when we intervene in the market and try to deliberately engineer what we believe the static equilibrium outcome ought to be.

In terms of positive theory, consumer sovereignty is a spontaneous order outcome, not something that we ought to deliberately design.

In terms of ethical theory, we ought to instead emphasize property rights and freedom of contract. Consumers do not have any rights except for those rights which flow from their own personal property and contracts. A consumer has no right to guarantee that corporations serve him.

It was with these considerations in mind that I wrote the following in one of my academic papers: "all we can say about monopoly grants of privilege are that they render supply more
inelastic, violating the moral right of potential competitors to compete."

Notice that I did not say that monopoly violates consumer sovereignty. This is because monopoly grants of privilege do not violate any consumer rights. Consumers do not have a right to guarantee that producers will compete with one another. Consumers only have a right to choose from what is offered to them. If there is only one producer making an offer, then the consumer has no right to complain. Instead, monopoly grants of privilege violate the rights of potential competitors who would have entered the market as suppliers if they were permitted. If just so happens that this coincidentally benefits consumers too.

mariorossi writes:

I don't know what to think about Google's anti-trust case. It's also just at the beginning. The commission is closer to a DA than to a judge, so the decision is hardly settled.

Personally I think anti-trust legislation is overall positive. I work in finincial markets and there are several originally self-imposed restictions that mimick anti-trust regulations (e.g. rules against cornering and market manipulation). I think they are mostly a self-arising features of a complex market. They are needed to keep the market functioning and liquidity flowing.

I am also not sure I buy the idea that Google doesn't extract monopoly rents from its dominant position. Dominance in the search space might ensure dominance in the advertising space. So while it seems you receive free search services, you still pay for them in the end through most of the stuff you buy.

I think the sport analogy is not so great. For example, Formula one routinely forbids some technologies to keep the sport interesting. I am sure that could be said for many other sports. They routinely change the rules when a certain style of play becomes dominant and reduces the entertainment. Are they not thinking about changing the three-point area nowadays? Did they not make rules on zone defense in the past (I think)? Surely some players are damaged by these chnages, but they still make them...

Pro sports are actually an intersting paradox. They are clearly monopolists in a sense, with a strong anti-trust bend within them. They entirely forbid competitions from outsiders, but there are multiple anti-trust features within the league to avoid a single excessively dominant team.

David R. Henderson writes:

@Michael Makovi,
Nicely reasoned, except for the last paragraph. You wrote:
Notice that I did not say that monopoly violates consumer sovereignty. This is because monopoly grants of privilege do not violate any consumer rights. Consumers do not have a right to guarantee that producers will compete with one another. Consumers only have a right to choose from what is offered to them. If there is only one producer making an offer, then the consumer has no right to complain. Instead, monopoly grants of privilege violate the rights of potential competitors who would have entered the market as suppliers if they were permitted. If just so happens that this coincidentally benefits consumers too.
But when the government grants monopoly privileges to producers, it bans exchange between the excluded producers and consumers. That violates the freedom of exchange of producers and consumers.

Mark Brophy writes:

[Comment removed. Please consult our comment policies and check your email for explanation.--Econlib Ed.]

Sergio Adrian Martinez Garcia writes:

Dear David:

I would greatly aprecciate your own assesment of the recent case against Google. I have a hard time sometimes convencing other fellow economists of the various absurdities perpetrated by antitrust.

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