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Friedman on antitrust

November 16, 2006

In remembrance of Milton Friedman, I call attention to a 1999 article by the Chicago School economist on antitrust policy in the wake of the Microsoft case:

My own views about the antitrust laws have changed greatly over time. When I started in this business, as a believer in competition, I was a great supporter of antitrust laws; I thought enforcing them was one of the few desirable things that the government could do to promote more competition. But as I watched what actually happened, I saw that, instead of promoting competition, antitrust laws tended to do exactly the opposite, because they tended, like so many government activities, to be taken over by the people they were supposed to regulate and control. And so over time I have gradually come to the conclusion that antitrust laws do far more harm than good and that we would be better off if we didn't have them at all, if we could get rid of them. But we do have them.
Under the circumstances, given that we do have antitrust laws, is it really in the self-interest of Silicon Valley to set the government on Microsoft? Your industry, the computer industry, moves so much more rapidly than the legal process, that by the time this suit is over, who knows what the shape of the industry will be. Never mind the fact that the human energy and the money that will be spent in hiring my fellow economists, as well as in other ways, would be much more productively employed in improving your products. It's a waste! But beyond that, you will rue the day when you called in the government. From now on the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation. Here again is a case that seems to me to illustrate the suicidal impulse of the business community.

It's notable that many Chicagoites did not follow Friedman's example in renouncing antitrust. There's even a self-described group of "post-Chicago" economists who have called for even stricter antitrust policies--more regulation, longer prison sentences for "price fixing," and removal of capital from the market via large criminal fines. Of course, such post-Chicagoites are in high demand by government regulators and businesses acting on their "suicidal impulses."

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