20.7.06

THE VIRTUES OF PEER REVIEW. David B. Kopel wrote Antitrust after Microsoft: The Obsolescence of Antitrust in the Digital Era under the auspices of the Heartland Institute. In Book Review No. 22, I will focus on the differences between scholarship-as-polemic and scholarship-as-required-for-effective-teaching-and-publishing-to-please-the-deans.

Mr Kopel has affiliations with several public policy shops that generally view competition policy as prone to stifle inventiveness and protect competitors. It's certainly legitimate to argue from that perspective, but it misleads readers to rely heavily on arguments published by sympathetic policy shops to suggest that monopolization policy is baseless. The point of the policy is to balance the benefits of consolidation (in Microsoft, a standard operating system that continues to evolve, much as the Standard Oil Trust offered improvements in the distribution and packaging of kerosene and the Aluminum Company of America embraced new opportunities) against the benefits of competition (a range of choices available to consumers and continuous improvement of a variety of products: what happens when the dominant firm stagnates?) Perhaps after all that monopolization policy is a form of corporate welfare for small business, but it's crucial for critics of the policy to understand the limits of polemics. Doing it well is not for everybody.

Under the Sherman Antitrust Act, the holder of a patent may not use that patent strategically to exclude competition from others. United Shoe Machinery was required to surrender some patents to the public domain; something similar happened in the consent decree breaking up the old Bell System, and the Microsoft settlement places more of Windows code in the public domain. Last week [October 2002], President Bush raised the issue with drug companies, seeking more rapid diffusion of generic drugs.

There is a research paper or two in here for somebody, particularly somebody a bit more familiar with the economics of strategic deterrence than I.

Doing it polemically might be more fun, but it's not necessarily doing it best. The theory of path-dependence has come in for a beating, particularly by critics of the Microsoft ruling such as Mr Kopel. There's a book called Winners, Losers, and Microsoft that's popular with critics of path dependence. It's a useful collection of possible counterexamples to the path-dependence argument. But that's not quite the same thing as a refutation of the argument itself. I have a somewhat more technical book, Bandwagon Effects in High-Technology Industries in the stack of summer reading. Perhaps a review by year's end.

Perhaps monopolization policy is misguided, or obsolete. Jeffrey Miron posts nine theses about antitrust policy that will reward careful study and might stimulate some discussion along those lines. There is certainly material for a few of my patented "no right answer" exam questions there. It would do students a dis-service, however, to assign Antitrust after Microsoft without either a well-reasoned opposing polemic or a solid grounding in the theory of scale economies and the practice of antitrust.

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