The One Antitrust Article You Must Read Now


Author: Steven J. Cernak

Apologies for the clickbait headline but all antitrust practitioners and policymakers should read Complexity-Minded Antitrust by Nicolas Petit and Thibault Schrepel. In their short article, the authors suggest a potentially radical new way to think about the competition that antitrust law is designed to protect. Written to raise more questions than answers, the article should get us all thinking about some of antitrust’s bedrock principles.

The authors are no strangers to provocative takes on cutting edge antitrust topics. Petit explored similar topics in the context of several big tech companies in his book Big Tech and the Digital Economy: The Moligopoly Scenario, a great read that I reviewed here. Schrepel has been reporting on the facts of blockchain and its implications for the economy and antitrust for years.

The article begins from the premise that neither the neoclassical/Chicago School view of competition nor its Neo-Brandesian critique are adequate to describe at least large swaths of today’s knowledge economy. The neoclassical view and its antitrust rules appear inappropriate for an economy with “unprecedented levels of increasing returns, feedback loops, and technological dynamism.” The Neo-Brandesians recognize those shortcomings, but their solution goes back in time to the “big is bad” theories of the early 20th Century and fails to account for “empirical facts, except those denoting corporate size, dominant shares, and conglomeration.”

The authors’ potential solution? Consider applying complexity science to antitrust. As the authors explain, complexity science studies how “micro-level interactions lead to the emergence of macro-level patterns of behavior.” Complexity focuses on systems and how they adaptively change to the context they create. The article lists applications of the theory to subjects like biology, game theory, and biochemistry.

The authors very briefly describe some of the applications in economics, led by those of economist Brian Arthur, and how those applications view the economy more like an evolving living organism rather than a machine. The authors then tentatively discuss how these concepts might apply to antitrust policy. I found at least three of their explorations intriguing.

First, they suggest that antitrust pay attention not just to the market or meso-level of a competitive system but also to the industry or macro-level and the firm or micro-level. Firms that compete at the market level might not be quite as rivalrous at the industry level. Inside the firm, different divisions might engage in “co-opetition” like WhatsApp and Messenger both cooperating and competing within Meta. (This older American immediately thought of Oldsmobile and Pontiac.) The point is that antitrust should consider if competitive changes at those other two levels might affect the rivalry at the market level.

Second, the authors suggest a different mental model for antitrust authorities. Instead of a physicist or craftsman looking to “reach static and predictable outcomes,” authorities might want to view themselves as a park ranger (per Arthur) or gardener (per Hayek) and look to create the conditions under which the competitive system is most likely to thrive. I think that mental model is consistent with the humility that many of us have been championing for years while still allowing enforcers to do more than throw up their hands and say “it’s too complex for us to do anything.”

Third, the authors suggest that antitrust policy focus more on promoting uncertainty, either instead of or in addition to, rivalry. This suggestion builds on some of Petit’s work in his book. There, he describes how some Big Tech companies seemingly without direct competitors still feel competitive pressure from potential entrants or product/technology shifts that might render their product irrelevant. In some ways, antitrust already captures this idea; after all, the prohibition on price-fixing agreements is a way to force competitors to live with the uncertainty that comes from not knowing how a competitor will price. Should further antitrust restrictions be placed on certain competitors to make them at least feel more vulnerable?

My one major pushback concerns the article’s quick jump to focus on path dependence. The concept, Brian Arthur’s articles on it, and stories like those surrounding the QWERTY keyboard were all the rage as I was finishing my economics studies and starting my career thirty or more years ago. Briefly, the concept relates to the possibility that certain economic activity will become locked-in for seemingly random or nefarious reasons, despite other, better alternatives. My recollection is that the concept was often (mis)used to tell “just so” stories with perfect hindsight and then justify antitrust intervention to get a competitive environment exactly right. I urge the authors to remember the humble park ranger mindset explained above when applying the concept.

One reason for my confidence that these authors understand that concern is that part of their research agenda is for scholars to conduct “historical work on the emergence and growth of markets, firms, and technologies.” Research on what really happened, especially if it accounts for the views of actual market participants, as Petit did in his book, and not just theoreticians, should generate useful lessons.

One such story that I will sign up to explore is the transition from steam to diesel locomotives and the early dominance of General Motors’ Electro-Motive Division in the U.S. At a 1955 Congressional hearing, one competitor told a very path dependent story that ascribed GM’s dominance to seemingly random choices by the U.S. government in its purchases during World War II. GM (and later researchers) successfully refuted that story with one that described a merger, plenty of engineering talent and expertise, hard work, and luck that already put GM on the path to success before war. Until I get the time to put the whole story together (you know, billable work and teaching and all), interested readers can find more here.

No matter your position on the current antitrust policy debates, you will learn something by joining the nearly one thousand others who have downloaded Complexity-Minded Antitrust in its first few days of publication and considering its ideas. Go do it now.

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