Reply To: Predatory Pricing


kwgeralds: “If there is no evidence of predatory pricing by a company in American history… where did Anti-Trust legislation get its support?”

If Rothbard is right, virtually every anti-cartelization/anti-monopoly measure/policy/regulation/law was actually intended to do the opposite. He explains this theory in a series of elections collected:
(these lectures are in reverse order; the first one is at the bottom and you work your way up).

The problem for would-be cartel-formers & would-be monopolists starts with what game-theorists would call a “Prisoner’s Dilemma” – the cartel as a whole could, in theory, prosper more if they all stuck to the agreement, but individually each member of a cartel has an incentive to “defect” – to cheat on the agreement to gain more market share. But when they all do that, the cartel falls apart. So they need something to force all the members to stick to the agreement.

To solve that, they first turned to trust-building: conglomeration. If they were all part of the same corporation (Trust), then they wouldn’t defect from the agreement. But open entry foiled that. So they needed something even stronger, and for that they turned to the State.

Rothbard’s argument, leaning on the Kolko book (that Woods also recommends but which I haven’t read yet – I ordered it yesterday) is that virtually every regulation sold to the public as preventing combinations has in fact – in intended fact – promoted them. (We see that down to today in modern legislation like Sarb-Ox and Frank-Dodd, both of which were sold to the public as “protecting the little guy” but which in fact make it more difficult for small firms to operate, for new startups to get into the market, and thus intrench large incumbent firms).

Rothbard also argues that the idea of “regulatory capture,” while superficially plausible, is actually incorrect, because there was no “capture” – these regulations were always, right from the start, written by one set of businessmen to screw another set (their competitors, potential & actual); this argument was plausible to me even though I haven’t read the books he mentions in this series of lectures, because of my prior knowledge of how the New Deal’s regulations were written.

Anyhow, if you have time for it, I highly recommend those Rothbard lectures – they’re eye-popping. O.o