Antitrust Economics on Trial.

Economics as a science relies upon a subtle balance between progress in economic theory and empirical evidence on the validity of hypotheses deduced from theory. Antitrust Economics on Trial is an excellent book for judges, policy makers in Congress, and university students who want to understand how political economic philosophy and the scientific method interact in a complex and important area of economics. Adams and Brock rise above the dust and clatter of the theoretical and empirical battles that fill the journals. Antitrust Economics on Trial provides a more fundamental explanation of the antitrust debate by explicitly recognizing that different value premises underlie the new learning from Chicago (Laissez Faire) and traditional (mainstream) theories of antitrust economics.

". . . the New Learning rests on a preference for liberty of contract and the associated ideal of competition free from government power, whereas traditional antitrust rests on a preference for eliminating gross inequalities in the marketplace and the associated ideal of competition free from private power? Is it fair to say that the New Learning proceeds from an unmitigated commitment to individual liberty, which is understood as antithetical to a commitment to individual liberty, which is understood as antithetical to a commitment to equality, whereas the critics of the New Learning adhere to the view that a strong commitment to a balanced power structure is entirely consistent with a strong commitment to individual liberty" (Adams and Brock, p. 126)? Scientific inquiry should be able to analyze the impact of these competing premises upon social progress and economic welfare. The scientific method is general and nicely illustrated by the Copernican Revolution. Trycho Brahe had developed complex empirical measurements that "proved" the earth was the center of the solar system. Significant empirical "irregularities", however, remained. Copernicus developed a heliocentric theory which, when tested, explained the previous empirical irregularities.

A social science such as economics and especially antitrust economics, probably will never support the level of scientific resolution that exists in the physical and biological sciences. Yet, we will continue to make progress if we recognize the need for empirical testing to choose among numerous different economic theories.

Adams and Brock's basic point is that the "New Learning" advanced by Chicago represents a fundamental departure from balanced scientific inquiry. They clearly explain how on several important questions the reliance upon price theory by Chicago analysts produces a tautological theory that is not empirically testable. On this point the Chicago expert in the Antitrust Economics on Trial states

"I believe that the ultimate facts relevant for antitrust purposes cannot be perceived directly. Nor can they be scientifically quantified. So-called performance tests and efficiency defenses are spurious. They cannot measure the factors relevant to consumer welfare; thus, after the extravaganza of an economic investigation was completed, we wouldn't know any more than we did before it began" (Adams and Brock, p. 37).

In response to this reasoning the Judge queries the expert asking:

"What does that leave us with in terms of empirical evidence? On what basis am I, and other judges, to decide concrete cases? On the basis of abstract economic theory or on the facts of a particular case?" (Adams and Brock, p. 39-40)

The Chicago expert's response is:

"We have to trust the theory and rely on common sense. We just have to recognize that economists, like other scientists, tend to measure what is measurable and forget about the rest, even though what is not measured may be vastly more important that what is measured" (Adams and Brock, p. 40).

In an appended footnote Adams and Brock continue.

"In a comprehensive review of the Chicago school, Melvin W. Reder (a Chicago alumnus) criticizes this methodology. In most scientific endeavors, Reder writes, it is customary to confront theory with evidence. By contrast, "Chicago economists tend strongly to appraise their own research and that of others by a standard which requires (inter alia) that the findings of empirical research be consistent with the implications of standard price theory." Melvin W. Reder, "Chicago Economics: Permanence and Change," Journal of Economic Literature 20 (1982): 13. If evidence arises that appears to conflict with their tight prior equilibrium assumption, data are examined and studies are reworked until the conflict disappears. But the possibility that the model of competitive markets in long-run equilibrium could be inadequate to explain phenomena is not admitted" (Adams and Brock, p. 40).

During the 1980s Chicago adherents and others such as game theorists found that it advanced their own scientific reputation if they dismissed prior empirical research as "ad hoc" misguided measurements of the Trycho Brahe type. Yet, these would be Copernicans have in most instances produced a theory that is not testable. They have shown little inclination to conduct the necessary empirical analysis that the scientific method requires for the advancement of knowledge.

Lamentably few economists today have the training and ability that Adams and Brock bring to bear upon fundamental questions of social science method. The strength of their presentation is that it is not a general discourse on method, rather it illustrates the critical importance of different methods upon the resolution of very important, actual policy problems in antitrust economics. This book is in the best tradition of renaissance scholarship. It is a delight to read because it distills complex questions to their essence. Thus, readers can understand the tradeoffs involved and appreciate why these questions may never be absolutely and definitely answered. After all social sciences are not as determinant as the physical and biological sciences.