Reflections on our collaboration.
"How has it been possible for you - -over the relatively short period of a decade - to have produced five books,(1) ten book chapters, some twenty-four articles in professional economics and law journals, as well as a plethora of popular pieces in newspapers and magazines?" "Given the differences in your age, background, and education," we are asked, "what made you decide to embark on these joint ventures?" "How do you work together?" "Who does what?" "How do you stay on the same wavelength?" "How do you reconcile differences?" Most frequently, "what is the secret of your successful collaboration?"Without dabbling in psycho-autobiography, we think the explanation is quite simple: a congruence of values - a common Weltanschauung, cemented by personal compatibility and congeniality.
First, we share a temperamental allergy to large-scale, mission-oriented research projects, financed by government or private interest groups. Participation in such research, we believe, deprives scholars of their independence. It demands an undue degree of conformity, adherence to rules and authority, respect for the status quo, and a not insignificant measure of human homogeneity. We prefer to function in an atmosphere where we feel free to reject accepted routine and convention, to rebel against orthodox modes of thought, to repudiate the "tried and true" and "expert authority," to go where "angels fear to tread" - in short, to feel free to be incorrigible non-conformists.
Some years ago, Hans Morgenthau warned that universities, through the very dynamics of their undertakings, have transformed themselves "into gigantic and indispensible service stations for the powers-that-be, both private and public. They serve society but they do not sit in judgement on it." Much of what they present "as truth is either not true at all or truth only by accident, arrived at because it furnishes the powers-that-be with ideological rationalizations and justifications for the status quo."(2) This judgement may be too harsh, but we have always taken it as a warning against the temptation to become spokesmen for the dominant power groups of our time.
Second, we are deeply suspicious of abstract theorizing that produces general theorems, reached with clearness, consistency and by sophisticated logic, but based on assumptions inappropriate to the facts. Such theorems are particularly dangerous when used by powerful groups and their political representatives to subvert the public interest.
A case in point is the application of price theory to the enforcement of Section 7 of the Clayton Act, which prohibits corporate mergers "where the effect may be to substantially lessen competition or tend to create a monopoly." According to the apostles of the Chicago School, "There is no body of knowledge other than conventional price theory that can serve as a guide to the effects of business behavior upon consumer welfare." "Basic economic theory," they say "is an intensely logical subject and much of it consists of a drawing out of the implications of a few empirically supported postulates.... In many cases the theory is so well grounded that we can be certain, or virtually so, of its reliability." Once its "basic premises are accepted, the rest follows like a proof in geometry. The system is entirely circular, which is its strength because circular logic is not rebuttable."(3) Having said that, the Chicago theorists conclude (without empirical investigation) that mergers are efficiency-enhancing and conducive to maximizing consumer welfare. Trends toward greater concentration in an industry, they claim, indicate that there are emerging efficiencies or economies of scale and therefore constitute "prima facie evidence that greater concentration . . . is socially desirable."(4) Vertical and conglomerate mergers should be totally immune from the law, because they do not involve a combination of direct competitors; indeed, attacking such mergers would obstruct the "creation of efficiency."
Such theorizing, of course, begs the crucial questions. For example, in analyzing the impact of a merger which is neither de minimis nor of monopolistic proportions, economic theory can only be the beginning of the analysis - only the first approximation in deciding whether the merger may substantially lessen competition or tend to create a monopoly. It can provide no simple algebraic equation or sophisticated geometric diagram that can help us make that prediction. To make the assessment required by statute, it is necessary to painstakingly examine the case in the functional context of the firms, industries and markets involved. As Chief Justice Earl Warren noted, it is necessary to examine
whether the consolidation was to take place in an industry that was fragmented rather than concentrated, that had seen a recent trend toward domination by a few leaders or had remained fairly consistent in its distribution of market shares among participating companies, that had experienced easy access to markets by suppliers and easy access to suppliers by buyers or had witnessed foreclosure of business, that had witnessed the ready entry of new competition or the erection of barriers to prospective entrants, all are aspects, varying in importance with the merger under consideration, which would properly be taken into account.(5)
Obviously, these are fact- and case-specific questions that no amount of abstract speculation or crude ideology (cloaked as "science") can resolve.
It is these kinds of questions which, because of their importance in adjudicating antitrust disputes and fashioning antitrust policies, have been a constant source of fascination to us and occupied much of our research efforts.
Third, unlike our mainstream colleagues, we believe that any meaningful analysis of economic problems must be undertaken in the context of political economy, rather than artificially constrained within the narrow confines of economic "science." We must take cognizance of the fact that power exists, and that it may appear in many guises - economic or political, personal or organizational, private or public. Such power comprises more than the ability to influence price in a particular market. It involves the broad discretion to influence how society's resources shall be used, the rules by which the economic game shall be played, and the kind of society in which we shall live. If we are to understand how the economy functions, we cannot finesse the existence of power. If we are to be relevant as political economists, we cannot avoid asking some crucial questions: What is the distribution of power? Is it concentrated or decentralized? Is its exercise subject to external restraints, either by the invisible hand of the market or the heavy hand of government? Is power responsible and accountable, and if so to whom? What are the safeguards against its abuse? Are its abuses readily correctable; if so, by what mechanism(s)? In short, if we are to understand the anatomy and the physiology of an economy, we must inquire who makes what decisions, on whose behalf, for whose benefit, and at what cost.
The neglect of the power problem by modern mainstream economists is, we believe, attributable in large part to an almost obsessive addiction to a mathematical-econometric methodology, which represents a formidable misallocation of intellectual resources. Economists have tended to ask themselves questions that can be analyzed with their new techniques, rather than finding techniques to deal with the questions they ought to ask. They play games they find amusing, rather than contemplate issues that are crucial and pressing. They quantify what appears to be quantifiable, even though it may not be important, and pass over what should be analyzed even though it may not be decisive. No wonder that Wassily Leontief, Nobellaureate and past president of the American Economics Association, criticizes the profession for having constructed such elaborate theoretical structures on so narrow and shallow a factual foundation.(6)
Fourth, again unlike so many of our mainstream colleagues, we refuse to deceive ourselves into believing that economics is a "value-free science" like physics or astronomy. Quite the contrary. As Joseph Schumpeter observed, "analytic work begins with the material provided by our vision of things, and this vision is ideological almost by definition."(7) In other words, the conclusions derived from a theory depend on underlying assumptions which, in turn, depend in large part on the theorist's metaphysical core, his ideological predilections, his cosmological outlook - on "what he thinks before he starts thinking."(8)
If, for example, an economist builds a theoretical model on the assumptions that (1) a market economy is subject to natural laws which make it inherently self-stabilizing; (2) economic behavior is based solely on rational utility- and profit-maximizing conduct; (3) markets are freely accessible to newcomers; (4) industry concentration is based solely on "superior skill, foresight and industry"; (5) monopoly and oligopoly power is constantly vulnerable to erosion whenever it fails to serve consumer welfare; and (6) government intervention in the economy generally does more harm than good - then the conclusions are predetermined from the start, and can be used to justify an extremist, neo-Darwinist policy of untrammeled laissez-faire. Obviously, theories built on different assumptions, based on a different view of the world, will lead to quite different conclusions and point to contrary public policies.(9)
In assessing the scientific claims of economic theory - especially when it is to be used as a guide to public policy - we believe it prudent to follow the time-tested maxim of caveat emptor. It is important to know as the Italian proverb suggests, "da che pulpito viene questa predica?"
Fifth, in our discussions of public policies, we do not claim to be "value-free" scientists. We readily confess that our cosmological outlook is profoundly influenced by the insights of the Federalist Papers and Adam Smith's system of liberty. But we are libertarians who believe that individual freedom can be meaningful only within a pattern of freedoms - within a free economic system - which in turn makes some types of government intervention indispensible. It is not enough, as some of our Chicago colleagues are wont to do, to shout "laissez-faire" and oppose all government intervention. As Jeremy Bentham pointed out, "To say that a law is contrary to natural liberty is simply to say that it is a law: for every law is established at the expense of liberty - the liberty of Peter at the expense of the liberty of Paul."(10) The maintenance of a free economic system requires an irreducible element of governmental force, coercion, and intervention so as to preserve the framework in which alone freedom can flourish. The crucial task, as Lord Robbins suggests, is to distinguish between government interventions that destroy the need for intervention and those that tend to perpetuate it.(11)
As Henry Simons has so ably articulated it, the cardinal principle of libertarianism holds that "no one may be trusted with much power - no leader, no faction, no party, no 'class,' no majority, no government, no church, no corporation, no trade association, no labor union, no grange, no professional association, no university, no large organization of any kind."(12) True libertarians must forever repeat with Lord Acton: "Power corrupts" - and not merely those who exercise it but those subject to it and the whole society.
As we see it, the paramount structural challenge to an advanced industrial society, intent on preserving both economic freedom and democratic institutions, is this: How to prevent private concentrations of power, organized into potent political pressure groups, from achieving dominance over the economy and, eventually, over the state; and, at the same time, how to do so without creating an omnipotent government, strong enough not only to control private oligarchies but also to become an instrument of oppression beyond public control. To this challenge, of course, there are no simple answers.
Sixth, mindful of the foregoing concerns, we have consistently advocated a decentralized power structure. On the political front, we are Jeffersonians. With the sage of Monticello, we believe that the structure of the political system is more important than the integrity of the individuals who exercise power under it - that the "time to guard against corruption and tyranny is before they shall have gotten hold of us. It is better to keep the wolf out of the fold than to trust to drawing his teeth and talons after he shall have entered."(13) On the economic policy front, we are unreconstructed antitrust traditionalists. With Justice Douglas, we believe that power that controls the economy should not be in the hands of an industrial oligarchy. Since all power tends to develop into a government in itself, industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whims and caprice, the political prejudices, and the emotional stability of a few self-appointed men. The fact that they are not vicious men but respectable and social-minded is irrelevant. That is the philosophy of the antitrust laws. It is founded on a theory of hostility to private power concentrations so great that even a government of the people can be trusted with it only in exceptional circumstances.(14)
Needless to say, these views do not conform to the currently prevailing orthodoxy, nor are they likely to enshrine their protagonists in the pantheons of conventional wisdom. But not to worry. The practitioners of our "value-free" science may be finely attuned to the fashions of the day, but the "truths" they dispense are transient and effervescent. During the heyday of the conglomerate merger wave of the 1960s, for example, venerable "experts" advised Congressional committees, as well as Fortune 500 corporations, that conglomerates were the wave of the future. They rationalized conglomerate bigness by appealing to "synergy" (2 + 2 = 5), by pointing to what they portrayed as a "revolution in management science," and by citing the alleged scarcity of "super-managers" whose wizardry could enhance economy-wide efficiency if more and more control were concentrated in their hands. Synergy, they assured us, translates into a lowering of costs and real social gains.(15) Today, alas, the fashion has changed. Now, respectable experts bemoan the reverse synergy of collapsed conglomerate empires. Their advice? "It's best to divest!"(16) A similar fate befell the highly-leveraged corporate deal-mania of the 1980s and its "scientific" defenders.
In our collaborative efforts, we have always felt that being fashionable exacts too high a price. Nevertheless, we recognize that there is a cost to being prematurely right.
Finally, a note on our career as playwrights - a source of curiosity and amusement among our colleagues. Looking back, we suppose that this choice of genre is primarily attributable to pedagogical philosophy, and secondarily to our literary tastes. In the classroom, we prefer the Socratic dialog to the magisterial lecture system. Believing as we do that learning is not a spectator sport, and that students must therefore be directly involved in the learning process, we prefer to use the discussion method in analyzing and elucidating economic problems. This method has the further advantage of demonstrating to students the complexity of economic issues, and tends to inspire in them an appropriate sense of humility.
As for our literary tastes, we are both afficionados of the Theater of the Absurd. Adams has long been a student of Samuel Becket, Arthur Adamov, Eugene Ionesco, and Jean Anouilh. Brock has avidly devoured the writings of Czech dissident Vaclav Havel, now president of the Czech Republic. This genre, we feel, provides a felicitous mechanism and a useful touch of irony for understanding contemporary debates of public policy. The nature of those debates is abundantly familiar: There is an absence of communication - a terrifying diversity of utterances, with the actors on the stage listening only to snatches and fragments of the dialogue, and responding as if they had not listened at all, At times, the dialogue consists of statements that are in and of themselves perfectly lucid and logically constructed but lacking in context and relevance. At other times, absurd ideas are proclaimed as if they were eternal truths. In this dialogue of the deaf, the actors are animated by the certitude and unshakable nature of their assumptions - one side relying on the wisdom of past experience, the other prepared to sweep away the beliefs that have been tested and found wanting - beliefs they consider illusions and self-deceptions.
Our decision to embrace this genre evolved quite naturally. Back in 1989, having spent a frustrating stint at the Bibliotheque Nationale in Paris, and after participating in the bicentennial celebration of the French Revolution, we decided to relax for a while at the charming little Val Majour in Fontvieille. There, in the peaceful ambience of a pastel countryside, idly reflecting on some of the absurdities of current economic policy quarrels, while lazily sipping our Rose de Provence, the idea struck us to try our hand at a "play." And so the initial plans were laid for Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire. Our purpose was to put in perspective the polemical books and pretentiously "scientific" articles that have done little to resolve the antitrust debate; to lay bare the states of mind and images that constitute the hidden assumptions in the debate - to provide an intersection between what is visible and what is under the surface, to expose the latent content that forms the essence of the controversy; to expose the disguised meaning of the words used by the protagonists in the debate. Our dialog, as we planned it, would find absurdity not in the depths of the irrational, but what on the surface would appear as rational. It would demonstrate (in the words of Milan Kundera) that a "false vocabulary systematically places the debate on false ground and makes it practically impossible to analyze concrete reality."(17)
According to our publisher, Princeton University Press, the experiment was a success both in the classroom and among non-academic readers. We were asked to write a sequel - this time selecting as our subject the debate over the use of "shock therapy" in engineering the transition from communism to capitalism in Eastern Europe. It was published by Princeton under the title Adam Smith Goes to Moscow in 1993. A Russian translation appeared two years later.
Economics is a dismal science. Its practitioners tend to be endowed with dour personalities and a foreboding outlook on life. They find it difficult to laugh - especially at themselves. Aware of this congenital defect, we try our best to overcome it: We un-puritanically tolerate each other's penchant for nicotine delivery systems; we exploit our age difference, sometimes with guile; we endure the fortunes of a physiological fate (as at the American Economics Association meetings a few years ago, when back pain prevented one of us from sitting and the other from standing); and we each attribute to the other sole responsibility for whatever value our writings may have. Above all, we enjoy the team effort that unites us.
Notes
1. The Bigness Complex (New York: Pantheon, 1986); Dangerous Pursuits: Mergers and Acquisitions in the Age of Wall Street (New York: Pantheon, 1989); Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire (Princeton, NJ: Princeton University Press, 1991); Adam Smith Goes to Moscow: A Dialogue on Radical Reform (Princeton, NJ: Princeton University Press, 1993); The Structure of American Industry, 9th ed. (Englewood Cliffs, NJ: Prentice Hall, 1995).
2. Hans J. Morgenthau, Truth and Power (New York: Praeger, 1970), p. 434.
3. Robert H. Bork, The Antitrust Paradox (New York: Basic Books, 1978), p. 117; Idem, "Judicial Precedent and the New Economics, in Eleanor M. Fox and James T. Halverson eds., Antitrust Policy in Transition (Chicago: American Bar Association, 1984), p. 16.
4. Bork, Antitrust Paradox, pp. 205-206.
5. Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
6. Wassily Leontief, "Theoretical Assumptions and Nonobserved Facts," American Economic Review, vol. 61, March 1971, pp. 1-7.
7. Joseph A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), p. 42.
8. Axel Leijonhufvud, "Ideology and Analysis in Macroeconomics," in Peter Koslowski ed., Economics and Philosophy (Tubingen: J.C.B. Mohr, 1985), pp. 182, 189.
9. For a fuller analysis of this point, see Walter Adams and James W. Brock, Antitrust, Ideology, and the Arabesques of Economic Theory," University of Colorado Law Review, vol. 66, (1995), pp. 257-327.
10. J. Bowring ed., The Works of Jeremy Benham (Edinburgh: W. Tait, 1843), vol. 3, p. 185.
11. Lord Robbins, Politics and Economics (London: Macmillan & Co., 1963), pp. 50-51.
12. Henry C. Simons, Economic Policy for a Free Society (Chicago: University of Chicago Press, 1948), p. 23.
13. Notes on the State of Virginia, reprinted in Thomas Jefferson: Writings (New York: Library of America, 1984), p. 246.
14. United States v. Columbia Steel Corp., 334 U.S. 495 (1948).
15. See, for example, Henry Manne, "Mergers and the Market for Corporate Control," Journal of Political Economy, April 1965; Neil H. Jacoby, "The Conglomerate Corporation," Center Magazine, July 1969; Business Week, "Special Report: Conglomerates - The Corporations that Make Things Jump," Nov. 30, 1968, pp. 74-80; U.S. Congress, Senate, Subcommittee on Antitrust and Monopoly, Hearings: Economic Concentration, Part 8, 91st Cong., 2d Sess., 1970, pp. 4736-37 (testimony of Professor J. Fred Weston); U.S. Congress, House, Antitrust Subcommittee, Hearings: Investigation of Conglomerate Corporations, 91st Cong., Part 3, pp. 247-48 (testimony of Harold Geneen, Chairman, ITT Corp.); and Oliver E. Williamson, Markets and Hierarchies (New York: Free Press, 1975), pp. 158-62.
16. Adams and Brock, Dangerous Pursuits, pp. 97-99.
17. Kundera, "Candide Had to Be Destroyed," in Jan Vladislav ed., Vaclav Havel, or Living in Truth (London: Faber and Faber, 1986), p. 261.
Vernon F. Taylor Distinguished Professor of Economics, Trinity University (TX) and past president of Michigan State University; and Moeckel Professor, Miami University (Ohio), respectively.
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| Title Annotation: | economics research |
|---|---|
| Author: | Adams, Walter; Brock, James W. |
| Publication: | American Economist |
| Date: | Sep 22, 1997 |
| Words: | 3567 |
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