Economic Stability and Antitrust Policy

Abstract

T HE proponent of a largely competitive, free-market, free-enterprise system is plagued incessantly, and often discredited in debate, by the claim that such an institutional system is, and has been, inherently and intolerably unstable. The wide fluctuations of employment, income, and production of the past are commonly attributed to competition and to decentralization of control. The facts of instability in the past are commonplace. It is likewise undeniable that industries (or better, enterprises) not characterized by effective competition have fared better in the face of general instability than have the more competitive areas of the economy (e.g., agriculture)-or, at any rate, better than they would have fared with more competition or more decentralization of control. From such evidence, the layman readily (too readily) concludes that competitive conditions mean instability, and that the remedy lies in removing competition in favor of some other instrumentality of control. The plausibility of this conclusion, moreover, has been assiduously exploited by special pleaders and apologists for innumerable producer groups. Such vulgar economic analysis is the main stock-in-trade, not only of our radicals and revolutionaries on the left but of monopolists and cartelizers on the extreme right as well-not to mention the more ingenuous advocates of planned economy. The answer of the radical-conservative or traditional economist liberal is that general and acute instability is, on any soundly reasoned analysis, primarily attributable to faulty monetary institutions and, in the broadest sense, to unfortunate fiscal policy. Indeed he may go further and insist that monopolistic control of prices and wage-rates has, in fact, served to aggravate monetary instability and substantially to counteract or to frustrate such soundly remedial monetary and fiscal measures as have been employed. This, in any case, is not the place (if, indeed, there is any proper place) for examining controversial questions of business-cycle theory. For present purposes, we may concede that rigidity of monopolistic prices and wages does set limits politically, if not economically, to fluctuations of general prices (if not of output and employment). Moreover, and more important, we may concede that, failing deliberate measures of fiscal