Market Power and Political Power

The last four years of antitrust policy has reversed course on 40 years of a Chicago School inspired goal of promoting a "consumer surplus" in favor neo-Brandeisian"anti-bigness." In simplest terms, the Chicago School would ignore bigness, or firm profits, and only consider whether consumers are better off, for example as could be the case with economies of scale. Neo-Brandeisians' main argument is that this static calculation does not include all of the possible harm from bigness because bigger post-merger firms are better at skewing laws and regulation in their favor to the harm of consumers, for example by erecting legal entry barriers. 

Most academic antitrust economists, on the left and on the right, embraced the Chicago School thinking as more and more carefully conducted studies provided evidence for the ideas. The evidence for the Neo-Brandeisian view has largely been speculative. But recently, Cowgill, Prat, and Valletti have provided a model and some evidence that merging firms significantly increase their post-merger lobbying expenditures. This is not conclusive but it is a start. We still do not know if this lobbying effort tips the scales or is in response to a knee-jerk anti-bigness bias. But it is a welcome contribution. The future of antitrust policy should be settled by evidence and not polemics.