Economics is not mentioned in the title of this book about the history of American competition policy. Score one for truth in advertising. From time to time Rudolph Peritz, a professor at the New York Law School, mentions some economic theory or doctrine. But Peritz is to economics what Al Gore is to environmental science: an immense chasm separates what the man thinks he knows from what he actually knows.
For example, Peritz declares that there were no free markets, given the enormous inequality of bargaining power between natural persons who labored and corporate persons who hired and fired them (p. 95). Evidently, Peritz regards inequality of bargaining power as a self-defining concept. He seems to think that a corporation whose assets exceed the personal wealth of a worker has greater bargaining power than the worker.
Any B student in an introductory microeconomics class could tell Peritz that a worker possessing only the most modest wealth has quite a lot of bargaining power if two or more employers are interested in acquiring that workers services. If Kmart offers Homer Simpson only $9 per hour while Sears stands ready to pay him $10 per hour for the same kind of effort, no firm has undue bargaining power over Simpson. Indeed, it is only because several massive conglomerations of assets exist that Simpson enjoys as much bargaining power as he does. Bargaining power comes from options, and options come from workers freedom to choose where to work, employers freedom to choose whom to hire and fire, and firms freedom to use their properties in any peaceful way they believe will maximize asset values.
Any A student in the same economics class could scold Peritz for asserting that free markets exist only when bargaining power is equal. If Simpson had, by some measure, less bargaining power than large firms, this condition would be unfortunate for Simpson. However, this inequality by itself would not mean that the market is not free. Free markets exist whenever some minimum respect for private property rights prevails and government does not interfere with the peaceful use and voluntary exchange of these rights. As long as humans exist, each will have ample opportunity for mutually advantageous exchanges with others. Bargaining power determines only the distribution of the resulting gains from trade. Nothing in either the theory or the practice of free markets requires that the gains from trade always, or even generally, be divided equally.
Although Peritzs book is not one to read for economic enlightenment, its subtitle does accurately promise to convey some history. Specifically, the book is a legal history of competition law and policy in the United States since 1888. But it is a peculiar history. It is a history only of lawyerly words. Peritz has combed impressive amounts of legal materialslegislative histories, committee reports, statutes, case briefs, and court opinions. He serves them up here. But this meal is the potato without the steak. The more important historyor, at least, a necessary complement to Peritzs history of lawyerly wordsis the history of what the lawyers were referring to.
The lawyers spoke of the economy, of trusts, of J. D. Rockefeller and Standard Oil, of Gustavus Swift and the Chicago meatpackers, of unfair competition and predatory pricing, and of mergers, monopolies, and price fixing. Peritz, though, never checks the lawyerly rhetoric against real-world facts. For him, sufficient proof that private monopolies were a constant threat to consumers and workers is furnished by the fact that politicians, bureaucrats, and judges spoke as though monopolies were such a threat.
Consequently, having acquired all his knowledge of economic history from reading congressional debates and court opinions, Peritz knows virtually no economic history. Examples abound. Peritz repeats the popular myth that Standard Oil practiced predatory pricing. In fact, economic historians have known for 40 yearssince the 1958 publication of John McGees famous paper on Standard Oilthat Rockefellers company did not practice predatory pricing. Peritz also writes that the trusts of the late nineteenth century unjustly enriched a select few at the expense of the commonwealth (p. 11). In fact, real wages rose during this era as output grew impressively. Furthermore, as Thomas DiLorenzo has shown, in the 1880s in the industries singled out in congressional debates as being monopolized, outputs increased faster than aggregate output in the booming economy. Likewise, real prices charged by firms in these allegedly monopolized industries fell. None of these facts are reconcilable with what Peritz thinks he knows about the economy. And Peritzs knowledge of more recent economic history is equally skimpy.
Not only is Peritz wholly misinformed about actual economic history, but even his history of legal rhetoric is marred by embarrassing mistakes. For example, he mentions the influential 1968 Neal Report as having been commissioned by the Carter Administration (p. 233). And he consistently gives wrong years for famous Supreme Court decisions1904 rather than 1905 for Lochner v. New York; 1910 rather than 1911 for Dr. Miles Medical Co. v. John D. Park & Sons; 1972 rather than 1973 for Roe v. Wade. Such mistakes do not instill in the reader confidence in the authors research skills.
The books gravest flaw, however, is its unquestioned acceptance of the statist sophistry that order among humans can be created only by coercion or the threat of coercion. According to practitioners of this sophistry, all seemingly voluntary interpersonal acts in an orderly society rest ultimately upon government sanction. Thus, there is no such thing as truly voluntary interpersonal relationships. Freedom of contract, for example, is a classical-liberal myth perpetuated by liberals naive refusal to understand that coercion is the necessary basis of all human order. Note how Peritz justifies the assertion that all contracts involve coercion: