John W. Mayo reviews whether or not the articulated principles and priorities of the Neo-Brandeisian movement in antitrust scholarship and enforcement represent a “paradigm shift,” per the philosophy of Thomas Kuhn. Mayo finds that the Neo-Brandeisian discourse is best understood as situated within the continuum of the current antitrust paradigm, and that many of its efforts to substantiate its distinctive ideas have failed to properly ground them in empiricism or repudiate existing studies.
This article is part of a symposium studying the “paradigm shift” in antitrust scholarship and policy. Inspired by philosopher Thomas Kuhn’s work on progress in science, this symposium asks if and how the tenures of Federal Trade Commission Chair Lina Khan, Department of Justice Assistant Attorney General Jonathan Kanter, and scholarship associated with the antimonopoly or Neo-Brandeisian movement has changed how we understand the priorities of antitrust enforcement, evidence of anticompetitive harm, and the study and enforcement of antitrust more broadly. Over the next few days, we will publish contributions from Tim Brennan, Eleanor Fox, Daniel Francis, Andrew Gavil, Richard Markovits, John Mayo, Steven Salop, and Randy Stutz. You can read the previously published articles here. ProMarket encourages our readers to respond to the symposium and the ideas these scholars put forth with their own. Responses can be sent to ProMarket@chicagobooth.edu.
The prompt for the current symposium is both provocative and intriguing: Did the appointments and subsequent policies of Federal Trade Commission Chair Lina Kahn and Department of Justice Assistant Attorney for Antitrust Jonathan Kanter represent a paradigm shift in antitrust akin to the “paradigm shift” described by Thomas Kuhn in his foundational work, The Structure of Scientific Revolutions?Exploring the commonalities and differences between Kuhn’s paradigm shift and the recent evolution of antitrust enforcement holds the promise of new insights into both the conduct of antitrust enforcement during the Biden Administration and in future administrations. To achieve this promise, I’ll first set the stage by briefly recounting Kuhn’s description of the evolution of science and the role of paradigm shifts in the advance of science.
With this taxonomy in place, I then examine each core element identified by Kuhn, along with the presence or absence of the corresponding developments in antitrust enforcement. This analysis leads me to conclude that the rhetorical flourishes of an antitrust revolution notwithstanding, the economic and legal basis for such a Kuhnian paradigm shift is lacking today and does not seem likely to emerge. Thus, while Neo-Brandeisian calls for a full-scale paradigm shift will continue, the more likely path forward is via what Kuhn refers to as “normal science.”
Kuhn’s Theory of the Evolution of Science
In 1962, the renowned philosopher Thomas Kuhn’s book The Structure of Scientific Revolutions rocked the prevailing understanding of the evolution of science. This masterpiece of philosophical thought has subsequently been cited over 150,000 times, across virtually all academic domains. While Kuhn’s contributions are manifold, the vast majority would seem to be unrelated to antitrust economics, law or enforcement policies.
One feature of his contribution, however, does provide a platform from which to assess the evolution of antitrust. Specifically, Kuhn identifies a prevailing perspective that “normal science” advances through incremental contributions by scientists which add to a stock of knowledge around which the scientific community coalesces. Kuhn refers to this stock of knowledge as the “paradigm” or “disciplinary matrix.” Kuhn’s powerful critique of this perspective was that, rather than incremental advances, science often advances through “paradigm shifts,” which represent the wholesale replacement of existing scientific methods and truths with alternative scientific methods and truths. He describes these advances as “revolutionary.” In offering this alternative, Kuhn creates a taxonomy by which we can evaluate whether recent developments in antitrust do indeed constitute a “paradigm shift.” Is what we are observing in antitrust enforcement truly “revolutionary?”
At the risk of overly simplifying, Kuhn offers the following taxonomy of the occurrence of such paradigm shifts:
- Initially, there exists a consensus set of theories, methods, analytical constructs, and salient data that scientists use to most effectively understand a natural phenomenon. This paradigm or disciplinary matrix forms a general consensus among members of the relevant scientific community.
- Serious anomalies emerge.
- Voices question the paradigm.
- New theories, methods, analytical constructs, and salient data are championed and adopted as superior in understanding the natural phenomenon.
Next, we step through this taxonomy with an application to antitrust.
The Antitrust Consensus
The initial state of the world in Kuhn’s taxonomy is one of consensus. Until roughly the last decade, it is fair to say that, although minor differences arose, a consensus among antitrust scholars, practitioners, and enforcers existed regarding the objectives of antitrust, the foundational economics, and how these inform the development of antitrust enforcement and law. A complete explication of this consensus is beyond the scope of this short article. Nonetheless, it is clear that a variety of axioms formed the “disciplinary matrix” of antitrust.
These axioms have included the proposition that a key—and only—goal of antitrust is the promotion and preservation of competition and the competitive process. The consensus economic theory indicates that assaults on competition and the competitive process are most often manifest through activities that reduce output, raise prices, degrade quality, or harm innovation. As such, while antitrust enforcement should vigorously confront these degradations to competition, it should not challenge market positions and power that are acquired and maintained through activities and conduct that increase output, reduce prices, improve quality, and accelerate innovation. This consensus is often (perhaps too simply) summarized as an adherence to a “consumer welfare” standard. Although this standard has sometimes been misconstrued as focusing solely on output markets, harms that occur in input markets, such as the market for labor, have been well within the ambit of the existing consensus.
The consensus also reflects that neither the size of firms, per se, nor the industries within which they operate constitutes a basis for differential antitrust treatment. Finally, the implicit, if not explicit, consensus has been that the existing antitrust statutes are broad enough to accommodate, and prosecute successfully where necessary, evolving business practices and the emergence of altogether new industries over time.
Economic, Antitrust, and Social “Anomalies”
According to Kuhn, the first important step toward a “revolution” in science begins with the detection of “anomalies” that are inconsistent with existing theories, data, and analyses. In the realm of antitrust, three types of anomalies may be identified. First, it is possible for such anomalies to arise in the economic foundations that underpin antitrust. That is, do existing economic models, data, and analyses fail to accurately portray the determinants of the competitive process? Second, anomalies may arise in enforcement policies, procedures, and practices. That is, do these features of antitrust enforcement adequately protect competition? And third, anomalies may arise in society writ large as a consequence of antitrust enforcement. Let’s consider each in turn.
Quibbles between economists regarding both theoretical models and empirical results have always been, and will always be, ongoing. This is Kuhn’s normal science at work, and it has largely characterized the economics discipline over the past decade. One earlier anomaly that is directly relevant to antitrust is, however, notable. It centered on the so-called Structure-Conduct-Performance (SCP) paradigm. This paradigm represented the “disciplinary matrix” of industrial organization economics for several decades prior to the early 1980s. In its most basic form, the SCP paradigm posited that industry structure (exogenously given) determines both industry conduct and economic performance of firms in that industry.
During the 1970s, however, a number of substantial inconsistencies (anomalies) in the SCP paradigm were revealed. Principal among these was that the paradigm’s assumed causation—running from industry structure to performance—was subject to reverse causality. That is, highly performing firms are likely to gain prominent or even dominant positions in markets, leading to high market concentration. In this instance, high concentration, per se, cannot be taken at face value as an indicator of a lack of competition; and may be instead a manifestation of successful rivalry in a market.
This anomaly, together with others, such as those identified by Richard Schmalensee, led to a paradigm shift in industrial organization economics away from the SCP paradigm to the New Empirical Industrial Organization (NEIO) paradigm, which relies on more structural economic models that explicitly identify the microeconomic foundations of competition (firm demand, firm costs, and conduct) to reveal situations in which firm behavior either aligns with or undermines the competitive process. This paradigm shift created a new platform for the advance of normal science in industrial organization. It has also been internalized into antitrust policymaking in a variety of ways including, most notably, with updates to the antitrust agencies’ Horizontal Merger Guidelines in 2010.
The second vein of claimed anomalies centers around perceived deviations of antitrust policies, procedures, and practices from those best suited to protect the competitive process. The most notable and repeated claim here is that prior to the Biden Administration, antitrust enforcers had become lax and the judiciary had become increasingly hostile to merger enforcement efforts. The economic manifestations of this perceived laxity have been alleged to be growing market concentration, rising price-cost margins, and flagging business dynamism.
A final vein of perceived anomalies highlights a perceived linkage between antitrust and a number of social ills. As recently described by Eric Posner with respect to mergers, these include the failure of antitrust to preserve small business, to limit corporate political power, to consider the effects of mergers on income distribution, and to consider the effects of mergers on racial and gender pay gaps. Others lament that antitrust enforcement has not addressed data privacy concerns.
Barry Lynn perceives even more societal anomalies that are attributable to the presumed laxity of antitrust and the perceived rise of concentration:
Inflation, shortages of drugs, the breakdown of supply chains, our industrial dependence on China. The cost of buying or renting a home or a car. How far we must drive to a hospital or to find fresh produce. The cost of medicine, milk, and chicken. The vast and growing inequality of wealth, political power, and control. The rise of the radical right. The surge in racism and homophobia. The attacks on reproductive choice and marriage. The collapse of our news media. In every instance, the concentration of control has played a big role or even the main role.
The “paradigm shift” required to address these perceived anomalies is thought to be an “antitrust revolution” that would at a minimum radically shift enforcement and, ideally, institutionalize different objectives for antitrust enforcement into new antitrust statutes and enforcement practices.
The Voices
The voices that point toward the perceived anomalies in the existing antitrust paradigm have come collectively from a loose coalition of antitrust reform advocates. Among these, some call for reform from within the current structure of antitrust; in Kuhn’s taxonomy, this represents “normal science”—no “revolution” necessary. The explicitly Neo-Brandeisian faction of antitrust reform, however, not only sees a need for a revolution, but asserts that it is already underway. Their aim is to radically remake antitrust policy in the image of Louis Brandeis. They claim that antitrust was originally intended to counter the growth and power of large business enterprises and that it should be used similarly today. Big business, they argue, poses a threat to the nation’s economic, social, and political well-being, and antitrust in itself should be used to limit the size and strength of big business as an explicit goal.
Moreover, from the Neo-Brandeisian perspective, antitrust’s goals extend beyond preserving competition as it manifests itself in prices, output, quality, and innovation to include the need to address a vast array of social and economic ills they perceive to have arisen as a consequence of lax antitrust enforcement. Neo-Brandeisian voices are resolute about the “revolution.” Indeed, those pro-enforcement judges, politicians, and scholars who oppose elevating Neo-Brandeisian fears about firm size to the forefront of antitrust are alleged to be “under the sway of antidemocratic, pro-monopoly ideology.“
This view of antitrust rejects reliance on the consensus paradigm that has shaped antitrust policy for nearly a half-century: the consumer welfare standard, under which antitrust applies principles of economics to identify business practices which create or enhance market power to the detriment of consumers and economic efficiency.
The Neo-Brandeisians’ advocacy for an antitrust revolution and their political success in garnering receptivity to this advocacy may, at one level, warrant the moniker of “antitrust revolution.” In the realm of Kuhn, however, the more easily achieved political and rhetorical victories of the Neo-Brandeisians differ from the more substantive and enduring paradigm shifts that would replace antitrust’s core theories, methods, analytical constructs, and data. The question which remains, then, is whether, aside from the rhetorical appeal to the Brandeisian aversion to large companies, a new, substantive foundation has been laid to warrant claims of a paradigm shift in antitrust.
A New Paradigm?
The appeals of the Neo-Brandeisian for a paradigm shift or a revolution naturally provoke, in the spirit of Kuhn, the question of what new set of theories, methods, analytical constructs, and salient data have been proffered to replace the existing paradigm. Although a vocal rhetoric has arisen regarding such a “revolution,” it is unclear that these rise to the level of anything approaching a viable alternative to the extant paradigm.
Consider the economic underpinning for antitrust enforcement. The Neo-Brandeisian alternative that would replace the existing paradigm proposes rules that would impose per se bans on many economic activities triggered solely by market structure. For example, Tim Wu proffers a policy that would ban mergers that reduce the number of major market competitors to less than four. This call for a per se-oriented, structure-centric (rather than the existing structure-inclusive) policy approach is, generously interpreted, insufficiently grounded in theoretical or empirical science to claim the mantle of a new paradigm. Ironically, the closest this approach comes to laying down an alternative economic paradigm is by its connection to the now discredited SCP paradigm of the 1970s.
Other Neo-Brandeisian attempts to provide a substantive foundation for a new paradigm of antitrust enforcement have been similarly unsuccessful. A proposed “protection of competition test” is said to be aimed at protecting the competitive process rather than consumer welfare (which is seen as a “value”). Yet, the proposed alternative fails to distinguish itself from the consensus paradigm. Indeed, mainstream antitrust enforcers in both Democratic and Republican administrations have emphasized the need (under the umbrella of the consumer welfare standard) to protect the competitive process. For example, in 2016, Acting Assistant Attorney General Renata Hesse indicated that “[T]he tools of economics simply provide enforcers with a better means of detecting situations where companies and individuals have subverted—or threaten to subvert—the competitive process.” Similarly, Assistant Attorney General Makan Delrahim, a Republican appointee, said in 2019 that “The consumer welfare standard is agnostic to considerations other than the actual competitive process.”
An alternative standard, recently proposed by Eric Posner, to underpin merger enforcement is a so-called “margin test,” which would focus on changes to the price-cost margins caused by mergers. As an example of how this proposed foundation for merger enforcement would differ from the current paradigm, Posner points to mergers that lead to both price declines and cost declines due to efficiency increases. In this situation, if the price reductions are less than the declines in costs, with the result that price-cost margins increase, the proposed merger would be prohibited. Thus, despite the fact that both consumers and the merging parties benefit from the price declines and cost reductions, respectively, the proposed margin test would block the merger because the merger is “assumed to cause broader social harms.”
Aside from the prima facie benefits to consumers and producers in this situation, which would seem to point unequivocally toward a (consensus) policy of permitting the merger, no serious or widespread scientific evidence corroborates the assumed “broader social harms” that are, in the margin test, used to justify prohibiting such mergers. In sum, the Neo-Brandeisian alternative foundations for antitrust enforcement either fail to differentiate themselves from the current paradigm (the protection of competition test) or are lacking in the scientific foundations (the margins test) akin to the paradigm shifts originally identified by Kuhn.
Conclusion: “Paradigm Shift” or the continuation of “Normal Science”
In conclusion, we ask whether the recurrent calls for a “paradigm shift” ultimately succeed? We do not believe so, for at least four reasons.
First, in Kuhn’s theory of the evolution of science, a paradigm shift requires more than animated voices aimed at maladies not being studied by a particular group of scientists. The failure of antitrust enforcers to address the Neo-Brandeisians’ laundry list of societal ills through the vehicle of antitrust is no more the basis of a required “paradigm shift” than is the failure of geologists to develop cures for mental illness. The ability of Neo-Brandeisians to identify societal issues and unsupported claims of their relationship to antitrust enforcement does not succeed in making the case that the consensus antitrust enforcement paradigm that has prevailed for several decades should be replaced by a much more expansive antitrust paradigm to address these social woes.
Second, a paradigm shift requires the design, testing, and validation of the superiority of new theories, methods, analytical constructs, and salient data. Yet no alternative foundation—Kuhn’s paradigm or disciplinary matrix—exists. The result is that Neo-Brandeisian pleas for an antitrust revolution must be seen at this point as simple advocacy for antitrust policies they prefer rather than a credible alternative framework, built upon theoretical and empirical evidence.
Third, the likelihood of a successful “paradigm shift” in antitrust also depends on the cooperation of not only the frontline antitrust agencies but also the judiciary. To date, however, the arguments drawn from outside the existing paradigm have seen very limited success. The Neo-Brandeisian attack on big firms, per se, runs headlong into a century of judicial precedent, as articulated in the majority opinion of United States v. United States Steel Corporation, which indicates that “[T]he law does not make mere size an offense . . . .” It is difficult to imagine that the judiciary will embrace a populist call for stand-alone antitrust attacks on firm size.
Fourth, although the loudest voices of “revolution” have received considerable popular attention, a more grounded scholarship has emerged to provide direct evidence disconfirming the Neo-Brandeisian alternative to the consensus. In particular, this research has revealed a host of Neo-Brandeisian false narratives, including the claims of widespread increasing market concentration, pervasive declines in competition, declining business dynamism, lax antitrust enforcement, an anticompetitive increase in firms’ price-cost mark-ups across the economy, and an anti-antitrust judiciary.
In closing, I emphasize that the Kuhn-like paradigm built around the existing antitrust consensus should not be seen as stationary. Much like Kuhn’s normal science, it instead is always evolving—most typically with incremental additions to the relevant stock of economic theory, empirical evidence and legal advances. Although a genuine revolution may yet emerge in the future, the evidence to date indicates that the Neo-Brandeisian rhetoric fails to satisfy Kuhn’s standards for their desired paradigm shift.
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