Antitrust & the Austrian Paradigm

In 1982, Israel Kirzner penned an essay concomitant the release of his extraordinary critique of modern price theory. My hopes are that the following excerpt will invite others to read the piece in its entirety:

The case against the regulation of the market (even by well-meaning and conscientious public servants), rests upon insights into this corrective process and into its socially benign character. Long before this corrective process can possibly lead to even approximate coordination, changes in the basic data of the market (individual preferences, the endowments of resources, and available technology) will have rendered the hypothesized state of full equilibrium (defined with respect to the initial state of the data) utterly irrelevant. But the discrepancies continually stimulate, in turn, changes in these existing patterns of resource allocation.

The truth is that, as Hayek explained four decades ago, the economic problem faced by society consists of the need to ensure that, as far as possible, the available bits of scattered knowledge of separate individuals be somehow mobilized to contribute to relevant decisions that affect the societal pattern of resource allocation. To try to measure the success with which a society addresses its economic problem, with a yardstick reflecting a pattern appropriate to hypothesized centralized omniscience, is akin to an attempt to assess the efficiency of an allocation pattern for scarce resources by comparing its results with those that might be imagined for a world in which scarcity is absent: The whole problem is how best to cope with scarcity (emphasis added). Similarly the socio-economic problem is how best to cope with the inescapable decentralization of knowledge.

We may put the matter quite succinctly: For reasonably successful coordination within a decentralized decision-making system, the discovery process constituted by competitive-entrepreneurial alertness to profit opportunities is crucial. Attempts at improvement by direct regulation are likely to be based on erroneous information (because the regulators cannot utilize the discovery process of profit pursuit) and are likely to block or distort the market’s own delicate discovery process.

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