Wednesday, May 13, 2015

A Critique of Anti-Trust Law and Natural Right Ethics

1. What economics is
In ethics, there has been a long debate to determine whether norms and values of action or the consequence of action is put priority on over the counterpart. Economics is the subject focusing upon the consequence i.e. Economics is a consequentialist philosophy. The mainstream economics puts emphasis on the positive statement firmly indicating what is, was, or will be caused, done, or happening instead of the normative statement indicating what “ought to” be done. Moral philosophy and psychology put emphasis on the normative statement because their interest is effect of human-individuals’ mind apart from their surrounding physical environment.

As economics is the subject to analyse causes and effects of human-individuals’ actions creating their surrounding physical environment. Even though the normative of their actions may become a means of the positive consequence of their actions, it is not always true because the intention of action does not always induce an initially intended consequence. So, realistic observations of outcomes induced by a particular action in consequence are eventually more practical than the meaning of these actions to know what should be done. Then, the logics developed from these observations implies the practical method to be done to induce a desired/planned outcome in consequence.


This consequentialist characteristics of economics is retained from the father of economics Adam Smith who is strongly influenced by Scottish culture of Legal Positivism, the school of law philosophy based on explicitly defined codes of actions designed to induce the desired consequence. Adam Smith was also a strong influence under his senior fellow David Hume, the remarkable Scottish enlightenment philosopher who was sceptical about any universal norm and value of actions because he claimed that morality defining norm and value is more relative than many moral philosophers claim. So, Hume claimed that the principle of actions is a mere interest of individuals, and interests are their desiring outcomes in consequence which these individuals are willing to induce.

The study of economics started from challenging the authoritarian moral entrepreneurship dogmatically defining and suggesting individuals to act by means of the universal moral code defined by the authoritarian moral entrepreneurs. Economics is originally an ethics emancipating individuals from the prison of moral dogma and then enabling these individuals to develop their own rational inference skills determining their own mind and action plans. Then, the normative philosophy should purely a matter of each individual’s business for their own mind development, and the positive philosophy should be only taken into practice to plan actions influencing others and plans creating/development physical objects, e.g. buildings and products, and structured organisations in which various humans are gathered e.g. corporations and government.


2. Monopoly and Anti-Trust Law
Monopoly is the situation which one party owns and controls a particular good/service industry/market and its business share without any competitor. Monopoly is usually categorised into the two types, natural monopoly and pure monopoly. Natural monopoly is formed when monopoly is necessary and inevitable to provide the efficient and optimum level of goods and services. In the later parts of this essay, monopoly means pure monopoly. Many economists tend to affirm that monopoly is a negative factor as an antithesis of a good competition. Even conservative economists such as Monetarists tend to assume that monopoly is an economic stagnation discouraging competition.

Pure monopoly takes place where any artificial enforcement power exists in economy. There are two kinds of pure monopoly. The one is that a national government can form pure monopoly by nationalising or heavily regulating a particular industry. The other is that an influential economic agent such as a big corporation prevents competitors away by its control over price and quantity, merging and acquiring a potential competitor and/or bribing. Anti-trust law is designed to prohibit the latter kind of pure monopoly, the pure monopoly by private economic agents.

Socialists (including the self-proclaimed liberals) and other various Staticists claim that any monopoly by their own government is legitimate and virtuous whereas the pure monopoly by private ownership is unnecessary and vile. Even many conservative and libertarian economists tend to think that the monopoly by private ownership is something needed to be prevented at the best effort. The reason behind is the monopoly by their government sets its price and quantity according to necessity meanwhile the monopoly by private ownership does not fulfil the necessity and causes an uneven wealth distribution.

They claim that the monopoly by private ownership is purely motivated by profit and allows these private enterprises to discourage competition enough to reduce both quality of products produced. So that this monopoly causes an inefficiency of products’ distribution among individuals in need, and these anti-monopoly activists argue that the genuine free market perpetuates the monopoly Then, anti-trust law was manifested to prevent such a market outcome by both socialists and non-socialists.


Nonetheless, this claim about monopoly is questionable by means of the free market mechanism. In a free market economy where majority of industries are operated by private enterprises and new market entrants are not strictly prohibited, these entrepreneurs always face some degree of competition. Even natural monopoly is not permanent due to a newly invented technology in the future and a newly discovered resource supply line. Furthermore, unless there is a prohibition by government regulation and/or a cultural/religious tradition, there is often various substitute available. All in all, the antagonism against monopoly seems to be meaningless.

These anti-monopoly activists tend to neglect about the impact of the capital/financial market. Even though a monopolistic firm disrupts any new market entrant potentially becoming her/his competitor in the real (goods & service) market, this entrant will be able to join and compete in this market as long as this entrant’s product is more or equally favourable. The investors in the capital/financial market are keen to invest the assets whose value is predicted to dramatically increase so that this market entrant may gain the capability to compete with the already existing firm. Therefore, when a monopoly is perpetuated, the case shall be either the products produced by this monopolistic firm is demanded or this market is not free enough.

Regarding to the monopoly price and quantity based on the profit motive, the monopolistic firm is extremely difficult to maintain their price and quantity control in favour of its own interest. Even with a restricted supply of both substitute and investment, this monopolistic control is very difficult to maintain especially when the surveillance technology by majority of individuals is widely available. Under free market, information is freely and widely available because every economic agent is competing with each other to obtain a useful information set with their best competence. Therefore, as same as a totalitarian regime in politics, an oppressive monopolist regime is also fragile when majority of citizens start protesting against it.

In addition, by means of macroeconomic situation, the aggregate production share of a market which this monopolistic firm can be not significantly high enough to be considered as a tycoon. When the aggregate production share of this market becomes significantly high, only one firm may become too costly to produce the demanded production level under this market factors of production. Then, production by two or more firms may become optimum.

These anti-monopolists excessively condemn the existence of monopoly because they tend to think that preventing monopoly is the legitimate norm and value in their ideal economic system. By contrast, the existence of monopoly does not always cause the economically negative consequence while it is actually often beneficial to economy. When a monopoly takes place, the operation by one monopolistic firm is just adequate to optimise factors of production than by more than one at the current supply technology and the demand level. Thus, the ulterior motive behind the anti-trust law prohibiting monopoly seems to not be the reason of economics focusing on consequence of actions: It rather seems to be the moral philosophical reasoning focusing on norm and value of actions.


3. Natural Right’s Dogmatism
Restricting monopoly does not frequently cracking down on monopoly. Some monopoly can be wrongly justified as pure monopoly even though it is actually natural monopoly. It could also be not significantly necessary to crackdown some pure monopoly because its factors of production requires only one firm and/or its not significantly high production share in macroeconomic scale. Thus, crackdown on monopoly is not consequently effective for economy.

Anti-Trust law cracking down on monopoly is far concerned with moral philosophy and psychology than economics. The idea of anti-trust and any other anti-monopoly is simply a moral dogma putting a high priority on competition as virtue of individuals always ought to maintain and practice. The aim of anti-monopoly is simply their value of actions does not always derive a desired consequence of economy, and their believing value is not often a means of productive consequences. This is just a matter of their normative belief, and so not related to the positive analyses of economics.

This trend of putting excessive priority on the normative belief tends to be observed in many countries adapting customary laws including the common law in their legal system which regard highly of the existence of Natural law. Even in some countries whose legal system is based on the civil (positive) law nowadays adapt this trend of the normative belief as their constitution putting emphasis on Natural law. Natural law is a legal philosophical theory which claims that there is a universal ethical principle commonly existing at different time periods, places, and occasions. Legal structures based on Natural law hardly indicate the explicitly determined legal code of justice. So, they remain their flexibility of legal interpretation but they are often inconsistent and influenced by irrational whims of general public and charismatic authorities.

There is a derivation theory of Natural law which is called Natural right. Natural right claims that there is a universally existing impregnable rights for all human individuals. Natural right more clearly defines about the universal ethical principle than Natural law as it claims that this invincible right is the universal ethical principle. Natural law regards that human individuals are not able to perfectly know what the universally existing law and ethical principle are because they are not the perfect being like God. By contrast, Natural right defines that human individuals are capable to know what is truly right for themselves. Thus, those who support Natural right tend to assume that their traditional kept value of their invincible right basing their action patterns is the means of their well-being.

The legal positivists and the mainstream classical economists argue that these claims by Natural right supporters are merely prejudicial as their belief does not positively derive the consequences of economy. Natural right may be helpful for each individual’s self-discipline and their personal wish meanwhile it is not practical to positively analyse the estimate outcomes of economics. The typical example is the anti-trust law attempting to prohibit monopoly as the means of their economic consequence. All in all, it claims that anti-trust law concerns moral philosophy far more than economics.