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Interview with Dominick T. Armentano
The Austrian Economics Newsletter

Fall 1998
Volume 18, Number 3

Dominick T. Armentano

The Anatomy of Antitrust

An Interview With Dominick T. Armentano

Dominick T. Armentano is professor emeritus at the University of Hartford, an adjunct scholar of the Mises Institute, a member of the editorial board of the Quarterly Journal of Austrian Economics, and author of Antitrust and Monopoly: Anatomy of a Policy Failure and Antitrust: The Case for Repeal

AEN: Has the Microsoft case revived the debate over antitrust?

ARMENTANO: Actually, the debate never went away. It was just out of the media for a while. But the Microsoft case does provide an opening for us to revisit some crucial theoretical and policy issues. The case illustrates how absurd it is to attempt to apply antique, unworkable, special-interest law to the new computer and telecommunications marketplace. Whats at stake is whether the pace and scope of technological change will be determined in the market or by government.  

AEN: How significant is the appellate court's decision in favor of Microsoft?

ARMENTANO: It's a good decision, but a narrowly based one. It ruled on a dispute between Microsoft and the Justice Department on a 1995 consent decree. The Justice Department allowed Microsoft to "integrate" its software. The debate is about whether Microsoft's packaging of its browser with its operating system constitutes legal integration and not illegal tying. The appellate court ruled in agreement with Microsoft, that it was integration.

The court also had some sweeping statements about the inadvisability of courts determining the course of software innovation. That's helpful. The rhetoric in the decision goes beyond rationalizing the wording of the consent decree. The court is giving an opinion that approximates a free-market view. But I don't know how important in law those statements are.

AEN: Why is the government so focused on whether the operating system and the browser go together?

ARMENTANO: The stated reason is Section 3 of the Clayton Act, which forbids tying agreements. It is illegal for a firm that sells a product to tie into another product. If a firm makes buying product B a condition of buying product A, and if that condition "substantially lessens competition," that's tying and that's illegal.

Now, court precedent suggests that illegality is conditioned on a firm exercising monopoly power in the tying good. This power is supposedly what allows the company to force suboptimal products on the market. The law doesn't read that way, but that's what precedent suggests.

But there's a problem here. If the company does indeed have a monopoly on product A, we can bypass the question of tying altogether. The monopoly itself should be regarded as a Sherman Antitrust Act violation. But there is circular reasoning going on here, since courts have used the existence of tying as the evidence of monopoly power.

For example, in the Standard Stations Case in 1949, the court ruled on Standard Oil of California's practice of  marketing petroleum products to independent stations that were under exclusive supply contracts. The court admitted that independent dealers voluntarily chose to tie themselves to Standard Stations and that Standard assisted the dealers financially.

Even though Standard's share of the gas market was only 6.7 percent, and that share had been falling for years, the court presumed a monopoly in the tying good in order to reach the decision it wanted to reach. The obvious economic benefits to everyone of the tying agreements, which would not exist were they not economically beneficial, were simply shunted aside.

AEN: It's your view that tying should never be illegal.

ARMENTANO: Yes. After all, tying can be a helpful way to economize on resources. Sellers may like tying agreements because they enhance goodwill with suppliers, limit free riding, and encourage distributors to invest in promotion and service. They can be good for consumers because they help save search costs. There is no reason to assume consumers voluntarily injure themselves by purchasing tied goods. In the Microsoft case, the good that the Justice Department says is illegally tied (Explorer) is actually free.

Now, some firms may think that tying is a good way to optimize net income. They try it, and it doesn't turn out to be the case. Why? Because the package is not what the consumers want. Consumers might rather shop around and buy goods separately from other manufacturers. In that case, the firm will drop the tying agreement, or at least the terms of the agreement. This can happen at the retail level or the wholesale level. The fact that not all goods are tied suggests that tying is not always the most efficient marketing tactic.

AEN: What about the court case that Robert Bork cites against Microsoft?

ARMENTANO: That would be the case of the Lorrain Journal, which involved the only newspaper in Lorrain, Ohio, and the advertisers that were using the paper to advertise their products locally. A radio station in a nearby town was granted a license, and came on the air and solicited for advertisers. Some of the paper's advertisers wanted also to use the radio station.

When the Lorrain Journal heard about that, the paper gave its advertisers an option. They could use the radio station to advertise, but then they couldn't also advertise in the paper. If they ran ads in the paper, they must do so exclusively. Clearly, the paper was attempting to get its customers (advertisers) to boycott a potential competitor. And it worked in the short run: many advertisers  dropped the radio station.

The government learned about this and brought a civil suit against the paper in 1948. It tried to get a preliminary injunction to stop the exclusive dealing agreement. The government did not get its injunction, and instead held a trial. The judge ruled that the Lorrain Journal was a near monopoly and used "coercion" to try to get the advertisers to boycott the radio station as an ultimate attempt to destroy it.

The paper appealed to the Supreme Court, arguing that the federal government had no jurisdiction and that it was an interference with the freedom of the press. The Court rejected both ideas, citing precedent in both cases, and orders that the lower court's injunction should go into effect. And that was the end of the case.

AEN: Where are the parallels with Microsoft?

ARMENTANO: That's the odd part. There are almost none. Microsoft competes in the market where its competitors do not have franchise monopolies from the government and where there is not just one competitor.

There was only one radio station in the Lorrain area. And in fact, from reading the case history, it appears that the paper's real goal was not to monopolize advertising but to get the license away from the radio station so it could have its own radio station. The paper's owners had even tried to get an FCC radio license about five years before this case. They were denied it and were very angry, and so set their sights on the station.

In the computer industry, there are hundreds of competitors and no legal restrictions on entry (as there were in the case of the radio station). There is no way to prevent people who have computers from downloading competitive browsers. Computer makers can load the Netscape Navigator into their computers, and Microsoft does not and could not stop that. It does not have an exclusive arrangement with them. So why Bork would cite this case is beyond me.

AEN: Let's say that Microsoft did have an exclusive agreement. Would you rise to its defense?

ARMENTANO: We must realize that every agreement is a compromise. Sure, companies that accept exclusive deals might want it some other way. Ultimately, we all want the freedom to do whatever we want whenever we want. But that's not what contracts are about. In a contract, you always give up something, but what you give up is less valuable than what you get.

If Dell or Compaq wanted to sign an exclusive deal with Microsoft because they thought it was in their interest, and in the interest of their consumers, then that would be absolutely fine. Now there might be some manufacturers that would rebel against that kind of deal. And rival software firms might see an opportunity to create competitive operating systems and software and offer them on terms more favorable to the manufacturers.

The economic disadvantage of tie-ins is that they might put buyers in a position where they offer the consumer second-best deals, which only invites competitors into the market. Microsoft is keenly aware of this. It wants to push, but it doesn't want to push so hard that it jeopardizes its market position and creates an opportunity for competitors to exploit. Stringently enforced exclusive dealing agreements might in fact do that. Anything that is to the disadvantage of consumers eventually brings into question the market position of the producers.

AEN: The Justice Department claims it has consumers' interests in mind.

ARMENTANO: But why would anyone assume Microsoft does not? Microsoft is selling to the final consumer, and only doing so through the conduit of computer manufacturers. Microsoft will not do something to Dell or to Compaq that would harm consumers. Why would it want to? Why would Microsoft want to offer a bad deal to the consumers who buy their software? In the market economy, there is an alignment between the interests of the consumers and the manufacturers. Anything that a company does that is contrary to those interests works against its own interests.

Microsoft is in a dominant position today, but in an expanding industry, whether it retains that position depends on whether it can offer the best products at the best price, and anticipate changes in the market. If it does not, it will lose market position, as it should. Either way, there is no need for any regulation.

AEN: Has the Microsoft case called forth new arguments for antitrust?

ARMENTANO: No, they are pretty much the same. The old predatory pricing accusation comes up with the claim that Microsoft is charging prices that are too low or even giving its products away. That accusation first came up in 1911, in the Standard Oil case. Well, consumers don't seem to be complaining about this supposed predation.

Other arguments are that dominant firms enjoy economies of scale and this necessarily leads to a monopoly position.  And of course it's true that if you are the most efficient company, you are going to survive and perhaps your rivals won't. That's just a truism.

If we look back to the United Shoe case of 1953, finally decided in 1967, and we change the names of the players, we might as well be talking about the software industry today. Here was a dominant firm that had tying agreements with some of its clients. Its prices were low and it innovated all the time. Its efficiencies made life very hard with some of its competitive rivals, who complained like hell about it. The government intervened to hamper United Shoe and ultimately broke the company up at the behest of these rivals.

AEN: Wasn't progress against these interventions being made in the 1980s?

ARMENTANO: Yes, we were making progress. The number of private cases went down. The number of big, blockbuster cases brought by the Justice Department went down too. The FTC was fairly quiet.  Austrian School and Chicago School criticism of antitrust had some effect on other academics, on the legal community, and even on the judicial community.

But I remember writing in 1986 that if we think antitrust is dead, we will be sadly disappointed in the future. We had a golden opportunity to abolish the antitrust laws. I argued that if we didn't abolish them, we would eventually get new administrators and a new slew of cases.

At an even deeper level, we will never get rid of antitrust until we get rid of the incorrect theories of monopoly and competition that drive the antitrust establishment. What we've got out there are bad theories of competition and terrible theories of monopoly power. So long as these wrong theories are out there, we will have the wrong policy.

AEN: Where do the Austrian and Chicago approaches diverge?

ARMENTANO: Many of the Chicago people have been helpful in the empirical research they've done on some of these cases. Scholars like Robert Bork, Yale Brozen, William Bowman, Harold Demsetz and others, have performed valuable services by showing, for example, that just because markets are concentrated doesn't mean the leading companies earn exorbitant rates of return. They've shown what big business has really done: innovated and kept prices low. They've shown that mergers make economic sense.

Where you get a dramatic divergence is on the theoretical level, and that plays itself out in some aspects of policy. The Chicago School is still married to neoclassical price theory. It is still married to equilibrium theory and to a version of the perfect competition as a model, or a benchmark against which you compare performance in the real world. And Chicago School economists still hold an incorrect theory of monopoly power. They still want to talk about market share and concentration ratios. They still haven't adopted the view that so long as markets are legally open, they are necessarily competitive and rivalrous, and they ought not to be regulated.

The consequence is this: Chicago School economists will not argue that we should abolish the antitrust laws. I remember spending hours upon hours trying to persuade Yale Brozen that we should get rid of the antitrust laws. He would go 99 percent of the way, and suddenly say: "well, Dominick, what about price fixing?"

For the Chicago School, nothing is more offensive and anticompetitive than firms getting together to fix prices. Even if you review the literature showing that price fixing usually doesn't work (and even George Stigler recognizes that), they still argue that it is unproductive activity and that it doesn't accomplish a social purpose.

The Chicago School does not have an Austrian-style coordination theory of efficiency that recognizes that markets are in a continual process of development. These economists do not recognize that it is impossible to freeze the market in place and declare this arrangement or that arrangement to be efficient according to some extra-market criteria.

Therefore, they will never go all the way and support abolition. Instead, they adopt what appears to be an ad hoc approach to antitrust. It is important to somehow convince the Chicago people that they should give up their equilibrium models and adopt the Austrian theory. I somehow doubt that will ever happen.

AEN: And Bork would be a good example of that.

ARMENTANO: If you read The Antitrust Paradox, Bork's classic book on why the antitrust laws don't make any sense, you come away saying, this guy is really right! There is no good case for the application of antitrust law. It's true that he does allow some room in the book for intervention, but not much room.

Then you suddenly wake up in 1998, and you find out that Bork thinks that Microsoft is a  predator that ought to be battered by antitrust law. And it turns out this is not really inconsistent with remarks he makes in his book. He says that if a firm has an absolutely dominant position, and it attempts to expand that position, the law should be employed. It's right there in the book. In some sense, then, he is not being inconsistent.

It is a bit of a shock to see him supporting Netscape against Microsoft. And it looks like he is merely supporting a firm that is losing in a battle with a more efficient competitor. But on the other hand, that's not the way he sees it. There's also the more cynical explanation: as a paid legal consultant to Netscape, he may just be willing to put personal financial interests above all else.

AEN: Are there other reasons why antitrust continues to receive support?

ARMENTANO:. I just finished reading Titan, a new book about John D. Rockefeller by Ron Chernow. It's a super book. It brings the point home that there will always be people who fear large firms that have achieved a great deal of success in a short period of time. Some people just get concerned when a firm has 80 percent and 90 percent of the market, regardless of the job it's doing for the consumers. And there will always be other smaller firms in the industry who seek to use government's antitrust power as a means of beating up on the more-successful competition.

There are also noneconomic considerations. From a factual standpoint, much of the criticism of Rockefeller was just wrong. The economic facts pointed out that consumers were benefitting from Standard Oil's dominant position. But the critics also launched personal attacks on Rockefeller himself and on how the wealthy lived.

Those attacks probably had a bigger impact on how legislators and the public felt than any of the economic facts about the case. In the end, Rockefeller's personal wealth, and the envy that it generated, was the determining  factor. Today, the public has a better understanding of entrepreneurship, and the justice of wealth accumulation, but still we haven't shaken those old attitudes.

AEN: But why isn't the wealth and power of government similarly criticized?

ARMENTANO: I suppose the explanation is psychological. Government is always put in a separate category, and somehow not subjected to the same strictures it imposes on everyone else. Government-created monopolies are not made the target of antitrust investigations, for example.

When I talk to average people, I expect them to exempt government and government monopolies from the criticisms they make of big business. But even when you talk to intellectuals, they make the same mistake. I'm not just talking about economists, but also intellectuals in other disciplines and in the media.

I don't know how to overcome that, except to keep showing how repressive government imposition is, and how government regulation harms economic welfare for everyone. Austrian theory suggests that if there really is a dangerous monopoly in the economy, the government is probably the reason it exists. The answer then is to deregulate. Antitrust is a form of regulation that takes us exactly in the wrong direction.

AEN: Your book Antitrust and Monopoly has been continually in print for 26 years . How do you account for that?

ARMENTANO: I think it tells a story that no other book tells. I remember when I began to teach in the late 1960s, the dean in the business school asked me to teach an antitrust course. I went out and looked for books, but I didn't find books that made much sense.

At the time, the book that everyone used was Clair Wilcox's Public Policy Toward Business, and I adopted it. I began to notice that there were all kinds of errors in it, historical and theoretical. He really wasn't telling the truth about what big business had done in the 19th century. I then decided that someday I would write a book that would really tell the story of big business. That's how my book on antitrust came about.

One of the innovations of the book is to present the business history before you get to the court case. That's not usually the way it's done. I worked to pack my book with economic history. I give the reader the facts about prices, profits, and outputs. Even Bork doesn't do that.

With the history in mind, students and readers look a bit more critically at what the government claims and what judges have done. Incidentally, that's also why I like Titan. Chernow explains where Standard Oil came from, how it grew, how it maintained its dominant position, and how it lost that position well before the antitrust case.

AEN: What about the theoretical side of your book? Still controversial?

ARMENTANO: We've made a lot of progress in antitrust theory since those chapters were first written. No one believes in the older and more simplistic perfect competition models anymore. The rivalrous theory of competition has made huge inroads within the profession. However, in monopoly theory, the profession is still far behind. We still talk about Herfindahl indexes, concentration ratios, and market shares as being determinative of something called monopoly power.

Part of this is driven by the need for shorthand ways to tell if companies are in violation of the law. But that's not all of it. There is also a drive to run everything through a model that is seemingly scientific. Industrial organization classes still spend inordinate amounts of time doing  statistical work. That turns students off, and doesn't really give them any insights into how American industry came to develop and create this tremendous amount of wealth that's all around us. An industrial organization class without real business history is a criminal offense.

AEN: You also deal with how smaller rivals use antitrust to go after larger companies.

ARMENTANO: This is an area where Public Choice theorists are better than Chicago theorists. Fred McChesney, Robert Tollison, and others, deal with the interest groups behind antitrust. But I get almost no feeling of this reality with George Stigler or Robert Bork. They seem uninterested in the dynamics of how these laws are used.

The fact is that antitrust is special-interest law. Indeed, this was the intent of the law. The antitrust laws were created precisely to be used by smaller rivals to clobber more efficient competitors. Even today, ninety percent of the cases are one firm suing another. One aspect of the Microsoft case that pleases me is that the interest-group angle has been obvious to one and all. Even the newspapers talk openly of this fact, and I think this is healthy.

AEN: Can you elaborate on the origins of antitrust?

ARMENTANO: Most economists recognize that most regulation has a special-interest origin. Economists used to argue that antitrust was the exception. Most of the Chicago people have argued in the past that antitrust was public-interest regulation. But it turns out the evidence runs the other way.

Research has shown that it began with business interests wanting their competitors regulated. That's true for state-level antitrust. And if you go back into the origins of the Sherman Act, it's clear that less efficient petroleum competitors wanted to get a federal law to regulate the activities of the supposed petroleum trust.

There is very little controversy about the Federal Trade Act of 1914: small business interests wanted a law that would come down on large businesses. That's why the law was written. The Robinson-Patman Act that came out of the Great Depression grew out of special-interest pleading. The U.S. Wholesale Grocers Association ended up writing the Act itself, and simply got Robinson and Patman to sponsor a law aimed specifically at A&P.

In short, there was no golden age of antitrust when monopolistic abuse was running rampant in a free market, and when government stepped in to guard the public interest. Antitrust law has always been legally ambiguous, theoretically untenable, and empirically unwarranted. And let's say we can't establish that antitrust originated as special-interest law. The point is that it has been used as special-interest law. That's the way the law works in practice.

AEN: Murray Rothbard puts a great deal of emphasis on this angle.

ARMENTANO: That's why Rothbard is so great to read. He had a tremendous influence on me. He always tried to bring out the real story of a particular case of government intervention. His history was never contrived the way mainstream economic history can sometimes be. Reading Rothbard was a mind-changing event for me that change my entire academic perspective on economics. In fact, it changed my whole life.

Not that I didn't always believe in the virtues of free markets; I had been convinced since high school. But I had no idea that there were economists like Rothbard around. I remember reading Henry Hazlitt and thinking, that's about as close as I'll ever get to someone who really believes in markets.

I read Ayn Rand, and she would frequently mention Mises, but she didn't mention Rothbard. I think I ran across his name in a footnote somewhere. So when I first read Rothbard, it was a tremendous, tremendous discovery. I'll never forget meeting him 1972 at a conference in Philadelphia. What an honor it was to meet that great man.

AEN: Would your case against antitrust apply in heavily regulated industries, like banking, for example?

ARMENTANO: That's always been a tough one. Banks are heavily regulated in some ways and

privileged in others. I would like to see those interventions repealed. But this is a different problem from that of antitrust. In banking, entry is not completely free. There are minimum capital requirements. But these are modest restrictions.

So the analysis I would use on bank mergers would be the same as for any industry. Mergers take place because there are efficiency gains to be realized, and these mergers ultimately benefit consumers.

The same type of analysis applies to other regulated industries, like telecommunications. What they need is not antitrust but deregulation. The Telecommunications Act of 1996 was positive, but there are so many special interests involved. Congress has yet to write a telecommunications bill that really removes all the restrictions on entry, particularly for the local telephone companies.

When industries are only partially deregulated, it tends to produce pressure for re-regulation. That is what happened in air carriers, for example. Some monopoly privileges remain in the industry, and have brought about real problems. Alfred Kahn, the father of deregulation in air carriers, has said there are predatory practices in airlines. He gives you the feeling that if he could re-regulate the industry he might do it.

AEN: What kind of policy changes help deter the urge to re-regulate?

ARMENTANO: Free trade, for one thing. It tends to make markets more rivalrous. Globalization and international competition means that consumers have more options and that firms are selling in more markets. This creates less of a reason in regulators' minds for the use of antitrust.

Incidently, there's been a lot of talk recently about the rise of protectionist ideology. I frankly don't see any signs of that coming back. But in the long run, the only way to prevent re-regulation will be to dismantle the regulatory apparatus completely. Only the Austrians have been consistent in that demand.

AEN: Do you think Mises, in dealing with the issue of monopoly price, left an opening for antitrust?

ARMENTANO: Mises isn't always as consistent on this topic as we might want him to be. Even when he's talking about a competitive market, he occasionally slips into a kind of pure competition analysis. There's a statement in Human Action where he says on a competitive market, there's no such thing as a price policy for the sellers. They have no alternative but to sell as much as they can at the highest price. That's really what the perfect competition model says. Mises seems to be equating that with a real market competition, though I don't think he intended to.  

Mises also discusses monopoly and even a monopoly price problem without all the distinctions Austrians make today. It doesn't come up very often in Mises, but it is there. He leaves a slight opening that would seem to call for regulation. However, he did not actually  recommend antitrust laws.

AEN: Was the problem of "resource monopoly" the issue for Mises?

ARMENTANO: When Mises talks about monopoly, he says it occurs when the whole supply of a commodity is controlled by a single seller. Israel Kirzner uses the same language. So they seem to have the same position with respect to monopoly. And that's a reasonable definition of monopoly: the whole supply of something is controlled by a seller or a group of sellers acting in concert. But the question is: does that create monopoly prices? Is there such a thing as a monopoly price? And do you use regulation to control it?

Mises and Kirzner seem to be saying, yes, you can get monopoly prices but nonetheless you should not regulate. So how are monopolies controlled? Kirzner talks about entrepreneurs coming up with substitutes for the monopolized good. Mises talks about the rise of alternative production processes. In both cases, you get market activity that works around the monopoly and ultimately impinges on the monopoly. There is some commonality here with Joseph Schumpeter's process of creative destruction. In the long run, they argue, the monopoly will be benign.

And yet, someone might just respond: why wait for the long run to destroy the monopoly? Why not just use regulation to do that right now? Kirzner has answered that objection by arguing that regulation short-circuits the discovery process. I'm still not sure that would persuade someone who wrongly fears the power of resource monopolies.

AEN: Do you reject the idea that there might be a resource monopoly?

ARMENTANO: Well, Kirzner gives the example of oranges. One firm owns all the orange trees and therefore monopolizes all the orange juice. I know this is intended as a hypothetical example. But I too used to believe in homogenous products like oranges--until I came to Florida. It turns out the orange market is extremely complicated. There is no such thing as an orange. There are all kinds of oranges. They are grown in different climates and have different uses and different markets.

If you had a monopoly over oranges grown in Indian River County, which is one of the great orange growing areas in the U.S., in some sense it wouldn't really mean anything. You could call it a monopoly, but only in the same sense that Pepsi has a monopoly over Pepsi. Depending on how you define the commodity, you can come up with as many monopolies as you want. I don't think that is a useful approach.

So there are inherent difficulties with the Mises-Kirzner approach. I think a better approach is the Rothbardian approach. Monopoly power should be seen as something that comes from outside the market, not inside the market. A legal restriction to enter a market is an example of monopoly power, but that can only be granted by the state.

Once you consider legal restrictions, it becomes meaningful to talk about monopoly. You can talk about monopoly power and monopoly prices. You can talk about restriction of output and even consumer injury. If there are legal restrictions into the market, it is more reasonable to engage in predatory practices. These terms begin to make sense within a framework of the interventionist state.

AEN: Have you ever discussed these ideas with antitrust regulators?

ARMENTANO: Yes, and I get a variety of responses. In the eighties, there were people in the Federal Trade Commission who liked my work. James Miller, for example. On the other hand, Frederick Shearer, who has worked there for many years, has criticized my work severely. So it depends on the persuasion of the person.

AEN: You have also talked about the ethics of antitrust.

ARMENTANO: If you adopt a strict natural rights position on property, economic relations must be governed by contract. So long as we are not interfering with anyone else, we can choose to trade or not to trade. That would include the right to merge our property. From an economic perspective, any interference with this right is inefficient. From an ethical point of view, it also violates property rights. It is therefore unethical. This not only applies to  mergers. You can extend that kind of analysis to price fixing agreements, tying agreements, or any cooperative behavior in a free market. Any interference in the freedom to contract is a violation of people's rights.

AEN: What about other rights, like the right to a wide variety of goods to purchase?

ARMENTANO: The problem is that there is no property right in a range of goods you do not already own. Rights only pertain to your own property and not anyone else's. A consumer doesn't have a right to a seller's property. A consumer has no right to a low price on a seller's property. In a free market, a seller may choose to boycott potential buyers and not sell them anything. There would be no violation of property rights in this case. Similarly, sellers do not have a right to consumer's income. In a free market, you must deal with on the basis of voluntary exchange.

AEN: What about the ethical implications of Rothbardian monopolies, i.e. those created by the state?

ARMENTANO: In that case, the government is violating rights by restricting the uses of justly owned property. By creating the monopoly through restricted entry, there is a seller who cannot use his property in a peaceful manner or a consumer who is restricted from buying. You get a monopoly as a result of such restriction. Even aside from questions of efficiency, I think we can also say this kind of regulation is unethical and contrary to the norms of free enterprise.

Not everyone accepts the natural rights approach to property. But as soon as you slip into the utilitarian framework, you start to introduce all kinds of confusions. Suddenly, consumers have additional rights beyond their property rights. They have a right to maximized welfare, for example. I think all this is misguided.

AEN: How would you characterize the interaction between economics and ethics.

ARMENTANO: It's important to keep ethics in the ethics box and economics in the economic box, and not get them mixed up. Economics as a science, Mises rightly insisted, is value free. But that does not mean that economists must never make value judgements. In fact, I  see the moral arguments as a final case-clinching way to argue for free markets.

At the same time, my ethical arguments against antitrust have caused me a tremendous amount of trouble. In my book, I only have four or five pages in which I discuss contracts, rights, and the moral argument. But when economists review the book, they will zero in on those few pages, and attack me for even bringing the issue up. I think that's totally off-base. I think you can bring it up, but you must do so within its own context.

Also, the advocates of antitrust make all sorts of ethical arguments, but they are implicit in their models. When such arguments are implicit, it's pretty hard to criticize the ethical assumptions because the person can always claim he or she is not actually saying that at all. I far prefer those who make their arguments explicit. For example, when I was defending price fixing, Judge Ginsberg once wrote that price fixing is a form of theft. I don't agree, but at least he put his argument out front so it can be dealt with.

AEN: Any thoughts on how popular culture treats business?

ARMENTANO: I've been doing economics for 35 years. When I started teaching in the 1960s, the feelings toward business were extremely poor. The defenders of business were very few and their arguments were not very powerful. We are much better off today, both in terms of the quality of arguments for the contribution of business to society and the quality of the defenders of economic liberty. If you look at public policy today, interventions like antitrust are much less pernicious than in the 1960s and the 1970s. We've deregulated some industries.

I'm not sure free-market arguments are an entrenched part of the popular culture. In fact, popular culture can be brutal in its treatment of business. But good books are being published, excellent opinion pieces appear in even the large newspapers, more students are being recruited into our ranks, and more teachers are presenting the Austrian perspective. That's why I'm optimistic about the future.