Bork on High

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Bork has taken again to his high horse and to his Olympian intonation
to defend the crazy antitrust prosecution of Microsoft. In a recent
letter to the Wall Street Journal (March 9), Bork castigates
severely those economists who doubt his claim that Microsoft employed
"predatory" pricing in the browser wars to drive Netscape
from the market and thereby misallocate economic resources.

pricing assumes that a larger firm can lower market prices to drive
out rivals and then raise prices to consumers and thus enjoy a monopoly
return. But there are two important problems with this notion. The
first is that the theory makes little economic sense, as Robert
Bork once acknowledged himself in his intelligent classic, The
Antitrust Paradox
(1978). But, unfortunately, the current
Robert Bork – a hired gun for ProComp, a group of Microsoft's
severest critics – now swallows this flaky theory entirely
and wants Microsoft dismembered for lowering prices to consumers.

in economics is a complete misnomer, designed by antitrust enthusiasts
to make business rivalry equivalent to some jungle tiger pulling
down the weakest wart-hog. Total nonsense. So-called predatory pricing
is just competitive pricing, plain and simple, and consumers benefit
from it enormously. Relevant to the current litigation, Netscape
held a near-monopoly in Net browsers and charged PC users for their
use. Microsoft entered the market and effectively lowered the market
price of browsers to zero, conferring great benefits on Net users.
And that is where we are today. ( And the Netscape browser, far
from disappearing, is still downloaded by millions of PC users.)
Is there anyone on the planet, aside from Robert Bork and Pro Com,
that believes that the current situation "misallocates resources"
or that it is credible to believe that Microsoft could somehow raise
prices and wipe out all past and current consumer benefits? Yet
the entire antitrust rationale for prosecuting Microsoft rests on
this shabby impossibility. Shame, shame.

second problem with the predation notion is the absolute dearth
of historical examples. Bork implies in his letter to the WSJ that
there are many examples in business history that support his position.
But aside from mentioning sham litigation, he cites exactly NONE.
Yet if there are nearly none, the clear implication is that while
prices may be competed downward during the so-called predatory process,
they are almost NEVER increased to consumers to recoup any lost
profits. And if "predators" don't raise prices, if prices
stay low due to open markets and competition, then the entire rationale
for antitrust enforcement evaporates into the Borkian ether. Indeed,
if antitrust itself stifles the process by legally attacking low
prices, then antitrust itself becomes part of the monopoly problem
and not part of any solution. Again, shame, shame.

Robert Bork know all of this? I dare say that he does. He says as
much and more about phony predatory notions and ill-advised antitrust
enforcement in his 1978 book. Why, then, his sudden love affair
with a discredited pricing theory, his unrelenting attack on Microsoft,
and his selective amnesia over the predatory nature of antitrust
enforcement itself? I can't know for sure but as an economist I'm
programmed to speculate that incentives, monetary and otherwise,
tend to explain behavior.

15, 2000

Armentano is professor emeritus in economics at the University of
Hartford and author of Antitrust:
The Case for Repeal
(Mises Institute, 1999). He lives in Vero
Beach, Florida.

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