Competition and Competition Law in the Classical Liberal Tradition

Abstract

It is often assumed that the creation and protection of competitive markets, whenever possible, is a central tenet of classical liberalism and that antitrust laws are an essential feature of a classical liberal political economy. The logic behind this proposition is that monopolization and cartelization produce private gains for their participants while resulting in “deadweight loss”: lower output, higher prices, and a general decline in overall wealth and productivity. But that cannot be the end of the story. Remedies to guard against these risks are both costly and (often) erroneous, thus deterring beneficial conduct, as well. This unavoidable tradeoff makes it unclear what concrete legal and policy prescriptions classical liberalism prescribes to maintain, protect, and promote competition—if any. As a result, classical liberal ideals have been invoked to justify deeply opposed policies: from antitrust abstentionism to aggressive trust-busting. This chapter aims to elucidate the perennial, albeit elusive question of whether classical liberalism supports the enactment of general antitrust laws and, if so, under what principles.