Competition Policy in America, 1888-1992: History, Rhetoric, Law.

• Author: Boudreaux, Donald J.

By Rudolph J. R, Peritz New York: Oxford University Press, 1996. Pp. x, 374. $67.50 cloth.

Economics is not mentioned in the title of this book about the history of American competition policy. Score one for truth in advertising. From time to time Rudolph Peritz, a professor at the New York Law School, mentions some economic theory or doctrine. But Peritz is to economics what Al Gore is to environmental science: an immense chasm separates what the man thinks he knows from what he actually knows.

For example, Peritz declares that "there were no free markets, given the enormous inequality of bargaining power between natural persons who labored and corporate `persons' who hired and fired them" (p. 95). Evidently, Peritz regards "inequality of bargaining power" as a self-defining concept. He seems to think that a corporation whose assets exceed the personal wealth of a worker has greater bargaining power than the worker.

Any B student in an introductory microeconomics class could tell Peritz that a worker possessing only the most modest wealth has quite a lot of bargaining power if two or more employers arc interested in acquiring that worker's services. If Kmart offers Homer Simpson only $9 per hour while Scars stands ready to pay bun $10 per hour for the same kind of effort, no firm has undue bargaining power over Simpson. Indeed, it is only because several massive conglomerations of assets exist that Simpson enjoys as much bargaining power as be does. Bargaining power comes from options, and options come from workers' freedom to choose where to work, employers' freedom to choose whom to hire and fire, and firms' freedom to use their properties in any peaceful way they believe will maximize asset values.

Any A student in the same economics class could scold Peritz for asserting that free markets exist only when bargaining power is equal. If Simpson had, by some measure, less bargaining power than large firms, this condition would be unfortunate for Simpson. However, this inequality by itself would not mean that the market is not free. Free markets exist whenever some minimum respect for private property rights prevails and government does not interfere with the peaceful use and voluntary exchange of these rights. As long as humans exist, each will have ample opportunity for mutually advantageous exchanges with others. Bargaining power determines only the distribution of the resulting gains from trade. Nothing in either the theory or the...