Competition and Innovation: Dangerous “Myopia” of Economists in Antitrust?

Christian Ewald, Nov 01, 2008

It seems fairly unlikely that the seminal papers of Professor Joseph A. Schumpeter would today have a good chance to be published in one of the leading journals specialized in industrial organization. This judgment, however, is a remarkable contrast with his still profound relevance in the world of antitrust. His warning that putting too much emphasis on static efficiency may risk killing endogenous technological change and growth has already inspired numerous policy debates in the past. A new paper by David S. Evans and Keith N. Hylton provides telling evidence that this is still true exactly 100 years after Schumpeter, for the first time, outlined the basis of what is known today as Schumpeterian tradeoff…. My comments on Evans & Hylton´s arguments are twofold: First, I consider it necessary to put at least two question marks behind their diagnosis that there is a severe risk of a myopic application of state-of-play antitrust economics. Second, in my view at least two further qualifications have to be made regarding Evans & Hylton´s perception of the scope and limitations of antitrust enforcement which explicitly or implicitly drives their argument. Both pillars together carry my view that to stay within the picture prescribing antitrust enforcers strong glasses which are in the risk of leading to a severe hyperopia or even blindness seems not to be a suitable therapy for an alleged myopia in antitrust; the Schumpeterian tradeoff should not provide the justification for an overly cautious hands-off approach.