On the Inefficiencies of Efficiency as the Single-minded Goal of Antitrust

Abstract

This article provides a skeptical look at the role of “efficiency” in antitrust analysis. It begins by discussing how various types of efficiency may be in conflict, such that the concept is actually less scientific or useful than often thought. The article asks, What economic considerations are excluded from today’s antitrust analysis? This leads to a discussion of political, social, and non-efficiency economic values; externalities; and three types of inefficiencies that may be caused by the single-minded hunt for efficiencies: X-inefficiency; diseconomies of scale, scope, and coordination; and the “too-big-to-fail” problem. Finally, the article describes some challenges facing reform proposals, including problems of prediction and quantification. The conclusion argues that the efficiency goal is fraught with problems and that a broader concept needs to take into account inefficiencies as well as efficiencies.