Monopoly in Law and Economics

THE TERM monopoly as used in the law is not a tool of analysis but a standard of evaluation.Not all trusts are held monopolistic but only "bad" trusts; not all restraints of trade are to be condemned but only "unreasonable" restraints.The law of monopoly has therefore been directed toward a development of public policy with respect to certain business practices.This policy has required, first, a distinction between the situations and practices which are to be approved as in the public interest and those which are to be disapproved, second, a classification of these situations as either competitive and consequently in the public interest or monopolistic and, if unregulated, contrary to the public interest, and, third, the devising and application of tests capable of demarcating the approved from the disapproved practices.But the devising of tests to distinguish monopoly from competition cannot be completely separated from the formulation of the concepts.It may be shown, on the contrary, that the difficulties of formulating tests of monopoly have definitely shaped the legal conception of monopoly.Economics, on the other hand, has not quite decided whether its task is one of description and analysis or of evaluation and prescription, or both.With respect to the monopoly problem it is not altogether clear whether the work of economists should be oriented toward the formulation of public policy or toward the analysis of market situations.The trend, however, is definitely towards the latter.The further economics goes in this direction, the greater becomes the difference between legal and economic conceptions of the monopoly problem.Lawyers and economists are therefore rapidly ceasing to talk the same language.Twenty years ago this was not the case.In 1915 there appeared in the JOURNAL an article on the Trust Problem which quoted the opinions of eminent economists on the significance of a contemporary "trust" decision.'The point the author was trying to make, flattering indeed to the study of economics, was "that in cases of this character no decision can be legally sound that is not fundamentally correct from an economic point of view." 2 The question posed to the economists was the import in tProfessor of Economics, Harvard College.The author wishes to