Abstract
It is now on the order of 45 years since Professor Edward S. Mason, working out of the Chamberlinian tradition, began to develop the rationale and organizing principles for the field we refer to as industrial organization. The organizing principle was the trinity — market structure, behavior, and performance; the basic premise, that the first of these, structure, is the conditioning, causal variable, the influence of which can be traced in the behavior of the active parties, and in the economic results they produce. The taxonomy of structure ran, in highly neoclassical fashion, along the competition-to-monopoly axis — that is, market structure was to be defined principally in terms of location on the competition-to-monopoly spectrum; and the most important focus of antitrust policy, it followed, was on market structure, not on behavior, let alone the intent that might be inferred from that behavior.1
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Notes
See Edward S. Mason’s Preface in Carl Kaysen and Donald Turner, Antitrust Policy: An Economic and Legal Analysis (Cambridge: Harvard University Press, 1959).
See our Fair Competition, The Law and Economics of Antitrust Policy (Ithaca: Cornell University Press, 1954).
Arthur M. Okun, Equality and Efficiency: The Big Tradeoff (Washington, D.C.: The Brookings Institution, 1975). I will devote no further attention to this last, increasingly pressing set of issues, because it is so clearly outside the scope of industrial organization economics. (Even this generalization needs qualification in intriguing ways: consider the effect of product differentiation and the particular directions of industrial research, development, and innovation on our collective demand for various kinds of private and public goods.)
See, for example, the report by the General Accounting Office, with the neutral title The Voluntary Pay and Price Standards Have Had No Discernible Effect on Inflation: The rate of inflation is equal to the difference between the rate at which total spending is rising and the rate of increase in the total output of goods and services. From the third quarter of 1978 through the first quarter of 1980, total spending in the United States grew at an average yearly rate of 10.9 percent. This growth far exceeded the economy’s capacity to increase its total output of goods and services. Inflation was inevitable (stress supplied). PAD-81-02 (December 10, 1980) p. 42.
“Market Power Inflation: A Conceptual Framework,” in The Roots of Inflation (New York: Burt Franklin, 1975) pp. 239-272. See also Harvey Leibenstein, “The Inflation Process: A Microbehavioral Analysis,” American Economic Review, 76 (May 1981): 368–73; and Gardner Ackley, “Evaluation of Incomes-Policies Alternatives,” presented at The Conference Board Colloquium on Alternatives for Economic Policy, Washington, D.C., June 1981.
See Daniel Mitchell, “Some Empirical Observations of Relevance to the Analysis of Union Wage Determination,” Journal of Labor Research 1 (Oct. 1982): 193–215, and Unions, Wages and Inflation (Washington, D.C.: The Brookings Institution, 1980).
Milton Kafoglis and Oliver Grawe, “A Reconsideration of the Efficiency of Regulation,” presented to American Economic Association (Association for the Study of the Grants Economy), December, 1979.
Prices and Quantities: A Macroeconomic Analysis (Washington, D.C.: The Brookings Institution, 1981) chapter 3. For amplification of these several points, see my “Market Power Inflation,” note 4, above, and, for a particulary thoughtful and thorough survey, Douglas F. Greer, Industrial Organization and Public Policy (New York: Macmillan, 1980), chapters 21 and 22.
Lester C. Thurow, “Cut Wages 4 Percent — Everybody’s,” New York Times (January 11, 1981), III-2.
Ibid.
The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities (New Haven: Yale University Press, 1982), Chapters 3 and 4.
I referred there to the possibility that the sum total effect of a large number of small, individually optimizing decisions might not be optimal at all. The analogy to tandem or leapfrogging wage settlements ending up in mutual frustration is, I think, apt. “The Tyranny of Small Decisions: Market Failures, Imperfections, and the Limits of Economics,” Kyklos, 19 (1966): 23-47.
“The Allocation of Energy Resources,” Brookings Papers on Economic Activity, III (1973) 527-70.
See my “Regulatory Reform: Is It Politically Achievable” in Leroy Graymer and Frederick Thompson (ed.), Reforming Social Regulation: Alternative Public Policy Strategies (Los Angeles: Sage Publications, 1982), Part III, Chapter 12.
Economic Report of the President, Washington, D.C. (January 1981) p. 30.
I draw here upon unpublished papers prepared for the Carter Administration’s Economic Policy Group, including Paul Krugman, “Foreign Experience with Industrial Policy: A Critical Review,” draft, 1980 (otherwise unidentified).
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Kahn, A.E. (1983). The Relevance of Industrial Organization. In: Craven, J.V. (eds) Industrial Organization, Antitrust, and Public Policy. Middlebury Conference Series on Economic Issues. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-1874-5_1
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