Tuesday, November 25, 2008


UPDATE: below

Science and SF writer Jerry Pournelle on the banking bailouts:
[M]y remedy is simple: any company that is too large to be allowed to fail is too large, and ought to be subject to anti-trust regulation.
I actually disagree: neither the bailed-out banks nor the big-3 automakers have "market power," and requiring a "Standard Oil-type" divestiture into smaller companies in either industry wouldn't help consumers (overcapacity is a major cause of the weakness in the vehicle manufacturing market; better that some car "badges" be terminated).

Still, I can't help admiring such a well-formed phrase.


John Hawkins of Right Wing News agrees with Pournelle. I amplify in comments why linking opposition to bailouts and antitrust law doesn't work.

(via Instapundit)


OBloodyHell said...

Sorry, Carl -- I agree with Pournelle on this one. If it's "too big to let fail" then it's claiming it's too large to be accountable for errors.

In a free market, that's A Real Bad Thing.

I get your point, too, but I still argue that any economies of scale aren't worth the anti-market downside.

Break it UP!

Anonymous said...

I agree also. Anti-trust legislation exists for a reason. Asking the poor and middle-class to subsidize opulent lifestyles of incompetent capitalists is simply wrong. You know that. Instead of bailing them out, let them fail and let the chips fall where they may. We could end up with a better society.

Carl said...

OBH and Anony:

Again, the problem is that the object of government anti-monopoly suits is structural change, usually through divestiture, that will benefit consumers (via reduced prices/increased output). No such outcome in the banking or automotive sectors would do that: the economies of scale strongly suggest otherwise. And no bank or automaker currently qualifies as possessing "market power," the sine qua non of antitrust success.

Tilting against bailouts might be appropriate in some areas (my view: bailing out financial institutions still seems the lesser evil; bailing out Detroit would be a mistake). To the extent you want to forbid bailouts, convince Congress. Don't tinker with a separate law designed to address a different problem.

OBloodyHell said...

> Again, the problem is that the object of government anti-monopoly suits is structural change, usually through divestiture, that will benefit consumers (via reduced prices/increased output).

I concur with that in general but it should also have a function of preventing any organization getting so large and central to the entire national economy that it effectively can run itself into the ground by incompetent management and require that the public bail them out.

Further, your argument fails in its initial conception -- Standard Oil consistently lowered prices, extensively, throughout its history. Breaking it up had nothing to do with benefitting consumers by reducing prices or increasing output. It was a remarkably well-run corporation.

And as far as "market power", that's a very narrow definition.

I think you are demonstrating remarkable market power whenever you can say to the US Consumer: "Help us. Or Else."

I'm not saying AT action is appropriate UNLESS the Fed is asked (read: "demanded") to step in.

Breaking up should be a part of ANY such agreement.

And frankly, all existing upper management should be summarily fired, with predjudice, and their contracts voided, including any golden parachutes. If you've run a company into the ground, you have no business expecting a parachute to apply.

And while we're at it, let's bring Raines and Gorelick up on the same charges that were used against Ken Lay.


Carl said...


Breaking up Detroit would lead to a proliferation of even more uncompetitive companies, which is not pro-consumer (which you seem implicitly to acknowledge in complaining about the Standard Oil breakup). And in arguing that "market power" is too narrowly defined, you make my point: antitrust law is designed to address a different issue.

Don't be like the liberals and try to hijack the judiciary into ordering what you can't convince the legislature to do.

bobn said...

I agree with Pournelle that too big to fail is too big. It needs to be broken up. If antitrust is the wrong mechanism, find or make another.

This crap, now started by those staunch "Conservatives" in the Whitehouse, seems to be endless. The $700,000,000,000 shitpile has drawn an endless supply of flies.

Even if it made prices go up, it is in the public interest not to have entities that are "too big to fail".

As for the Wall Street crowd, I want heads on pikes.