Organizational Form and Enforcement Innovation

ABSTRACT:

In this article, we examine one mechanism through which enforcement innovation occurs and is passed into practice at the U.S. antitrust agencies. Our main thesis is that agency economists are uniquely situated to produce, adapt, and disseminate new methodologies that improve enforcement accuracy because of the multiple and conflicting roles they play. Agency economists are trained in academic PhD programs to value methodology above application, and to read and publish in academic journals. They know how to narrow questions, so that they can be answered precisely, using theoretical and/or empirical models. But when they arrive at the agencies, these economists trained in academic PhD programs are thrust into decision-making roles where they must render judgments on messy, real-world cases, typically with imperfect knowledge, and often in conflict with agency attorneys, political appointees, and/or the economists and attorneys who appear on behalf of parties. How to manage this process in a way that produces growth (useful innovation) is a primary institutional challenge for the antitrust agencies.

We focus on the organizational structure of the U.S. antitrust agencies with an eye toward isolating the factors that encourage or discourage the development and application of useful, innovative economic tools. Specifically, we examine how the relationship between academia and the agencies and the dual responsibilities of research and casework serve to encourage what has become known as “enforcement R&D,” the development and application of new methodologies for screening and evaluating mergers, and for quantifying the expected harm to competition of various behaviors.