Thanks for the comments.

First, I don’t think that DOJ budgets are exogenous from GDP: budgets are driven by tax receipts, which in turn are intextricably linked to GDP as they represent a particular percentage of a taxpayer’s income.

Second, I don’t think that DOJ budgets are a compelling proxy for levels of antitrust enforcement, because they neglect the other main federal antitrust agency, the FTC, all state AG enforcement, and all private enforcement. One would logically expect that when DOJ enforcement declines, these other entities would pick up the slack.

Third, there’s a significant lag in terms of enforcement and its effects. DOJ or FTC brings an investigation, the investigation turns into a case, the case leads to a court judgment, the court judgment is interpreted by commentators, and leads to advice by in-house and outside counsel. So for the expenditures to have their full effect on the economy could take years or even decades.

Any one of these problems would be problematic. Jointly, I believe they are fatal.

I certainly agree that there is an open empirical question concerning the impact of antitrust enforcement (as the Baker survey cited above suggests). But I’m trying to understand your specific objections here.

The first seems to be that the level of antitrust enforcement is endogenous. Are you arguing that DOJ enforcement is causally determined by GDP? I’m not sure I believe that, and wont argue with it here, but is that what you’re saying?

The second is that the DOJ budget measure might not be a good measure of antitrust intervention because some benefits of antitrust enforcement (and costs, obviously) come not from the enforcement action itself but from counselors who advise clients to avoid liability risks (not to mention non-DOJ enforcement). Obviously true. But I would disagree that the problems raised by this rise to the level of describing the paper as intellectual dishonest relative to the cross-sectional approach (which has its own problems).

Two thoughts. One is that those counselors probably do more of that advising where the federal agencies are more active such that the DOJ activity might capture that. Also, FTC and DOJ levels of intervention might well be correlated over time such that it would not be unreasonable to focus on the DOJ budget. Additionally, it might well be an interesting result in its own right to show that DOJ expenditures alone produced negative macroeconomic effects. One could obviously not then generalize to the antitrust mission as a whole … but still interesting I think.

Third, you prefer the cross-sectional approach. Thats all well and good. You might enjoy Hylton & Deng’s study here:
papers.ssrn.com/sol3/papers.cfm?abstract_id=950964

But these cross-sectional studies must tangle with some endogeneity issues of their own (and other problems that generally apply to this approach).

What you really want is a nice natural experiment in the intensity of antitrust enforcement so that you can cleanly identify the effects. Unfortunately, this doesn’t happen in the real world too often and so we are stuck trying our best to measure these things with what we’ve got. I wouldn’t describe the effort as worthless at all.

A far better, and more intellectually honest approach would be a cross-sectional analysis of different countries’ economies, comparing their market structures, level of competition enforcement, overall economic efficience, and levels of market and income concentration.