The Public PursenYale Brozen: Concentration, Mergers,nand Public Policy; Macmillan;nNew York.nJoel Seligman: The Transformationnof Wall Street: A History of the Securitiesnand Exchange Commissionnand Modem Corporate Finance;nHoughton MifQin; Boston.nby Gavin D. Arbucklenr*ifty years ago Berle and Meansnpublished The Modem Corporation, anwork that developed and justified manynof the grounds for the public suspicionnand fear of large corporations whichncharacterized the years of the GreatnDepression. George Stigler and ClairenFriedland have shown that the centralnpropositions of that book were not supportednby the statistical evidence availablenin the 1930’s. In retrospect, itnappears that the acceptance of the ThenModem Corporation’s arguments bynprofessional economists, and their usenin designing the securities acts of 1933nand 1934, was due more to a shift in intellectualnfashion than to the weight ofnits empirical evidence. In some respects,nYale Brozen’s Concentration,nMergers, and Public Policy is an attemptnto reverse the hostile change in academicnattitudes towards large businesses thatnoccurred in the days of Berle and Means.nIndeed, while reading Professor Brozen’sndiscussions of economies of scale, rivalrynbetween small numbers of firms, and thentechnological and innovative efficienciesnof large enterprises, one is struck bynthe feet tlut none of his arguments wouldnhave been unfamiliar to Schumpeter, orneven to pre-Depression industrialorganizationneconomists such as CharlesnVan Hise.nBrozen draws upon a vast number ofncontemporary research articles to chal-nMr. Arbuckle is an economist whonwrites from Madison, Wisconsinn22inChronicles of Cttlturenlenge prevailing academic analyses ofnthe economic effects of industrial concentration.nEarlier textbooks and articlesntended to associate dominance of anmarket by a small number of large firmsnwith tacit collusion, higher prices, thenabsence of competition, and overallnlosses of economic eflficiency; Brozenncites evidence demonstrating that largenfirms with large shares of markets arencharacterized by lower costs and greaternoperating efficiencies than smaller firms.nHe even su^ests that persisting largennumbers of small firms in a marketncould, in some circumstances, be takennas an indication of an absence of vigorousncompetition and of ineflficientiynhigh-cost production, while an increasednconcentration in a market dominated bynlarge, highly profitable firms could signalneconomic health and productivenefficiency. These are, of course, thenopposite of the expectations generatednby standard industrial-organizationnanalysis.nWith regard to public policy, Brozennadvocates a shifl: away from antitrustnprosecutions based on inferences ofneconomic inefficiency grounded innstudies of market structure. He arguesnthat the government’s role should be directednat deterring explicitly anticompetitivenconduct such as price-fixing.nSince firms grow and gain market sharesnbecause of their eflficiency rather thannby conspiring against potential competitors,nBrozen believes that antitrustnactions preventing mergers and thatnforcing large firms to divest themselvesnof parts of their operations makes nonpositive contribution to economic welfare.nHe believes that structural barriersnnnto entering markets tend to be ineffectivenin protecting high-cost producersnfrom competition over the long run, sonthat market forces can be relied on toneliminate inefficient business conductnwithout government intervention.n”rofessor Brozen is not alone inntaking this approach to industrial concentration.nWork along this line hasnbeen appearing with increasing regularitynin the academic economics journalsnover the past five years, particularlynfrom University of Chicago researchers.nBrozen’s book draws much of this workntogether for the first time. In assessingnthe reasons for the popularity of Brozen’snapproach, it is tempting to assert that itnis due solely to the force of hisnarguments. Adjusting doctrine to fit thenintellectual fashion of the moment isnonly what one would expect of annacademic indiscipline like psychologynor the pseudoscience of sociology, butneconomists—at least outside the ranksnof government consultants—^like tonthink their views are influenced only bynempirical evidence.nProfessor Brozen’s analysis of studiesnconcerning the profits-concentrationnrelationship serves to thro^v considerablendoubt on simplistic theories inferringncollusion and insulation from competitionnfrom concentrated industrial structure.nBut to prove that growing firmsnwith large market shares owe their successnto their eflficiency in reducing costsnone must look directiy at cost data, andnthere are very few cost studies in Mr.nBrozen’s book. There is an excellentnreason for this: relatively few costnstudies have been done. Cost fiinctionsnare considerably more diflficult to estimatenmathematically than the sort ofnprofits-concentration relations investigatednin the past. Measuring how technologicallyninnovative and progressivenan entity is proves even more diflficult.nOne cannot say that Mr. Brozen has conclusivelynproven his case. Some of then