Chicago boys and the “imaginary” Microsoft monopoly

Posted by Leo Soto on June 22nd, 2012.

When you are a Chilean and you hear about something from Chicago school of economics, that rings close to you. Basically because what we call the “Chicago Boys” shaped our current economy. Chile is, in fact, a living application of many ideas of the Chicago school, with both positive and negative outcomes.

So when I read a Chicago economist using the computer industry and, in particular, the Apple vs Microsoft history as evidence that “What might appear to be monopolies are frequently and decisively broken by innovative competitors rather than antitrust regulators”, well, it makes difficult for me to not say something.

Ignoring that the antitrust case represented a clear signal that abusive practices from Microsoft would not be indefinitely tolerated is naive. Damn, Microsoft even invested in Apple and promised to keep producing Mac software because that would help them to make their case that they were not an abusive monopoly. The money and guarantee of support for Office software definitely helped Apple while it was on life support.

I can tell you that free market do not make regulators irrelevant. We have had such Chicago-style free market in Chile and we have suffered the consequences. The few companies that dominate the medical drug retailing sector screwed up thousands of Chileans by colluding on price on various key products. We just had a significant confidence crisis on the financial sector triggered by the lack of regulation and monitoring. We are in the middle of a huge crisis in the education sector, with the highest cost in the world relative to the GDP per capita, which offers very little quality education in return.

I’m not a fan of a huge government sector. But believing that markets are really efficient in the real world and using oversimplified evidence to back up that belief is, at the very best, self-deceiving.

Originally published at on June 22, 2012.