2009 Press Releases

Press Release

Tuesday, June 02, 2009

For Immediate release

Economists get call from Washington to join Obama team

Contact: Kathleen Maclay (510) 643-5651, kmaclay@berkeley.edu
Susan Gluss, 510.642.6936 sgluss@law.berkeley.edu

Berkeley, CA—June 2, 2009… Two University of California, Berkeley, professors who have been named the federal government's top antitrust economists and a third chosen as a senior official in the same field are among the latest campus faculty members enlisted to help the Obama administration shape policy for the nation.

Their appointments appear to highlight the growing strength of the "Berkeley School of Antitrust Economics." Its approach to antitrust analysis and policy is grounded in rigorous training in orthodox economic theories and modeling. But it is characterized by a willingness to look for new theories when others have reached their explanatory limits, close attention to empirical evidence and institutional details, and openness to modifying or rethinking existing economic models as new kinds of economic activity raise novel questions.

The announcements also coincide with a shift in antitrust policy announced by the Obama administration. On May 11, the Justice Department retracted a 2008 report that amended Section 2 of the Sherman Antitrust Act, an amendment that loosened rules that made it illegal to attempt to create a monopoly in the marketplace. "The report ... raised too many hurdles to government antitrust enforcement," said Christine Varney, assistant attorney general, in a speech to the Center for American Progress. "Withdrawing the report is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers."

The appointments, announced in recent weeks, include:

Carl Shapiro, the Transamerica Professor of Business Strategy at UC Berkeley's Haas School of Business and a professor of economics. He will become the chief economist and deputy assistant attorney general for economic analysis in the Antitrust Division of the U.S. Department of Justice. Shapiro, a UC Berkeley faculty member since 1990, held this same post from 1995 to 1996.

Joseph Farrell, a professor of economics, who also is heading to the nation's capital to take on the job of chief economist and director of the Bureau of Economics at the Federal Trade Commission. The FTC is the sister antitrust enforcement agency to the Department of Justice and is also responsible for federal law enforcement in consumer protection.
This is Farrell's third stint in the government. From 1996 to 1997, he was chief economist at the Federal Communications Commission (FCC). From 2000 to 2001, Farrell was deputy assistant attorney general for antitrust economics in the Justice Department.

Howard Shelanski, a professor at the UC Berkeley School of Law and a co-director of its Berkeley Center for Law & Technology. He is taking a leave of absence to work with Farrell as a deputy director of the FTC's Bureau of Economics and to run the bureau's antitrust division.
Shelanski, a former associate dean of Berkeley Law, was the chief economist at the FCC from 1999 to 2000 and was a senior economist with the President's Council of Economic Advisers from 1998 to 1999.

"At a time when we are facing the most daunting economic challenges of our lifetime, it is gratifying that the Obama administration can look to the expertise and leadership of UC Berkeley economists to guide us toward better times," said UC Berkeley Chancellor Robert Birgeneau.

Before Obama even took the oath of office, he announced the nomination of Christina Romer, a UC Berkeley economics professor and an expert on the Great Depression, to head his Council of Economic Advisers. Then he named UC Berkeley physics professor and former Lawrence Berkeley National Laboratory Director Steven Chu as U.S. secretary of energy. Tom Kalil, former special assistant for science and technology to Birgeneau, was tapped to become the associate director of the Office of Science and Technology. Laura Tyson, a professor and former dean at the Haas School as well as former top economic advisor to President Clinton, is now a member of Obama's Economic Recovery Advisory Board, an independent group established to provide insights from outside the Beltway.

And what the San Jose Mercury News dubbed "Obama's Bay Area brain trust" continues to grow.

For example, the White House recently announced the nomination of Michael Nacht, a professor and former dean at UC Berkeley's Goldman School of Public Policy, to become assistant U.S. defense secretary for global strategic affairs. Nacht is an authority on national security policy.

But it's in the field of economics that UC Berkeley continues to draw the most attention from Washington, D.C.

Other UC Berkeley economists who have previously served as deputy assistant attorney general in the U.S. Department of Justice include Richard Gilbert, professor of economics (1993-1995); Daniel Rubenfeld, professor of law and of economics (1997-1998); Michael Katz, professor at the Haas School and in the economics department (2001-2003) and Shapiro (1995-1996). Katz also was the chief economist at the FCC from 1994 to 1996. Shelanski and Aaron Edlin, a UC Berkeley professor of economics and of law, both served as senior economists for the Council of Economic Advisers in the Clinton administration. Other UC Berkeley economists have served in additional positions in Washington, D.C., as well.

"Especially when the nation is in crisis and expertise is so badly needed, Cal is the place where America looks for leadership," said Robert Reich, a professor of public policy at UC Berkeley's Goldman School of Public Policy, who has worked in three presidential administrations, most recently as U.S. secretary of labor in the Clinton administration.
Farrell, Shapiro and Shelanski count themselves among the members of the Berkeley School of Antitrust Economics, which for nearly 20 years has shared its expertise - in fields including economics, business, law, agricultural and resource economics and public policy - with several presidential administrations.

"Each of us has examples of how we have applied Berkeley School methods to specific antitrust matters," said Shapiro, citing his testimony for the government in the Microsoft antitrust case, which also involved substantial work by Rubinfeld and Farrell. He also referenced Gilbert's work on intellectual property guidelines and Katz's testimony for the Justice Department on credit card antitrust. Shelanski has testified at Justice Department and FTC hearings about antitrust remedies and about antitrust and innovation.

Shapiro said the Berkeley School's pragmatic approach to competition policy draws on advances in industrial organization economics to fashion new policies that are "empirically grounded, theoretically sound, practical and crafted to protect the competitive process from monopolistic abuses and anti-competitive mergers."

In contrast to the Berkeley School, Shapiro said the (University of) Chicago "School of Antitrust" is more likely to involve arguments that markets work efficiently and that market forces alone will, if left to themselves, erode monopoly power over time.
Shelanski added that the Berkeley School is anchored by a willingness "to recognize that real problems should be the cause for investigation and not fitted into a box, and to recognize when existing theories fall short."

At the Haas School, Oliver Williamson, a professor emeritus of business, economics and law, is credited with major contributions to the Berkeley School through his transaction cost analysis work that linked many business behaviors to an increased interest in efficiency rather than to a wish to block competition.

UC Berkeley's economic expertise is being tapped by the Obama administration at levels similar to that of the Clinton administration, but Shelanski cautioned against seeing the appointments as political.

"It would be a mistake to conclude that Berkeley economics is liberal economics," he said, noting that the number of UC Berkeley economists chosen to serve in the Clinton and Obama administrations likely reflects greater interest by those chief executives in public policy.

Farrell and Shapiro have co-authored numerous articles on competition economics and recently wrote a research paper on a method for determining whether a merger might reduce competition and drive up prices ("Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition":
http://faculty.haas.berkeley.edu/shapiro/alternative.pdf).

Shapiro has published extensively on industrial organization, competition policy, the economics of innovation, and competitive strategy, and was director of UC Berkeley's Institute of Business and Economic Research from 1998 to 2008.

In a recent talk on "Competition Policy in Distressed Industries," now on the Department of Justice Web site at http://www.usdoj.gov/atr/public/speeches/245857.htm, Shapiro addressed the role of antitrust economics in the current downturn, and cited some of Romer's work in discussion of the Great Depression.

"As we map the course ahead for regulatory reform and competition policy," Shapiro said, "the first step is to diagnose the public policy failures that caused the current crisis so we can correct past errors and avoid repeating them. In this regard, it seems clear to me that the crisis in the financial sector primarily reflects a failure of government regulation, not any underlying failure in the ability of well-regulated competitive markets to serve consumers and promote economic growth."

Farrell has published widely on industrial organization and microeconomics, including the economics of standards and of innovation.
He teaches graduate and undergraduate industrial organization, regulation and antitrust, competitive strategy, microeconomics, statistical decision theory and game theory.

Shelanski's teaching and research focus on antitrust and regulation, as well as on telecommunications policy. He has written numerous papers on the relationship between antitrust and regulation and on competition policy in high-technology markets. Shelanski and Katz have co-authored several papers on mergers and innovation.

###

NOTE: Downloadable photos of Carl Shapiro, Joseph Farrell and Howard Shelanski are available at http://www.berkeley.edu/news/media/download/.
Two speeches given by Farrell when he was deputy assistant attorney general at the Department of Justice are available online at:
http://www.usdoj.gov/atr/public/speeches/speech_farrell.htm.
Speeches by Shapiro when he held the same position are online at:
http://www.usdoj.gov/atr/public/speeches/speech_shapiro.htm.
Publications by Shelanski are online at:
http://www.law.berkeley.edu/institutes/bclt/research/research_shelanski.htm.