The congressional elections of 1994 rocked Washington and the country with the ousting of the Democratic party\u27s long-standing control of the Congress. Less than two years later radical welfare reductions were signed into law by the democratic president. The reemergence of conservative ideology has brought calls for the slashing of government programs and a renewed zeal for the free market. This enthusiasm for the market mechanism rests on the belief that unfettered economic exchange will yield the most efficient allocation of resources to society. This belief is based on the implicit assumption that markets tend to be competitive in the absence of governmental intervention. Given the growing demand to limit the government\u27s direct intervention in matters of the economy, it is imperative to know if and when markets are competitive.
The solution to this question has been at the root of industrial organization since the 1950\u27 s with the early empirical work of economist Joe Bain. It is now over forty years later and there is still a lack of a definitive answer to this fundamental query. It is not from lack of effort - hundreds of theoretical and empirical papers have been published on this topic. Why the answer should be so elusive stems largely from two basic limitations to economic inquiry: Explicit and implicit political values influencing research. The difficulty in applying the experimental design to economic questions.
The two are related of course, but each plays its own role in preventing economists - and society - from reaching definitive conclusions to economic problems
